SUPREME COURT REPORTS [1960(2)]

r96o the competence of the arbitrators. The High Court ., Ai-r , din appeal under the Letters Patent, did confirm the

""/S. opi arsna d , 'd h d b t th a?td sans. Ltd. or er, setting as1 e t e awar ; u ere was no v. binding decision between the parties that the claim The Union of Iudia described in Sch. B, that is, the claim for establish-

Shah J.

January 2I

ment and contingency charges, was within the competence of the arbitrators in reference under cl. 20.

It may be observed that according to the High Court

of East Punjab in the Appeal No. 31 of 1953, under the Letters Patent, it was not necessary to express any opinion whether the claim in Sch. U was within the competence of the arbitrators, and the claims described in Sch.]) does not appear to have been agitated in the second arbitration proceeding.

We, accordingly, agree with the view of the High .Court that the Award of the arbitrators was liable to be set aside because of an error apparent on the face of the award. In this view, the appeal fails and

i~ dismissed with costs.

Appeal dismissed,.

CHAMPALAL

MST. SAMARATH BAI

(JAFER IMAM, J. L. KAPUR AND K. SUBBA RAO, JJ.)

Arbitration-Award, Registration of-Power of court to extend time for filing-The Arbitration Act, 1940 (X of 1940), s. 14(2)- Jndian Ncgistration Act, (XV I of 1908), ss. 17, 49-Indian Limitation Act, (J X of 1908), Art. 178-Jndian Succession Act, 1925 (XXXIX of 1925), s. 192.

By means of a will the respondent's husband authorised her to adopt the appellant, and the will was duly registered after the death of the testator. The relevant portion of the will ran thus:-

"Under this will, I am authorising the said Champalal Ishv,:ardas to execute the same.

I have appointed him the executor of this will.

Under the said will the said Champalal alone shall be the full O\vner of my entire rnovable and immoveable property and the executor of. the will after my

death if I adopt him during my lifetime or even if my wife r960 adopts him (after my death)."

Champa/al The appellant applied for appointment of a curator under v. s. 192 of the Succession Act but subsequently the parties entered Mst. Samarath Bai into an agreement for arbitration in the matter. Three arbitrators were appointed and the time for making the award was extended by the Court on their application. The arbitration agreement stated that the arbitrators had to decide what should be the respective rights of the parties in the estate in case the respondent adopted the appellant. An award was made and filed in Court by the arbitrators to the effect that the respondent should adopt the appellant according to Hindu Law within four months failing which the appellant would be heir and executor of the entire property of the deceased and the respondent would be entitled to a maintenance of Rs. zoo per mensem.

But if in spite of the respondent's readiness to adopt, the appellant refused to be adopted within four months, he would not have any right in the property nor would he be the executor.

The award was at first unregistered and on being returned it was subsequently registered and refiled in Court. The attorney of two of the arbitrators furnished to the Sub-Registrar a list of the property covered by the award. The proceedings under the Succession Act and the Arbitration Act were then separated. The respondent made an application under s. 14(2) of the Arbitration Act, and the appellant applied for setting aside the award. The Court passed a decree in terms of the award. The High Court on appeal by the appellant .upheld the award.

On appeal by a certificate of the High Court the appellant contended that being an executor he could not refer the matter to arbitration,· that the award was not filed within the time prescribed by the Limitation Act, that it was not registered according to law, that the First Additional Judge had no jurisdiction to extend time for making the award, that the arbitrators were guilty of misconduct and the award was in excess of the power given to them and that even if the awarci"was proper and legal the respond'"nt having refused to adopt the appellant the decree should have been as provided by the award on the happening of tlile contingency and the Court passing the decree had no jurisdiction to take subsequent events into consideration.

Held, that the filing of the award by the arbitrators after notice to the parties was not barred by limitation as Art. 178 of the Limitation Act applied to applications made by the parties and not to the filing of the award by the arbitrators.

The award required registration but the filing of an un-· registered award under s. 49 of the Registration Act was not prohibited; what was prohibited was that it could not be taken into evidence so as to affect immoveable property falling under s. 17 of the Act.

Champalal

812 SUPREME lJOURT REPORTS [1960(2)]

The Court had jurisdiction to entertain the application for filing the award and to extend time for filing it.

By the will the appellant could not get the property of the Mst. Samarath Bai testator nor \Vas he constituted an executor except in the event of his being adopted and therefore he could enter into the arbitration agreement.

Kapur].

The agreement for arbitration having specifically stated that the consequences of adoption or non-adoption \Vere to be decided by the arbitrators, they rightly laid down what was to happen if the adoption did not take place owing to the default of either party, imposing a time limit was implicit in the terms of the agreement and their award \Vas not in excess of the power given to them by the arbitration agreement.

The award could not be treated as having perverted the line of succession by merely stating that if the adoption did not take place the respondent would receive l: share of the testator's property and it would form her stridhan.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 34 of 1956.

Appeal from the judgment and order dated February 19, 1954 of the former Nagpur High Court, in Misc. Appeal No. 164 of 1949, arising out of the judgment and decree dated November 22, 1949, of the First Additional District Judge, Akola, in Civil Suit No. 12-A of 1948.

0. B. Agarwala and GanpaJ; Rai, for the appellant.

S. K. Kapur and B. P. Maheshwari, for the respondent.

1960. January, 21. The Judgmentof the Court was delivered by

KAPUR J.-This is an appeal against the judgment and order of the Nagpur High Court and arises out of proceedings under the Indian Arbitration Act.

The appellant in this case is Champalal and the respondent is Samarath Bai, the widow of Lal Chand.

The parties who are Jains belong to Balapur in the district of Akola in the previous State of Madhya Pradesh. The relationship of the parties is shown by the following pedigree table : ·

I Nanak Chand

I Bulakhidas= Jivanbai

I Babibai= Rasiklal

Phool Chand

I I I Khushal Chand Sundarlal I Lalchand= Samarathbai

I Ishwardas ·

I Champalal

I Sakarchand

I Ratanbai= Vijay Kumar

I Bag la!

I I I Vinaychand

I Deolal

I I

I I

I Digamber Das

I Vimalchand

On September 14, 1944, Lal Chand made a will by which he authorized his wife Samarath Bai to adopt Champalal and made certain disposition of his property. Lal Chand died on September 26, 1944.

On October 20, 1944, the appellant made an application under s. 192 of the Succession Act to the First Additional District Judge of Akola for the appointment of a Curator. This was Misc. J udl. No. 3 of 1944.

Notices were issued to the respondent, Samarath Bai and her daughters. The will was registered on December 2!J, 1944. On January 10, 1945, an arbitration agreement was entered into between the appellant and the respondent and on January 16, 1945, both parties applied for stay of proceedings in the case (Misc. Judi.

No. 3of1944) and the case was adjourned to March 28, 1945, and then was adjourned to June 18, 1945. On that date the arbitrators made an application to the First Additional District Judge for extension of time for four months for making the award. This application was opposed by the appellant but the court gave three months' time on July 26, 1946. The award was made on October 18, 1946. On October 21, it was filed by the arbitrators in the court of the First Additiona.l Di,; trict Judge who on October 30, gave to the parties ten days' time for objections, On November 15~

Champa I al v.

Mst. Samarath /la1

Kapu1 J.

SUPREME COURT.REPORTS [1960(2))

'96° 1946, the appellant filed objections to the award and on January 31, 1947, the respondent applied for a Champalal f v. judgment in terms o the award and for a decree . • VI st. Samaratk Bai The award was unregistered and therefore at the request of the respondent it was handed over for Kapur J. getting it registered to Mithulal who was an attorney of two of the arbitrators Magandas and Sakarchand.

On February 7, 1947, he presented it for registration to the Sub-Registrar but the Sub-Registrar returned it as it was not accompanied by a list and particulars of the property covered by the award. On February 15, 1947, the list and particulars signed by Mithulal were supplied and the award was represented for registration by Mithulal. As he was an attorney of only two of the three arbitrators the Sub-Registrar registered the document on March 26, 1947, in regard to said arbitrators and refused it qua the third arbitrator, Bhogilal. But under the orders of the Registrar the document was registered in regard to Bhogilal also and it was refiled on July 21, 1948, in the Court of the First Additional District Judge. He ordered the two proceedings one under s. 192 of the Succession Act and the other under the Arbitration Act to be separated and the proceedings under the Arbitration Act were ordered to be registered as a suit on August 14, 1948, and on August 30, the court ordered a proper application as required under the High Court Rules to be filed. On September 15, 1948, an application under s. 14(2) of the Arbitration Act was filed.

On October 14, 1948, the appellant filed an application for setting aside the award and therein raised various objections which were rejected and on November 22, 1949, a judgment was passed. in accordance with the terms of the award followed by a decree.

Against this order the appellant took an appeal to the High Court which was dismissed on February Hl, 1954.

The High Court held that the application filed by the respondent dated September 15, 1948, under s. 14(2) of the Arbitration Act was not within time but the original application filed by the arbitrators on October 21, 1946, was within time; that no objection could be taken to the award on the ground that

there were two awards one by ; he arbitrators and 1 ~6° the other by Mithulal who had added to the award by giving the list and particulars; that the First . Cha.;:alat . Additional District Judge was authorised to extend Mst. samarath Bai time for making an award on the application of the arbitrators and he was properly seized of the case ; Kapur J. that no misconduct had been proved and that no illegality had been established and that the appellant : did not get anything under the will except on adoption nor was he until then constituted an executor.

Against this judgment this appeal has been filed on a certificate by the High Court.

In appeal before us counsel for the appellant raised six points: (I) the filing of the award was not within time as no application was made under s. 14 within the time allowed by the Limitation Act; (2) that the award required registration and was not registered in accordance with law and the mere fact that it was registered does not clothe it with legality ; (3) the :First Additional District Judge had no jurisdiction to grant three months' extension of time to the arbitrators for . making the award which was granted on July 26, 1946; (4) that the arbitrators were guilty of misconduct; (5) that the award is in excess of the power given to the arbitrators under the agreement of arbitration and (6) even ifthe award was proper and legal the respondent had refused to adopt the appellant and therefore the decree should have been as provided by the award on the happening of that contingency and in the alternative the First Additional District Judge who passed the decree had no jurisdiction to take.subsequent events into consideration.

