3 S.C.R.

SUPREME COURT REPORTS 481

conveying the property when a mere loan was intended on the security of the property. It is unfortunate, having regard to the provision of s. 58(c) of the Transfer of Property Act, that the plaintiff is debarred from proving that the transaction was in the nature of a mortgage. In the circumstances we direct that there will be no order as to costs throughout.

Appe, al allowed.

ORIENT WEAVING MILLd (P) LTD.

THE UNION OF INDIA

(B. P. SINHA, c. J., J. L. KAPUR, M. HIDAYATULLAH, J. c. SHAH and J. R. MUDHOLKAR, JJ.)

Central Excise-Power of Central Government to grant exemption-Rule-Notification granting exemption to co-operah'.ve society-Constitutional mlidity-Central Excises and Salt Act, 1944 (1of1944), ss. 37(2), cl. (xvii)-Central Excise Rules, 1944, r. 8(1)-Constitution of India, Arts, 14, 19(1)(/) and (g), 43.

By r. 8 (1) of the Central Excise Rules, 1944, framed by the Central Government in exercise of its Power under s. 37(2)

cl. xvii of the Central Excises and Salt Act, 1944, "the Central Government may from time to time, by notification in the Official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods for the whole or any part of the duty leviable on such go'.>ds." By two notifications issued under the said rule the Central Government exempted cotton fabrics produced on po, ver looms owned Dy co-operative societies ti'om the duty leviable thereon subject to certain conditions.

Under s 38 of the Act the said rule and notifications on publication in the Official Gazette had effect as if enacted in the Act. The petitioners, apprehending loss of business in competition with the fifth respondent, a co-operative society, chal1enged the rule and the notifications on the grounds( I) that the power of exemption conferred on the Union Government violated Arts. 14, 19(l)(fl and (g} of the Constitution and (2) that assuming that it did

196!

K. Simrathmull '.

S. Nanjalingioh

Gowder

Shah J.

Ftbuary 38.

llMI

Orittil W talting

Mills (P) Lld.

y, 1 lu Union of lndi4

482 SUPREME COURT REPoRTs (1962] SUPP

not do so, the exemption granted by the notifications \Vas in excess of the power granted by r. 8(1).

field, that the contentions were \Vithout substance a1.d must fail.

Rule 8 of the Rules was as much a part of the Act as s. 3712) cl. (xvii~ and it was always open to the State to tax certain classes of goods and not to tax others.

It wa5 the function of the State to .determine what hind of taxes should be levied and in what manner.

R•