In our opinion points nos. I, 2 and 3 are wholly without substance. The award was made on October 18, 1946, and the arbitrators filed it in the court of the First Additional District Judge and they also gave notice to the parties by registered post informing them of the making of the award. It has not been shown as to how the filing of the award is barred by limitation.

Article 178 of the Limitation Act which was

I Of

r9o relied upon by the appellant applies to applications made by the parties and not to the filing of the award Cha1npalal

v. by the arbitrators.

Mst. Samarath Bai The second question that the award required registration and could not bet filed by the arbitrators T<atrir I before it was registered is equally without substance.

The filing of an unregistered award under s. 49 of the Registration Act is not prohibited; what is prohibited is that it cannot be taken into evidence so as to affect immoveable property falling under s. 17 of that Act.

That the award required registration was rightly admitted by both parties. It was contended by counsel for the appellant that under s. 21 of the Registration Act and the rules made under s. 22 a description of the property was necessary and as that was supplied through Mithulal who, according to counsel, did not have the necessary authority to do so, the award must be taken to be an incomplete document which could not be registered. The High Court has found that in the circumstances of this case lists were not necessary and therefore anything done by Mithulal whether authorised or not will not affect the legality of the registration. The third point that the First Additional District Judge before whom the application was made for extending the time for making the award had no jurisdiction is also not sustainable. It so happened thatthe court which had jurisdiction to entertain applications for the filing of awarJs was the same before whom the application under s. 192 of the Succession Act had been filed. If that court was the proper court in which such applications \\ere to be made then no defect can be found in the application being made to that court or that court giving such extension.

The ground on which the charge of misconduct of the arbitrators was founded was that the arbitrators had before hearing the parties decided amongst themselves that they would give a particular award. The High Court has found that this charge has not been proved. It was based on a statement of the appellant that one of the arbitrators, Magandas, had suggested to him that he, the appellant, should agree to give to

T--

, .

the respondent an absolute estate in a portion of the I96o property and if that was done the dispute would be settled, but he was agreeable only to giving a life Champalal estate and th.e arbitrators then told him that in that Mst. sa~rath Bai case they would give an absolute estate to the respondent. As the High Court has pointed out this fact Kapur J. was not pleaded in the first application of objections filed by the appellant and it was in its opinion an after-thought. Reliance was also placed on the following statement ofMagandas in cros-examination asP.W.3:

"We had decided as to how the award was to be made by us, but as these two persons did not come we made the application to the Court for extension of time".

But the explanation of the other arbitrators was that they wanted to bring about an amicable settlement and had gone to Balapar and then to Akola. The appellant and his brother had promised to follow them there but as they did not turn up an application was made for extension of time. There is nothing wrong in what the arbitrators did and it cannot be said that any inference of misconduct can be drawn from this evidence.

It was then submitted that the award was in excess of the powers given to the arbitrators and was therefore invalid. This point was divided into three points : (i) that the reference itself was invalid and therefore the award was a nullity; (ii) that the award was in excess of the powers given to the arbitrators and (iii) the award was contrary to law on the face of it. In support of point No. (i) it was submitted that the appellant having accepted the office of an executor could not enter into an arbitration concerning the execution, authority to adopt or the property covered by the will. It is unnecessary to decide the vitality of this point because according to . the true construction of the will the appellant was not to become the executor till he had been adopted. Paragraph 10 of the will was as follows :

"I have this day, made as above the will of my estate. TJnder this will, I am authorising the said

r96o Champalal Ishwardas to execute the same. I have appointed him the executor of this will.

Under the Cha111palal 1 h 1 b h v. said wil , t e said Champalal alone shal e t e full Mst. Samarath Bai owner of my entire movable and immoveable property and the executor of the will after my Hapur J. death if I adopt him during my lifetime or even if my wife adopts him (after my death)." The words "under the said will the said Champalal shall be ............ the executor of the will after my death if I adopt him during my lifetime or even if my wife adopts him after my death" show that the appellant was to become executor after his adoption and as he was not adopted he cannot be the executor and therefore the argument that an executor cannot enter into arbitration does not arise and we do not think it necessary to decide this matter beyond saying that the a.ppellant was not constituted an executor eo nominie but was to be an executor if he was adopted.

Similarly the question whether the appellant after accepting the office of an executor had renounced it or a discharge was necessary under s. 301 of the Succession Act does not arise.

Points (ii) and (iii) may be taken up together.

It was argued that the award is in excess of thepower given to th~ arbitrators because it determined the rights of the appellant as an executor and becaue it was in excess of para. No. 1 of the arbitration agreement which provided that the arbitrators should maintain the gifts to charities and the gift in favour of the testator's daughters and others. It is difficult to see how the award has lost sight of this paragraph.

As a matter of fact the arbitrators have maintained the gifts to charities and other gifts made by the testator in the will and they have clearly stated that the person becoming the owner of the deceased's property, will have to provide for the maintenance of the persons named in the will and pay the charities therein enumerated.

Another objection raised was that according to the arbit.ration agreement the arbitrators had to enforce the will and not to act outside it and also they could not impose a limit of time for adoption. How they

- -.. ..

have acted dehors the will has not been shown.

The

I960 . contention raised was that according to the arbitra- Champalal tion agreement the arbitrators had to decide in what v. proportion the parties to the dispute were to "enjoy "Mst. Samarath Bai the estate of the testator and not that one of them will get nothing at all. As we read paragraph IO of Kapur J. the will, and the High Court also so construed it, the appellant could get the property of the testator only if he was adopted by the testator or his widow, the respondent. It is not correct, therefore, to read the term of the arbitration agreement as meaning that the appellant was to get at least some portion of the property irrespective of his being adopted.

Paragraph 2 of the arbitration agreement shows that they had also to decide that in c11se the respondent adopted the appellant what should be the respective rights of the parties in the estate. The arbitrators decided that the respondent should adopt the appellant according to Hindu Law within four months before February, 1947, and if the respondent failed so to do within the time above specified the appellant would be the heir and executor of the deceased's entire property and the respondent would

be entitled to Rs. 200 per mensem as maintenance.

But if in spite of the respondent's readiness to adopt the appellant refused to be adopted within four months, he would not get any rights in the property of the deceased nor would he be the executor. As it was specifically stated in the arbitration agreement that the consequences of the adoption or non-adoption were to be decided by the arbitrators, they rightly laid down what was to happen ifthe adoption did not take place and also provided that if it was due to the default of the appellant one consequence win follow

and if it was the default of the respondent another corisequerrce would follow. The words of the agreement

" In the same way the arbitrators may also decide that in case it is decided that the party No. 2 should adopt the party No. l anq. if that thing is accepted by the pa.rty No. l and in case the adoption takes place, what shall be the rights of both the parties and how they will stand in respect of the property .... , ....... _"

z96o mean that the power to limit the time was implicit because the happening of these events could not be Champalal l f" £ l l v. e t or a imit ess period.

Mst. Samarath Bai The courts below have found on the evidence that the appellant was not prepared to be adopted. We Kapur J. have been taken through the evidence and we find no reason to differ from the opinion of the High Court that the appellant was not prepared to be adopted. His attitude in regard to that matter is clear from ground No. 37 of the Grounds of Appeal taken by him in the High Court which was:-

"The lower Court erred in holding that Champalal was not within his rights in consenting to get adopted by Mt. Samarathbai within the time fixed by the arbitrators without prejudice to his objections against the a ward " and the courts have rightly come to that conclusion.

In this view of the matter the alternative argument of taking subsequent events into consideration does not arise.

It was also argued that by making the award the arbitrators had perverted the line of succession. All that the award has stated is that in case the adoption takes place the respondent would receive ! share of the property of the testator and it would form her stridhana. How that has perverted the line of succession is difficult to understand.

There is no force in this appeal and it must there- fore be dismissed with costs.

Appeal dismissed.

cl. 20

High Court

of East Punjab

CHAMPALAL

MST. SAMARATH BAI

JAFER IMAM, J.

L. KAPUR

K. SUBBA RAO, JJ.

s. 14(2)

Jndian Ncgistration Act

ss. 17, 49

Indian Limitation Act

Art. 178

Jndian Succession Act, 1925

s. 192

Champalal Ishv,:ardas

Champalal

s. 192

Samarath Bai

s. 14(2)

Limitation Act

Art. 178

Limitation Act

s. 49

Registration Act

s. 17

Samarath Bai testator

First Additional District Judge, Akola

B. Agarwala

S. K. Kapur

B. P. Maheshwari

KAPUR

Nagpur High Court

Champalal

Samarath Bai

Lal Chand

Nanak Chand

September 26, 1944

October 20, 1944

s. 192

December 2!J, 1944

January 10, 1945

January 16, 1945

March 28, 1945

June 18, 1945

July 26, 1946

Kapur

Mithulal

Magandas

Sakarchand

February 7, 1947

February 15, 1947

March 26, 1947

Bhogilal

July 21, 1948

s. 192

August 14, 1948

September 15, 1948

s. 14(2)

October 14, 1948

November 22, 1949

February Hl, 1954

s. 14(2)

October 21, 1946

samarath Bai

s. 14

Limitation Act

October 18, 1946

Article 178

Limitation Act

s. 49

Registration Act

s. 17

s. 21

Registration Act

s. 22

s. 192

Magandas

ofMagandas

Balapar

Akola

s. 301

Samarath

Samarathbai


S.C.R..

SUPR.EME COUR.T R.EPORTS 821

THE SUPER.INTENDENT, CENTR.AL PR.ISON,

FATEHGARE

RAM MANOHAR. LORIA

(B. P. SINHA, C.J., P.B. GAJENDRAGADKAR, K. SuBBA RAo, K.C. DAs GUPTA AND J.C. SHAH, JJ.)

Fundamental Right-Infringement of-Enactment imposing restrictions on freedom of speech-Constitu.tional validity-Test- "In the interest of public order".

Meaning of-Doctrine of severability-Applicability-Constitution of India, Arts. r9(r) (a), r9(2)- U.P. Special Powers Act, r932 (U.P. XIV of r932) s. 3.

Section 3 of the U.P. Special Powers Act, 1932 (XIV of 1932), provided as follows:-

"Whoever, by word, either spoken or written, or by signs or by visible representations, or otherwise, instigates, expressly or by implication, any person or class of persons not to pay or to defer payment of any liability, and whoevet does any act, with intent or knowing it to be likely that any words, signs or visible representations containing such instigation shall thereby be communicated directly or indirectly to any person or class of persons, in any manner whatsoever, shall be punishable with imprisonment which may extend to six months, or with fine, extending to Rs. 250, or with both." The appellant, who was prosecuted under the section for delivering speeches instigating cultivators not to pay enhanced irrigation rates to the Government, applied to the High Court for a writ of habeas corpus on the ground, amongst others, that the said section was inconsistent with Art. 19(1) (a) of the Constitution and as such void. The High Court decided in favour of the appellant and he was released. The State appealed to this Court and the question for determination was whether the impugned section embodied reasonable restrictions in the interests of public order and was thus protected by Art. 19(2) of the Constitution.

Held, that even though in a comprehensive sense all the grounds specified in Art. 19(2) of the Constitut.ion on which any reasonable restrictions on the right fo freedom of speech must be based can be brought under the general head "public order", that expression, inserted into the Article by the Constitution (First Amendment) 'Act, 1951, must be demarcated from the other grounds and ordinarily read in an exclusive sense to mean public peace, safety and tranquility in contradistinction to national upheavals, such as revolution, civil strife and war, affecting the security of the State.

Ramesh Thappar v. The State of Madras (1950) S.C.R. 594, Brij Bhushan v. fThe State of Delhi. (1950) S.C.R. 605, The State of Bihar v. Shailabala Devi. (1952) S.C.R. 654 and Cantewell v.

Connecticut. (1940) 310 U.S. 296, discussed.

I960

January 2c.

822 SUPREME COUR'f REPORTS (1960(2)]

i960 It is \vcll settled by decisions of this Court that in a restriction in order to be reasonable must have a reasonable relation to The Superintendent, the object the Legislation has in view and must not go beyond it . . Central Prison, Restrictions, therefore, meant to be in the interest of public Fatehgarh order 'vhich have no proximate relationship or nexus with it v. but can be only remotely or hypothetically connected with it, Ra1n .lfanohar cannot be reasonable within the meaning of Art. 19(2) of the Lohia Constitution.

Rex v. Basudcva, A.I.R. (r950) F.C. 67, applied.

Ramji Lal Modi v. The State of U.P. (r957) S.C.R. 860 and Virendra v. The State of Pttnjab, (r958) S.C.R. 308, explained.

So judged, it cannot be said that the acts prohibited under the wide and sweeping provisions of s. 3 of the Act can have any proximate or even foreseeable connection with public order.sought to be protected by it, and, consequently, that section, being violative of the right to freedom of speech guaranteed by Art. 19(1) (a) of the Constitution, must be struck down as ' unconstitutional.

It would be incorrect to argue that since instigation by a single individual not to pay taxes might ultimately lead to a revolution resulting in distruction of public order, that instigation must have a proximate connection with public order. No fundamental rights can be restricted on such hypothetical and imaginary consideration.

Nor is it possible to accept the argument that in a democratic set up there can be no scope for agitational approach or that any instigation to break a bad law must by itself constitute a breach of public order, for to do so without obvious limitations would be to destroy the right to freed-Om of speech on which democracy is founded.

It is not possible to apply the doctrine of severability relating to fundamental rights as enunciated by this Court to the provisions of_ the impugned section, since it is not possible to precisely determine whether the various categories of instigation mentioned therein fall within or without the constitutionally permissible limits of legislation and separate the valid parts from the invalid.

R'.M.D. Chamarbaugwalla'v. The Union of India (r957) S.C.R. 930, explained and distinguished.

Ramesh Thappar v. The State of Madras (r950) S.C.R. 594 and Chintaman Rao v. The State of Madhya Pradesh. (r950) S.C.R. 7 59, referred to.

CRIMINAL

APPELLATE

JURISDICTION: Criminal Appeal No. 76 of 1956.

Appeal from the judgment and order dated August 27, 1954, of the Allahabad High Court in Criminal M.isc. Writ No. 20 of 1954.

. -=

. . -

-. '

K. L. Misra, Advocate-General for the State of Uttar Ig6o Pradesh. G. C. Mathur and 0. P. Lal, for the appel-Th 5 -. d 1 t e uperinten ent, an S.

Central Prison N. S. Bindra, for the respondent.

Fatehgarh v.

1960. January 21.

The Judgment of the Court Ram Manohar was delivered by Lohia

SUBBA RAO J.-This appeal raises the question of Subba Rao J. interpretation of the words "in the interest of public -order" in Art. 19(2) of the Constitution.

The facts are not in, dispute and they lie in a small compass. The respondent, Dr. Ram Manohar Lohia, is . the General Secretary of the Socialist Party of India. The U. P. Government enhanced the irrigation rates for water supplied from canals to cultivators.

The party to which the respondent belongs resolved to start an agitation against the said enhancement for the alleged reason that it placed an unbearable burden upon the cultivators.

Pursuant to the policy of his party, the respondent visited Farrukhabad and addressed two public meetings wherein he made speeches instigating the audience not to pay enhanced irrigation rates to the Government. On July 4, 1954, at 10 p.m. he was arrested and produced before the City Magistrate, Farrukhabad, who remanded him for two days. After investigation, the Station officer, Kaimganj, filed a charge-sheet against the respondent before Sri P.R. Gupta, a Judicial Officer at Farrukhabad. On July 6, 1954, the Magistrate went to the jail to try the case against the respondent, but the latter took objection to the trial being held in the jail premises. When the Magistrate insisted upon proceeding with the trial, the respondent obtained an adjournment on the ground that he would like to move the High Court for transfer of the case from the file of the said Magistrate. Thereafter the respondent filed a petition before the High Court for a writ of habeas corpus on the ground, among others, thats. 3 of the U. P. Special Powers Act (Act No. XIV of 1932), 1932, (hereinafter called the Act) was void under the Constitution.

r960 In the first instance the petition came up for -- disposal before a division bench of the High Court at The Supnintcndenl, All h b d t" f D d Ch t d" Central Prison a a a COilSIS Ill g 0 ' esa1 an a urve I, Fatehgarh JJ. Elaborate arguments were addressed before them v. covering a wide field.

The learned Judges delivered Ram lVlanohar differing judgments expressing their views on the Lohia main points raised before them. ThPy referred the

Subba Rao J. matter to the Chief Justice for obtaining the opinion of a third Judge on the following two points : "(i) Was the provision of s. 3 of the U. P. Special

Powers Act of 1932 making it penal for a person by spoken words to instigate a class of persons not to pay dues recoverable as arrears of land revenue, inconsistent with Art. 19(l)(a} of the Constitution on the 26th of January, 1950?" and "(ii) if so, was it in the interests of public order ? ". The petition was placed before Agarwala, J., as a third Judge, who agreeing with Desai, J., gave the following answers to the questions referred to him : Question No. (i). "The provision of section 3 of the U. P. Special Powers Act, 1932, making it penal for a person by spoken words to instigate a class of persons not to pay dues recoverable as arrears of land revenue, was inconsistent with Article 19(1)(a) of the Constitution on the 26th , January, 1950."

Question No. (ii). "The restrictions imposed by section 3 of the U. P. Special Powers Act, 1932, were not in the interests of public order." In the usual course the matter was placed before the two learned Judges who first heard the case and they, on the basis of the majority view, allowed the petition and directed the respondent to be released.

The State has preferred the present appeal against the said order of the High Court.

The learned Advocate General, appearing for the appellant, stated before us that he did not propose to canvass the correctness of the majority view on one of the important points raised in the case, namely, that the effect of the passing of the Act did not ipso facto deprive a citizen of his freedom of speech guaranteed under Art. 19(1) (a) of the Constitution and its validity should be tested by the provisions

~. ' -

of Art. 19(2) thereof.

He did not concede the z96o validity of the finding in this regard but assumed Th 5 P-. 1 d 1 • .c h f h' N h' e u erin en en, its correctness .tOl' t purpose o t IS case. ot mg Central Prison further, therefore, need be mentioned on this point.

Fatehgarh The gist of the argument of the learned Advocate v.

General may be stated thus : The legislature can Ram Manohar Lohia make laws placing reasonable restrictions on the rights of a citizen to freedom of speech and expression Subba Rao J. in the interests of public order among other grounds.

The words "in the interests of public order" are wider in connotation than the words " for the maintenance of public order". Laws are rules made by the legislature for the governance of the people in the State which they are bound to obey, and they are enacted to keep public peace and order. The avowed . object of s. 3 of the Act was to prevent persons from instigating others to break the laws imposing a liability upon a person or class of persons to pay taxes and other dues to the State, any authority or to any land-owner. The impugned section was enacted in the interests of public order and therefore the section was protected by Art. 19(2) of the Constitution. The learned Advocate General pointed out that the object of the State in preferring this appeal was to obtain the decision of this Court on the question of constitutional validity of s. 3 of the Act and not to pursue the matter against Dr. Lohia.

The respondent was not present at the time .the appeal was heard and was not represented by an advocate. As the question raised was an important one, we requested Mr. N. S. Bindra to assist the Court, and he kindly agreed to do so. He supported the majority view of the High Court. We record our thanks for his assistance.

At the outset it would not be out of place to notice briefly the history of the Act. The Act was originally passed in the year 1932 during the British rule. In an attempt to offset the campaign of non-payment of taxes and other forms of agitation resorted to by the Congress Party, originally it was put on the. statute book for one year; but in 1940 when the State was under the " Governor's rule ", the Act was made

z960 permanent. Under the Act, ss. 1 and 2 came into - effect immediately on the passing of the Act and The' 5"1P'1"Pnt'.nd, nt, s. 1(2) enabled the Government by notification to en ra nson d ll f h . . .

Fatehgarh exten a or any o t e remammg sectrons to any v. district or to any part of a district in the United Ram Manohar Provinces. After the Constitution, the Act was not Lohia repealed but was allowed to continue, with necessary adaptations, in the statue book. Between April and Subba Rao f.

June, 1954, the State Government extended the prov1s10ns of the Act to 33 districts including :Farrukhabad district.

Now let us look at the provisions of the Act to ascertain its scope and field of operation. The preamble discloses that it was enacted in 1932 to make provision against and to take powers to deal with instigation to the illegal refusal of the payment of certain liablities and s. 2 defines "liablity " to mean "land revenue or any sum recoverable as arrears of land revenue or any tax, rate, cess or other dues or amount payable to Government or to any local authority, . or rent of agricultural land or anything recoverable as arrears of or along with such rent ".

Section 3 prescribes the punishment for instigation to the non-payment of a liability. As the argument centres round this section, it will be convenient to read the same : Section 3: Whoever, by word, either spoken or written, or by signs or by visible representations, or otherwise, instigates, expressly or by implication, any person or class of persons not to pay or to defor payment of any liability, and whoever does any act, with intent or knowing it to be likely that any words, signs or visible representations containing auch instigation shall thereby be communicated directly or indirectly to any person or class of persons, in any manner whatsoever, shall be punishable with imprisonment which may extend to six months, or with fine, extending to Rs. 250, or with both." Section 4 says that any person to whom an arrear of liability is due may apply to the Collector to realize

it, and the Collector is authorized to realize the same

--~ -

as an arrear of land revenue.

The impugned section z96o may be dissected into the following components : -. d h d h k The Superinten ent, • (1) w oever by wor , eit er spo en or written, or Central Prison by signs or by visible representations or otherwise, Fatehgarh

(ii) instigates, (iii) expressly or by implication, v.

(iv) any person or class of persons, (v) not to pay Ram Manohar any liability, (vi) to defer payment of any liability, Lohia

(vii) does an act with intent that any words etc. shall Subba Rao J. be communicated to any person or class of persons,

(viii) with the knowledge that it is likely that such words etc. shall be communicated to any person or class of persons, (ix) such communication may be made directly, or indirectly and (x) shall be punished with imprisonment or with fine or with both. Under this section a wide net has been cast to catch in a variety of acts of instigation ranging from friendly advice to a systematic propaganda not to pay or to defer payment of liability to Government, any authority or to any person to whom rent is payable in respect of agricultural land. The meaning of this section, read along with ss. 2 and 4, can be ascertained more clearly by illustration than by definition.

(1) A instigates B not to pay any liability to Government, any authority or to any land owner; (2) A instigates B to defer payment of any liability to Government, any authority or landlord; (3) A instigates a class of persons to do the same; (4) A may do any one of the foregoing things not only by word, but also by signs, visible representations or otherwise; (5) A may do any one of the things bona fide either to get the claim decided in a Court oflaw or to gain time to get the law changed; (6) A may instigate B not to pay any amount due to Government or to any authority, but the said amount can be recovered by the authority concerned as arrears of land revenue; (7) A may tell C with intention or with knowledge that the said instigation may be communicated to B so that he may not pay; (8) any statement by A to C may imply such instigation. In its wide amplitude the section takes in the innocent and the guilty persons, bona fide and mala fide advice, individuals and class, abstention from payment and deferment of payment,

z96o expressed or implied instigation, indirect or direct

Th S P-. 1 d 1 instigation,. liability due not only to Government euerinenen, .

Central Prison but to any authority or landholder. In short, no Fatehgarh person, whether legal adviser or a friend or a wellv. wisher of a person instigated can escape the tentacles Ram Manohar of this section, though in fact the rent due has Lohia been collected through coercive process or otherwise.

Subba Rao J.

We shall now proceed to consider the constitutional validity of this section. The material portions of the relevant provisions of the Constitution may now be read: Article 19: "(1) All citizens shall have the right- ( a) to freedom of speech and expression ;

(2) Nothing in sub-clause (a) of clause (1) shall affect the operation of any existing law, or prevent the State from making any law, in so far as such law imposes reasonable restrictions on the exercise of the right conferred by the said sub-clause in the interests of the security of the State, friendly relations with foreign States," public order, decency or morality, or in relation to contempt of court, defamation or incitement to an offence." Clause (2) of Art. 19 was amended by the Constitution (First Amendment) Act, 1951. By this amendment several new grounds of restrictions upon the freedom of speech have been introduced, such as friendly relations with foreign States, public order and incitement to an offence. It is self evident and common place that freedom of speech is one of the bulwarks of a democratic form of Government. It is equally obvious that freedom of speech can only thrive in an orderly society. Clause (2) of Art. 19, therefore, does not affect the operation of any existing law or prevent the State from making any law in so far as such law imposes reasonable restrictions on the exercise of the right of freedom of speech in the interest of public order, among others. To sustain the existing law or a new law made by the State under cl. (2) of Art. 19, so far as it is relevant to the present enquiry, two conditions ehould be

complied with, viz., (i) the restrlctions imposed must i96o be reasonable; and (ii) they should be in the interests Th 5 P . 1 d 1 . d

B ,, "d h f h e u crin en en., of public or er. e1ore we cons1 er t e scope o t e Central Prison words of limitation, "reasonable restrictions" and Fatehgarh "in the interests of", it is necessary to ascertain the v. true meaning of the expression "public order" in the Ram Manohar said clause. The expression " public order" has Lohia a very wide connotation. Order is the basic need Subba Rao J. in any organised society. It implies the orderly state of society or community in which citizens can peacefully pursue their normal activities of life.· In the words of an eminent Judge of the Supreme Court of America "the essential rights are subject to the elementary need for order without which the guarantee of those rights would be a mockery". The expression has not been defined in the Constitution, but it occurs in List II of its Seventh Schedule and is also inserted by the Constitution (First Amendment) Act, 1951 in cl. (2) of Art. 19.

The sense in which it is used in Art. 19 can only be appreciated by ascertaining how the Article was construed before it was inserted therein and what was the defect to remedy which the Parliament inserted the same by the said amendment. The impact of cl. (2) of Art. 19 on Art. 19(l)(a) before the said amendment was subject to judicial scrutiny by this Court in Ramesh Thappar

v. The State of Madras( 1).

There the Government of Madras, in exercise of their powers under s. 9(1-A) of the Madras Maintenance of Public Order Act, 1949, purported to issue an order whereby they imposed a ban upon the entry and circulation of the journal called the "Cross Roads" in that State.

The petitioner therein contended that the said order contravened his fundamental right to freedom of speech and expression. At the time when that order was issued the expression "public order " was not in Art. 19(2) of the Constitution; but the words " the security of the State " were there. In considering whether the impugned Act was made in the interests of security of the State, Patanjali Sastri, J., as he then was, after citing the observation of Stephen in his Criminal Law of England, states:

(1) [19soJ s-.c.R. 5,94, 600, 601, 602.

The Superintendent.

Central Prison

Fatehgarh v.

Ram Manohar Lohia

Subba Rao ].

"Though all these offences thus involve disturbances of public tranquillity and are in theory offences against public order, the difference between them being only a difference of degree, yet for the purpose of grading the punishment to be inflicted in respect of them they may be classified into different minor categories as has been done by the Indian Penal Code. Similarly, the Constitution, in formulating the varying criteria for permissible legislation imposing restrictions on the fundamental rights enumerated in article 19 (1), has placed in a distinct category those offences against public order which aim at undermining the security of the State or overthrowing it, and made their prevention the sole justification for legislative abridgement of freedom of speech and expression, that is to say, nothing less than endangering the foundations of the State or threatening its overthrow could justify curtailment of the rights to freedom of speech and expression ......... ''.

The learned Judge continued to state:

"The Constitution thus requires a line to be drawn in the field of public order or tranquillity marking off, may be, roughly, the boundary between those serious and aggravated forms of public disorder which are calculated to endanger the security of the State and the relatively minor breaches of the peace of a purely local significance, treating for this purpose differences in degree as if they were differences in kind." The learned Judge proceeded further to state:

"\Ve are therefore of opinion that unless a law restricting freedom of speech and expression is directed solely against the undermining of the security of the State or the overthrow of it, such law cannot fall within the reservation under clause

(2) of article 19, although the restrictions which it seeks to impose may have been conceived generally in the interests of public order." This decision establishes two propositions, viz.,

(i) maintenance of public order is equated with maintenance of public tranquillity;. and (ii) the offences against

public order are divided into two categories, viz., (a) 1960 major offences affecting the security of the State, and T' ---:- (b) . i:c • l . b h f l l l rie Superintendent, . mor ouence.s mvo v:rng .eac o pure y oca Central Prison s1gmficance. This Court m BriJ Bhushan v. The State Fatehgarh of Delhi (1 ) followed the earlier decision in the context v. ofs. 7(1) (c) of the EastPunjabPublicSafety Act, 1949.

Ram Manohar Fazl Ali, J., in his dissenting judgment gave the Lahia expression "public order" a wider meaning than that Subba Rao J. given by the majority view.

The learned Judge observed at p. 612 thl:ls :

"when we approach the m, atter in this way, we find that while' public disorder' is wide enough to cover a small riot or an affray and other cases where peace is disturbed by, or affects, a small group or persons, ' public unsafety ' (or insecurity of

the State), will usually be connected with serious internal disorders and such disturbances of public tranquillity as jeopardize the security of the State." This observation also indicates that "public order" is equated with public peace and safety. Presumably in an attempt to get over the effect of these two decisions, the expression "public order " was inserted in Art. 19 (2) of the Constitution by the Constitution (First Amendment) Act, 1951, with a view to bring in offences involving breach of purely local significance within the scope of permissible restrictions under

cl. (2) of Art. 19. After the said amendment, this Court explained the scope of Ramesh Thappar' s Gase (1) in The State of Bihar v. Shailabala Devi (2). That case

was concerned with the constitutional validity of s. 4 (1) (a) of the Indian Press (Emergency Powers) Act, 1931. It deals with the words or signs or visible representations which incite to or encourage, or tend to incite to or encourage the commission of any offence of murder or any cognizable. offence involving violence.

Mahajan, J., as he then was, observed at p. 660.:

"The deduction that a person would be free to incite to murder or other cognizable offence through the press with impunity drawn from our decision in

( l) [1950] S.C R . 605.

{2) (1952] S.C.R. 654.

1o6

The Superintendent,

Central Prison Fatehgarh v.

Ran1 1\1 anohar Lohia

Subba _Rao J.

Ramesh ThfiLppar's case could easily have been avoided as it was avoided by Shearer J., who in very emphatic terms said as follows :

"I have read and re-read the judgments of the Supreme Court, and I can find nothing in them myself which bear directly on the point at issue, and leads me to think that, in their opinion, a restriction of this kind is no longer permissible. " The validity of that section came up for consideration after the Constitution (First Amendment) Act, 1951, which was expressly made retrospective, and therefore the said section clearly fell within the ambit of the words "in the interest of public order". That apart the observations of Mahajan, J., as he then was, indicate that even without the amendment that section would have been good inasmuch as it aimed to prevent incitement to murder.

The words "public order " were also understood in America and England as offences against public safety or public peace. The Supreme Court of America observed in Cantewell v. Connecticut (1) thus:

"The offence known as breach of the peace embraces a great variety of conduct destroying or menacing public order and tranquillity. It includes not only violent acts and words likely to produce violence in others. No one would have the hardihood to suggest that the principle of freedom of speech sanctions incitement to riot ...... When clear and present :danger of riot, disorder, interference with traffic upon the public streets, or other immediate threat to public safety, peace, or order appears, the power of the State to pre\•ent or punish is obvious. " The American decisions sanctioned a variety of restrictions on the freedom of speech in the interests of public order. They cover the entire gamut of restrictions that 011, n be imposed under different heads in Art. 19(2) of our Constitution. The following summary of some of the cases of the Supreme Court of America given in a well-known book on Constitutional Law illustrates the range of categories of cases covering

(I) (1940) 310 US. 296, 308.

--'

~· 1fthat expression. "In the interests of public order, the i960 State may prohibit and punish the causing of ' loud and raucous noise' in streets and public places by The Superintenden', means of sound amplifying instruments, regulate the Central Prison hours and place of public discussion, and the use of Fatgarh the public streets for the purpose of exercising freedom Ram Manoha• of speech ; provide for the expulsion of hecklers from Lakia meetings and assemblies, punish utterances tendirig to incite an immediate breach of the peace or riot as Subba Rao J. distinguished from utterances causing mere 'public inconvenience, annoyance or unrest'." In England also Acts like Public Order Act, 1936, Theatres Act, 1843 were passed: the former making it an offence to use threatening, abusive or insulting words or behaviour in any public place or at any public meeting with intent to provoke a breach of the peace or whereby a

breach of the peace is likely to be caused, and the latter was enacted to authorise the Lord Chamberlain to prohibit any stage play whenever he thought its public performance would militate against good manners, decorum and the preservation of the public peace. The reason underlying all the decisions is that if the freedom of speech was not restricted in the manner the relevant Acts did, public safety and tranquillity in the State would be affected.

But in India under Art. 19(2) this wide concept of "public order" is split up under different heads. It enables the imposition of reasonable restrictions on the exercise of the right to freedom of speech and expression in the interests of the security of the State, friendly relations with foreign States, public order, . decency or morality, or in relation to contempt of court, defamation or incitement to an offence.

All the grounds mentioned therein can be brought under the general head "public order" in its most comprehensive sense. But the juxtaposition of the different grounds indicates that, though sometimes they tend to' overlap, they must be ordinarily intended to exclude each other. " .Public order" is therefore something which is demarcated from the others. In that limited sense, particularly in view of the history of the amendment, it can be postulated th.a.t "public order''

r96o is synonymous with public peace, safety and tranquil-,,

Th -.

Jity. e Superintendent, • . • .

Central p,; son The next questron IS what do the words "rnterest Fatehgarh ' of public order" mean? The learned Advocate

General contends that the phrase "in the interest Ram Manohar uf public order" is of a wider connotation than the Loln'.a words "for the maintenance of public order" and,

Subba Rao J. therefore, any breach of law which may have the tendency, however remote, to disturb the public order would be covered by the said phrase. Support is sought to be drawn for this wide proposition from the judgment of this Court in Ramji Lal Modi v. The State of U.P. (1 ). It is not necessary to state the facts of that case, as reliance is placed only on the observations of Das, C.J., at p. 865, which read:

"It will be noticed that the language employed in the amended clause is "in the interests of" and not "for the maintenance of'. As one of us pointed out in Debi Saran v. The State of Bihar ('), the expression "in the interests of" makes the ambit of protection very wide.

A law may not have been designed to directly maintain public order and yet it may have been enacted in the interests of public order." The learned Chief Justice again in V irendra v. The State of Punjab(') observed, at p. 317, much to the sctme effect :

"As has been explained by this Court in Ramji Lal Modi v. The State of U.P. (1), the words "in the interests of" are words of great amplitude and are much wider than the words "for the maintenance of."

The expression "in the interests of" makes the ambit of the protection very wide, for a law may not have been designed to directly maintain the public order or to directly protect the general public against any particular evil and yet it may have been enacted "in the interests of" the public order or the general public as the case may be." We do not understand the observations of the Chief Justice to mean that any remote or fanciful conneo. tion between the ipugned Aot and the public order (I) [r957] S.C, R. 860. .

(2) A.LR (I954) Pat 254. .

(3) [1958] S.C.R. 308, ·

...

.,..

would be sufficient to sustain its validity. The learned r960 Chief Justice was only making a distinction between TheSuperntendent

an Act which expressly and directly purported to Central 'Prison ' maintain public order and one which did not expressly Fatehgrah state the said purpose but left it to be implied therev. from; and between an Act that directly maintained Ram Manoha• public order and that indirectly brought about the Lohia same result. The distinction does not ignore the necessity for intimate connection between the Act and the public order sought to be 'maintained by the Act.

Apart from the said phrase, another limitation in the clause, namely, that the restrictions shall be reasonable, brings about the same result. The word "reasonable" has been defined by this Court in more than one decision. It has been held that in order to be reasonable, "restrictions must have reasonable relation to the object which the legislation seeks to achieve and must not go in excess of that object".

The restriction made "in the interests of public order"

must also have reasonable relation to the object to be achieved, i.e., the public order. If the restriction has no proximate relationship to the achievement of public order, it cannot be said that the restriction is a reasonable restriction within the meaning of the . said clause. A full bench decision of the Federal

Court in Rex v. Basudeva (1) contains some observations which give considerable assistance to construe the words. In that case, the appellant was detained in pursuance of the order ma.de by the Government of U.P. under the U.P. Prevention of Black-Marketing (Temporary Powers) Act, 1947. The question was whether the preventive detention provided for in s. 3(1) (i) of the said Act was preventive detention for reasons connected with the maintenance of public order. The argument in that case ran on the same lines as in the present case. The learned Advocate General there urged that habitual black-marketing in essential commodities was bound sooner or later to cause a dislocation of the machinery of controlled distribution which, in turn, might lead to breaches of tpe peace and that; herefore, det.ention with a view to ; prevent such black-marketing was covered by th~

\I) A.I.R. (l950) F, C, 67

Subba Rao J.

r96o entry. Answering that argument, Patanjali Sastri, J.,

Th S P-. d 1 as he then was, pointed out, at p. 69: e u erinten en , Central Prison "Activities such as these are so remote in the Fatehgrah chain of relation to the maintenance of public order v. that preventive detention on account of them Ram Manohar cannot, in our opinion, fall within the purview of Lohia Entry I of List IL ............ The connection con-

Subba Rao J. templated must, in our view, be real and proximate, not far-fetched or problematical." The decision, in our view, lays down the correct test.

The limitation imposed in the interests of public order to be a reasonable restriction, should be one which has a proximate connection or nexus with public order, but not one far-fetched, hypothetical or problematical or too remote in the chain of its relation with the public order.

We shall now test the impugned section, having regard to. the aforesaid principles. Have the acts prohibited under s. 3 any proximate connection with public safety or tranquility ? We have already analysed the provisions of s. 3 of the Act. In an attempt to indicate its wide sweep, we pointed out that any instigation by word or visible representation not to pay or defer payment of any exaction or even contractual dues to Government, authority O< a landowner is made an offence. Even innocuous speeches are prohibited by threat of punishment. There is no proximate or even forseeable connection between such instigation and the public order sought to be protected under this section.

We cannet accept the argument of the learned Advocate General that instigation of a single individual not to pay tax or dues is a spark which may in the long run ignite a revolutionary movement destroying public order. We can only say that fundamental rights cannot be controlled on such hypothetical and imaginary considerations. It is said that in a democratic set up there is no scope for agitational approach and that if a law is bad the only course is to get it modified by democratic process and that any instigation to break the law is in itself a disturbance of the public order. If this argument without obvious Hmitations be accepted, it would

destroy the right to freedom of.speech whicb is the z96o very foundation of democratic way of life. Unless Th c; . . . a 1 there is a proximate connection between the instiga- ~.~;~~";:1:0:;•' tion and the public order, the restriction, in our view, Fatehgarh is neither reasonable nor is it in the interest of public v. order. In this view, we must strike down s. 3 of the Ram Manohar Act as infringing the fundamental right guaranteed Loliia under Art. 19(l)(a) of the Constitution.

The learned Advocate General then contended that Subba Rao .f. the section is severable and that if so severed, the section may be made to function within the limited field that stands the test of Art. 19(2) of the Constitution. He asks us to read the section as follows :

"Whoever, by word, either spoken or written, or by signs or by visible representations, or otherwise, instigates, expressly or by implication, any class of persons not to pay or to defer payment of any liability, and whoever does any act, with intent or knowing it to be likely that any words, signs or visible representations containing such instigation shall thereby be communicated directly or indirectly to any class of persons, in any manner whatsoever, shall be punishable with imprisonment which may extend to six months, or with fine,. extending to Rs. 250, or with both." By so doing he argues that in; tigation of a class of persons only is made liable and thereby the section is rid of the vice of unconstitutionality.

The doctrine of severability vis-a-vis the. fundamental rights is sought to be supported on the basis of the wording of Art. 13(1) of the Constitution.

Under that Article laws, in so far as they are inconsistent with the provsions of Part III, are void only to the extent of such inconsistency. But this implies that consistent and inconsistent parts of a law are severable. This doctrine in its relation to fundamental rights was considered by this Court in three decisions. In Ramesh Thapper's case (1) such an argument has been repelled by this Court. Patanjali Sastri, J., as he then was, stated the legal position thus at p. 603 :

(r) (1950] S.C.R. 594, 600, 601, 602.

The Superintendent,

Central Prison

Fatehgarh v.

Ram JVI ano har Lohia

Subba Rao].

"Where a law purports to al'lthoi:ise the imposition of restrictions on a fundamental right in language wide enough to cover restrictions both within and without the limits of constitutionally permissible legislative action affecting such right, it is not possible to uphold it even so far as it may be applied within the constitutional limits, as it is not severable. So long as the possibility of its being a pp lied for purposes not sanctioned by the Constitution cannot be ruled out, it must be held to be wholly unconstitutional and void." In Ohintaman Rao v. The State of Madhya Pradesh (1), the same principle ls again restated. Mahajan, J., as he then was observed at p. 765:

"The law even to the extent that it could be said to authorize the imposition of restrictions in regard to agricultural labour cannot be held valid because the language employed is wide enough to cover restrictions both within and without the limits of constitutionally permissible legislative action affecting the right. So long as the possibility of its being applied for purposes not sanctioned by the Constitution cannot be ruled out, it must be held to be wholly void." The wide reach of this principle appears to have been circumscribed t6 some extent in a later decision of this Court in R. M. D. Ohamarbaugwalla v. The Union of India (2). In that case the constitutionality of ss. 4 and 5 of the Prize Competitions Act (42 of

1955) Was challenged on the ground that 'prize competition' as defined in s. 2(d) of the Act included not merely competitions that were of a gambling nature but also those in which success depended to a. substantial degree on skill.

This Court, having regard to the history of the legislation, the declared object thereof and the wording of the statute, came to the conclusion that the competitions which were sought to be controlled and regulated by the Act were only those competitions in which success did not depend to any substantial degree on skill. That conclusion was sufficient to reject the contention raised in that case; but even on the assumption that.

(1) [1950] s.c.R. 759.

(2) [1957] s.c.R. 930.

> ---

'prize competition' as defined in S; 2(d) of the Act

I960 included those in whi9h success depended to a The superintendent substantial degree on skill as well as those in which it central Prison ' did not so depend, this Court elaborately considered Fatehgurh the doctrine of severability and laid down as many v. as seven rules of construction. On the application of Ram Manohar

Lakia the said rules it was held that the impugned provisions were severable in their application to competitions in which success did not depend to any Subba Rao f. substantial degree on skill.

The foregoing discussion yields the following results: (I) "Public order" is synonymous with public safety and tranquillity : it is the absence of disorder involving breaches of local significance in contradistinction to national upheavals, such as revolution, civil strife, war, affecting the security of the State ; (2) there must be proximate and / reasonable nexus between the speech and the public order; (3) s. 3, as it now stands, does not establish in most of the cases comprehended by it any such nexus; (4) there is a conflict of decision on the question of severability in the context of an offending provision the language whereof is wide enough to cover restrictions both within and without the limits of constitutionally permissible legislation; one view is that it cannot be split up if there is possibility of its being applied for purposes not sanctioned by the Oonstituti®n and the other view is that such a provision is valid if it is severable in its application to an object which is clearly demarcated from other object or objects falling outside the limits of constitutionally permissible legislation; and (5) the provisions of the section are so inextricably mixed up that it is not possible to apply the doctrine of severability so as to enable us to affirm the validity of a part of it and reject the rest.

It is not necessary in this case to express our preference for one or other of the foregoing decisions.

Assuming that the summary of the rules of construction given in the last of the cases cited supra are correct and exhaustive, we are not satisfied that in the instant case the impugned section with the

.t97

840 SUPREME COURT REPORTS [HlliO (2)]

I9~0 omissions suggested by the learned Advocate General --:- could, wholly or to any extent, be salvag('d. The The Sapmntendent, d f th t" "th ti t d · Central Prison wor s o e sec ion WI 1e sugges e om1ss1ons Fafohgarh continue to suffer from the same vice they are v. subjected to without the said omissions, The

Ram Manohar suggested omissions from the section only exclude r.ohia individuals from the operation of the section and confine it to a class of persons and in other respects Subba Rao J, it is not freed from the defects already pointed out by us. In R. M. D. Chamarbaugwalla's Case (1) the difference between two classes of competitions, namely, those that are of gambling nature and t.11ose in which success depends on skill, is clear-cut and has long been recognized in legislative practice. Rut in the present case it is not even possible to predicate with some kind of precision the different categories of instigation falling within or without the field of constitutional prohibitions.

The constitutional validity of a section cannot be made to depend upon such an uncertain factor. Whether the principle of the first two decisions is applied or that of the third is invoked, the constitutional validity of the section cannot be sustained.

We, therefore, hold that s. 3 of the Act is void as infringing Art. 19(1)(a) of the Constitution. The entire section therefore must be struck down as invalid.

If so, the prosecution of the respondent under that section is void.

The learned Advocate General made an impassioned appeal to persuade us to express our view that though the present section is void on the ground that it is an unreasonable restriction on the fundamental right, in the interests of public order the State could legitimately re-draft it in a. way that it would conform to the provisions of Art. 19(2) of the Constitution. It is.not this Court's province to express or give advice or make general observations on situations that a.re not presented to it in a particular case. It is always open to the State to make snch reasonable rcstrictiolls which are permissible under Art. 19(2) of the Constitution.

In the result, the appEial is dismissed.

Appeal dismissed.

(1) [1957] s.c.R. 930.

THE SUPERINTENDENT, CENTR.AL PRISON, FATEHGARH

RAM MANOHAR. LORIA

B. P. SINHA, C.J.

P.B. GAJENDRAGADKAR

K. SuBBA RAo

K.C. DAs GUPTA

C. SHAH, JJ.

Constitution of India

Special Powers Act

s. 3

Section 3

Special Powers Act, 1932

Art. 19(1)

Art. 19(2)

Art. 19(2)

S. 296

January 2c.

Art. 19(2)

s. 3

Art. 19(1)

K. L. Misra

G. C. Mathur

. P. Lal

Ram Manohar

Lohia

SUBBA RAO

Subba Rao

Art. 19(2)

Ram Manohar Lohia

Socialist Party of India

U. P. Government

Farrukhabad

July 4, 1954

City Magistrate, Farrukhabad

Kaimganj

P.R. Gupta

July 6, 1954

Special Powers Act

Fatehgarh

Ram lVlanohar

s. 3

Powers Act

26th of January, 1950

Agarwala

Desai

section 3

Special Powers Act, 1932

Article 19(1)(a)

26th , January, 1950

section 3

Special Powers Act, 1932

Art. 19(1)

Art. 19(2)

Ram Manohar Lohia

s. 3

Art. 19(2)

s. 3

Lohia

N. S. Bindra

Congress Party

ss. 1 and 2

s. 1(2)

Fatehgarh

Subba Rao

Farrukhabad district

s. 2

Section 3

Section 3

Section 4

Ram Manohar

ss. 2 and 4

Fatehgarh

Article 19

Art. 19

Art. 19

Art. 19

Supreme Court of America

Seventh Schedule

Art. 19

Art. 19

Parliament

Art. 19

Art. 19(l)(a)

Government of Madras

s. 9(1-A)

Art. 19(2)

Patanjali Sastri

Stephen

England

Indian Penal Code

article 19

article 19

EastPunjabPublicSafety Act, 1949

Ram Manohar Fazl Ali

Art. 19

Art. 19

Ramesh Thappar

s. 4

Mahajan

Shearer

Supreme Court

America

Art. 19(2)

Ram Manoha•

Theatres Act, 1843

India

Art. 19(2)

Das

Act

Government of U.P.

s. 3(1)

s. 3

s. 3

s. 3

Art. 19(l)(a)

Art. 19(2)

Art. 13(1)

Ramesh Thapper

ss. 4 and 5

Prize Competitions Act

s. 2(d)

s. 3

R. M. D. Chamarbaugwalla

s. 3

Art. 19(1)(a)

Art. 19(2)

Art. 19(2)


S.C.R.

SUPREME COURT REPORTS 841

KHANDESH SPG. & WVG. MILLS CO. LTD. v.

THE RASHTRIYA GIRNI KAMGAR SANGH,

JALGAON (P. B. GAJEND_RAGADIUR, K. SuBBA RAo, AND K. c. DAS GUPTA; JJ.)

Industrial Dispute-Bonus-Fu.ll Bench Formula-Rehabilitation-Reserves used as working capital-Mode of Proof.

In ascertaining the surplus available for the payment of bonus according to the Full Bench formula the Industrial Court allowed the statutory depreciation but did not give any credit for the rehabilitation amount claimed. The Industrial Court estimated the amount required for rehabilitation at Rs. 60 lakhs; out of this amount it deducted Rs. 51 lakhs representing the reserves and the balance of Rs. 9 lakhs spread over a period of 15 years gave the figure of Rs. 60,000 as the amount that should be set apart for the year in question for rehabilitation. This amount being less than the statutory depreciation the Industrial Court held that the appellant was not entitled to any deduction on account of rehabilitation as a prior charge. The appellant contended that the balance-sheet disclosed that the entire reserves had been used as working capital and consequently the said reserves should not be excluded from the amount claimed towards rehabilitation.

Held, that the appellant had failed to prove that the reserves had in fact been used as working capital and as such the amount was i; ightly deduct11d by the Industrial Court from the amount fixed for rehabilitation.

The Associated Cement Companies Ltd. v. Its Workmen. "[1959] S.C.R. 925, referred to.

In view of the importance of the item of rehabilitation in the calculation of the available surplus it was necessary for tribunals to weigh with great care the evidence of both parties to ascertain every sub-item that went into or was subtracted from the item of rehabilitation. If parties agreed, agreed figures could be accepted.

If they agreed to a decision on affidavits, that course could be adopted. But in the absence of agreement the procedure prescribed by 0. XIX, Code of Civil Procedure had to be followed.

The accounts, the balancesheet and profit and loss accounts were prepared by the management and the labour had no hand in it.

When so much depended on this item it was necessary that the Industrial Court insisted upon a clear proof of the item of rehabilitation and also gave a real and adequate opportunity to labour to canvass the correctness of the particulars furnished by the employers.

Indian Hume Pipe Company, Ltd. v. Their Workmen. [r960] 2 S.C, R. 32, Tata Oil Mills Company Ltd. v. Its Workmen. [r960] I S.C.R I. and Anil Starch Products Ltd. v. Ahmedabad Chemical Workers' Union. C.A. No. 684 of 1957 (not reported), referred to.

z960 January 22.

r96o

CIVIL APPELATE JURISDICTION: Civil Appeal No.

Khand'5h SPG & 257 of 1958. wvG. Mill; Appeal by special leave from the Award dated co. Ltd.

August 20, 1957, of the Industrial Court, Bombay, in v.

Reference (IC) No. 197 of 1956.

TheRoshtriyaGirni O. K. Daphtary Solicitor - General of India.

Kainf:Za~;, ngh, S. N. Andley, J.B. Dadachanji and Rameshwar Nath,

 for the appellant.

Subba Rao].

B. P. Maheshwari, for the respondent.

I. N. Shroff, for Interveners Nos. 1 and 2.

The Intervener No. 3 did not appear. •' 1960 January 22, The Judgment of the Court was delivered by

SuBBA RAO J.-This appeal raises the quest.ion as to what extent the reserves can be deducted from the amount required for rehabilitation of plant and machinery and also as to the manner by which the deductible reserves can be ascertained. It would be enough if we narrated only the facts relevant to the question raised. The appellant., Khandesh Spinning and Weaving Mills Company Limited, is a textile mill and its factory is situate at Jalgaon. The respondent, Rashtriya Girni Kamgar Sangh, represents the employees of the appellant-Company. The responde11t on behalf, of the employees issued a notice to the appellant under s. 42(2) of the Bombay Industrial Relations Act, 1946, demanding payment of reasonable bonus for the period from January 1, 1955 to December 31, 19()5.

Negotiations in this regard having failed, the respondent made a reference to the Industrial Court under s. 73A of the said Act for arbitration of the dispute arising out of the said notice.

The arbitrato_r, i.e. the Industrial Court, following the "Full Bench Formula", ascertained the surplus to be Rs. 2·20 lakhs after deducting the prior charges from the gross profits of the Company, but it did not give any credit to the rehabilitation amount apart from the statutory depreciation. The Industrial Court disallowed this item for the following reasqns: It estimated the amount required for rehabilitation at Rs. 60 lakhs; out of this amount it deducted Rs. 51 lakhs representing the reserves and the balance of Rs. 9 lakhs spread over a period of 15 years gave the

- t- ' -

figure of Rs. 60,000 as the amount that should be set I96o apart for the year in question for rehabilitation. As E<h d--;:; PG & the statutory depreciation, was Rs. 83,639, it came to nv~~ Mill; the conclusion that the Company would not be entitled co. Ltd. to any allocation as a prior charge for rehabilitation. v.

After excluding the said item of rehabilitation, itTheRashtriyaGirni fixed the surplus in a sum of Rs. 2•20 lakhs and Kamgar Sangh, awarded to the employees four months' basic wages falgaon as bonus.

The learned Solicitor General contended that the Subba Rao f.

Industrial Court accepted the position that the reserves were used as working capital, but deducted the said amount from the amount required for rehabilitation op a wrong and unjustified assumption that, as the amounts so required would be spent for rehabilitation over a course of 15 years by instalments, the temporary user of the said reserves would not affect the question as they would be released in part or in whole in future years. He argued that -this assumption was contrary to the view expressed in .decided cases and also the principle governing the ascertainment of the 'am.ount for rehabilitation purposes.

On the contrary the learned counsel for the respondent argued that the Industrial Court only assumed that the reserves had been utilised as working capital, as in the view taken by it, it did not in the least matter whether the reserves were so utilised or not and that, even if that view was wrong, the appellant could not succeed, unless it proved by relevant and acceptable evidence that the reserves were so utilised and that it did not place before .the Industrial Court any such evidence to prove that fact. The first question, therefore, is, what is the scope of the finding of the Industrial Court in this regard? The Industrial Court in dealing with the contentions of the parties before it observed as follows :

"lt is true that until some amount is required to be spent for rehabilitation, replacement or modernization, reserves must be used as working capital, but Shri Vimadalal's argument overlooks that the amount required to be spent for rehabilitation over a course of 15 years is not required to be •

I960 spent all at once, but by instalments over a long period." Hhandesl• SPG. & Th b t" d'd t d fi d" h wvG. Mills ese o serva 10ns I no recor any n mg t at co. Ltd. the reserves were used as working capital. It was v. only an assumption made by the Industrial Court, as, TheRashtriyaGirni in the view taken by it, it was immaterial whether

Hamgar Sangh, the reserves were used as working capital or not. We Jalgaon do not think that the aforesaid opinion expressed by

Subba Rao J. the Industrial Court is sound. In ascertaining the surplus for the purpose of fixing the bonus for a particular year, the state of affairs in that year is the guiding factor. If in a subsequent year any part of the reserves used as working capital is released, that amount will have to be taken into account in ascertaining the surplus for that year and so on for subsequent years : otherwise it will lead to the anomaly of the reserves being excluded from the amount required for rehabilitation, though as a matter of fact the entire reserves were utilised as working capital, and though in future years they were expected to be released but in fact not so released. This would lead to a result inconsistent with the decisions on the subject which have clearly laid down that the reserves which have been used as working capital shall not be deducted from the amount fixed for rehabilitation.

This result does not advance the case of the appellant, unless it is able to prove by admissible evidence that it has used the reserves as working capital during the bonus year in question. The principles governing the "reserves" in this context are wellsettled. This Court in The Associated Cement Companies Ltd. v. Its Workmen (1) restated the principle thus at p. 970:

"Before actually awarding an appropriate amount in respect of rehabilitation for the bonus year certain deductions have to be made. The first deduction is made on account of the breakdown value of the plant and machinery which is usually calculated at the rate of 5°/0 of the cost price of the block in question. Then the depreciation and general liquid reserves available to the employer are deducted. The reserves which have already

(I) [1959] S.C.R. 923.

] •

. >--

been reasonably earmarked for specific purposPs of I96o the industry are, however, not taken into account J(andesh SPG. & in this connection. Last of all the rehabilitation wvc. Mills amount which may have been allowed to the co. Ltd. employer in previous years would also have to be v. deducted if it appears that the amount was avail- The Rahstiiya Girni able at the time when it was awarded in the past Kmr; Sangh,

and that it had not been used for rehabilitation a gaon purposes in the meanwhile. These are the broad Subba Rao J. features of the steps which have to be taken in deciding the employer's claim for rehabilitation under the working of the formula." This decision, therefore, lays down, so far as it is relevant to the present purpose, that two items shall be deducted from the rehabilitation amout ai;; certained by adopting the "Full Bench Formula" namely,

(i) general reserves available to the employer; and

(ii) reserves which have not already been reasonably, earmarked for specific purposes of the industry. The question is whether the mere availability of reserves or the simple earmarking for specific purposes would be sufficient to claim the said amounts as deductions. 'Ve do not think that by using the said words this Court meant to depart. from the well-recognized principle that if the general reserves have not been used as working capital, they cannot be deducted from the rehabilitation amount. The reserves may be of two kinds. Moneys may be set apart by a company to meet future payments which the company is under a contractual or statutory obligation to meet, such as gratuity etc. These amounts are set apart and tied down for a specific purpose and, therefore, they are not available to the employer for rehabilitation purposes. But the same thing cannot be said of thA general reserves: they would be available to the employer unless he has used them as working capital.

The use of the words "reasonably earmarked" is also deliberate and significant. The mere nominal aHocation for binding purposes, such as gratuity etc., in the company's books is not enough. It must be ascertained by the Industrial Court on the material placed before it whether the said amount is far in excess of the requirements of the particular purpose for which

z96o it is so earmark0d and whether it is only a device to reduce the claim of the labour for bonus. vVe do not J{andesh SPG. &

WVG. Mills suggest that it is the duty of the Industrial Court to co. Ltd. ascertain the correct. or exact figure required for a v. . .particular purpose; but it is certainly its duty to The Rashtnya Girni discover whether the so. called earmarking for a parti-

Kamgar Sanah, l • d · h c 1 Jalgaon ° cu ar purpose is a ev10e to mrcurnvent t e ; ormu a.

If it is satisfied that there is such a device, it shall Subba Rao J. deduc_t that figure in calculating the rehabilitation amount and if possible arrive at a real figure for that purpose. So too, in the case of general reserves when an employer claims that a specific amount reserved has been used as working capital, it is the duty of the Industrial Court to arrive at a finding whether the said reserves, or any part of them, have been used as working capital and, if so, to what extent during the bonus year. Shortly stated before a particular reserve can be deducted from the rehabilitation 'amount it must be established that it has been reasonably earmarked for a binding purpose or the whole or a part of it ha~ been used as working capital and that only such part of the reserves coming under either of the two heads can be deducted from the said amount.

To illustrate, take a particular bonus year, say 1955.

To start with, from the gross profits of that year only items specifically declared by this Court in The Associated Cement Companies Ltd. v. lt.s Workmen(') to have a prior charge over the bonus shall be deducted to arrive at the surplus. No question of deducting any other amount reserved in regard to the profits of that year arises. But the company has specifically earmarked certain amounts for specific binding purposes in 1954 or earlier to meet future binding obligations, such as gratuity etc. ; or has reserved amounts for general purposes but not to meet any contractual or statutory obligations and has not utilised the same as working capital. In the former case the amount must be deemed to have been utilised and, therefore, it cannot be deducted from the rehabilitation amount ; but in the latter case, as the said amounts were not utilised by the employer as working capital, they shall be deducted from the rehabilitation amount.

(1) [1959] S.C.R. 925

...

What then is the procedure to be followed for z96o ascertaining the said facts ? The burden is obviously Kanrlesh SPG . .,,. on the employer who claims the exclusion of the wvc. Mills reserves from the rehabilitation amount on the ground Co. Ltd. that they are used as working capital or reasonably v. earmarked for a specifie purpose to establish the said TKheRashtri5yaGihrni amgar ang , facts and to prove the same by relevant and Jalgaon acceptable evidence. The importance of this question in the context of fixing the amount required for Suba Rao J. rehabilitation cannot be over-estimated. The item of rehabilitation is generally a major item that enters into the calculations for the purpose of ascertaining the surplus and, therefore, the amount of bonus. So, there would be a teudency on the part of the employer to inflate this figure and the employees to deflate it. The accounts of a company are prepared by the management. The balance-sheet and the

profit and loss account are also prepared by the company's officers.

The labour have no concern in it. When so much depends on this item, the principles of equity and justice demand that an Industrial Court should insist upon a clear pro.of of the same and also give a real and adequate opportunity to the labour to canvass the correctness of the particulars furnished by the employer.

Cases coming before us disclose that the Industrial Courts and Labour Tribunals are not bestowing so much attention on this aspect of the case as they should. Some of the tribunals act on affidavits and sometimes even on balance-sheets and extracts of accounts without their being proved in accordance with law.

For the purpose of holding an enquiry or a proceeding under the Bombay Industrial Relations Act, 1946, s. 118 of the said Act confers on the Industrial Court the same powers as are vested in

Courts in respect of-(a) proof of facts by affidavits;

(b) summoning and enforcing t.he attendance of any person and examining him on oath; (c) compelling the production of documents; and (d) issuing commissions for the examinations of witnesses.

In Courts facts have to be established either by oral evidence or by documentary evidence proved in the

r960 manner prescribed by law.

But Order XIX of the

1, ande.<h SPG. & Code of Civil Procedure empowers the Court to have

Wl'G. Mills particular facts proved by affidavits. Under rule 1 co. Ltd. thereof, "any Court may at any time for sufficient v. reason order that any particular fact or facts may be The RashtriyaGirniproved by affidavit, or that the affidavit of any J(amgar Sangh, witness may be read at the hearing, on such condi- Jalgaon tions as the Court thinks reasonable".

But it is subject to the proviso that where it appears to the Subba Rao J.

Court that either party bona fide desires the production of a witness for cross-examination, and that such witness can be produced, an order shall not be made authorizing the evidence of such witness to be given by affidavit.

Under rule 2, "upon any application evidence may be given by affidavit, but the Court may, at the instance of either party, order the attendance for cross-examination of the deponent". A combined effect of the relevant provisions is that ordinarily a fact has to be proved by oral evidence, but the Courts, subject to the conditions laid down in Order XIX, may ask a particular fact or facts to be proved by affidavits. Industrial Courts may conveniently follow the said procedure.

In view of the importance of the item of rehabilitation in the matter of arriving at the surplus for fixing the bonus, principles of equity and justice demand that tribunals should weigh with great care the evidence adduced by the management as well as by the labour to ascertain every sub-item that goes into or is subtracted from the item of rehabilitation.

If the parties agree, agreed figure can be accepted. If they agree to a decision on affidavits, that course may be followed.

But in the absence of an agreement, the procedure prescribed in Order XIX of the Code of Civil Procedure may usefully be followed by the tribunals so that both the parties may have full opportunity to establish their respective cases.

Recent decisions of this Court emphasize this aspect of the matter. In Indian Hume Pipe Company Ltd. v. Their Workmen (1 ), the balance-sheet was relied upon for proving that the amounts were available for use as working capital and that the

(>) [1959] S, C, R, 925

I '

balance-sheet showed that they were in fact so used.

I 96o Bhagwati, J., who delivered the judgment of the Court, presumably to meet the contention that the Kandesh SPG. &

h d b d b d 362 WYG. Mills balance-sheet a not een prove , o serve at p. h

~~ t us: v. "Moreover, no objection was urged in thiSTkeRashtriyaGirni behalf, nor was any finding to the contrary recorded Kamgar Sangh, by the tribunal." Jalgaon In that case it was conceded that the reserves were I Subba Rao ]. in fact used as working capital. t is suggested that the learned Judge solely relied upon the relevant items in the balance-sheet in support of his conclusion and that the said observation was only an additional ground given by him, but we are inclined to think that the Court would not have accepted the items in the balance-sheet as proof of user if it was not satisfied that no objection was taken in that behalf. In Tata Oil Mills Company Ltd. v. Its Workmen (1 ), a similar question was raised. It was contended by the labour in that case that the depreciation reserve was not used as working capital and therefore no return should be allowed on the said reserve. The Chief Accountant of the Company made an affidavit on behalf of the Company that the said depreciation reserve, along with others, had been used as working capital. This Court accepted the affidavit for the year in question, but made the following observations for future guidance:

"It will, however, qe open to the workmen in future to show by proper cross-examination of the company's witnesses or by proper evidence that the amount shown as the depreciation reserve was not available in whole or in part to be used as working capital and that whatever may be available was not in fact so used in the sense explained above. In the present appeal, however, we must accept the affidavit of the chief accountant." These observations also recognized the necessity to give an opportunity to the workmen to cross-examine the witnesses put forward by the management to prove the user of any particular reserve as working capital. This Court once again dealt with the same

(1) (1959) S.C.R. 924.

subject in Anil Starch Products Ltd. v. Ahmedabad

Chemical Workers Union (1).

That appea.! also raised 1'""d"h Sl'G. & the question whether return should be allowed on the lVVG . • fills depreciation reserve used as working capital. It was Co. Ltd. v. contended for the labour in that case that the The Rashtriya Girni depreciation reserve was not used as working

Hamgar Sangh capital. Rejecting the said contention,· \V'anchoo,

Jalgaon J b d

Subba l?ao ]. ., o serve :

" It is enough to say in that connection that an affidavit was filed by the manager of the company to the effect that all its reserves including the depreciation fund had been used as working capital.

The manager appeared as a witness for the company before the Tribunal and swore that the affidavit made by him was correct. He was crossexamined as to the amount required for rehabilitation, which was also given by him in that affidavit; but no question was put to him to challenge his statement that the entire depreciation reserve had been used as working capital.. ....... In the circumstances, we must accept the affidavit so far as the present year is concerned and hold that the working capital was l{s. 34 lacs." Notwithstanding the said finding, the learned Judge took care to reserve the rights of the workmen in future by making the following observations:

... It will, however, be open to the workmen in future to show by proper cross-examination of the company's witnesses or by proper evidence that the amount shown as depreciation reserve was not available in whole or in part as explained above to be used as working capital and that whatever was available was not in fact so used." This judgment again reinforces the view of this Court that proper opportunity should be given to the labour to test the correctness of the evidence given on affidavit on behalf of the management in regard to the user of the reserves as working capital.

What is the position in the present case ? It is not suggested that there is any reserve which has been reasonably earmarked to discharge a contractual or statutory obligation.

We are only concerned with \1) Civil Appeal No. 684 of 1957 (not reported)

S.C.R.

SUPREME COUl~T REPORTS 851

general reserves. :The 'learned .Solicitor _General r 96o contends that the balance-sheet discloses that the entire reserves have been used as working capital and Kandesh SPG. &

h h . d d'd . - th' •t• WVG Mills t at t e respon ent . I_ not canvass __ IS ~OSI 10n m Co.· Ltd. the statement filed by It before the Industrial Court. v.

We have already pointed out that the balarice-sheet, TheRdshtriyaGirni without its being proved by a pers.on competent to do Kamgar Sangh, so, cannot prove that any reserves have been utilised Jalgaon as working capital. In the written-statement filed Subba Rao]. by the appellant before the Industrial Court, no specific allegation is made that the reserves were utilised as working capital, though in its statement o~ calculations the said reserves were not excluded from the amount claimed towards rehabilitation. As there ii no specific allegation, the respondent also in its statement did not deny the said fact, but in its statement of calculations it did not deduct the reserves from the rehabilitation amount. Therefore, it must be held that the respondent did not accept the position that the reserve funds were utilised as working capital. Strong reliance is placed upon the evidence of the General Superintendent of the appellant-Company, but a perusal of that evidence discloses that the said witness has not depmied that -the Company used the .reserves as working capital; nor does the said witness seek to prove either the balanceslieet or any extract taken therefrom. - In the circumstances, the respondent had 1no _ opportunity to cross-examine him in respect of the alleged user of the reserves. For the aforesaid reasons, -we, have no option but to hold that Rs. 51 lakhs representing the reserves were not used as working capital and, therefore, the said .amount , was rightly deducted bythe Industrial Court from Rs. 60 lakhs fixed by it-towards rehabilitation. As the balance of Rs. 9 lakhs _ sp!'ead over 15 years came to only Rs. 60,000 during the bonus year and as the statutory depreciation was Rs. 83,639, the Industrial Court rightly excluded .the entire rehabilitation amount from its.calculations in arriving at the surplus. . _ No other points were raised before us. In the result, the appeal fails and is dismissed with costs. ·

... : .. , · Appeal di8m_i8sd. _

841

KHANDESH SPG. & WVG. MILLS CO. LTD

THE RASHTRIYA GIRNI KAMGAR SANGH

K. SuBBA RAo

K. c. DAS GUPTA

Code of Civil Procedure

CIVIL APPELATE JURISDICTION

TheRoshtriyaGirni O. K. Daphtary

S. N. Andley

J.B. Dadachanji

Rameshwar Nath

Subba Rao

B. P. Maheshwari

I. N. Shroff

SuBBA RAO

Jalgaon

Rashtriya Girni Kamgar Sangh

s. 42(2)

Bombay Industrial Relations Act, 1946

January 1, 1955

December 31, 19()5

s. 73A

Subba Rao

Vimadalal

Hamgar Sangh

Subba Rao

Suba Rao

s. 118

Code of Civil Procedure

Order XIX of the Code

Bhagwati

Kandesh

thiSTkeRashtriyaGirni

Kamgar Sangh

Jalgaon

s. 34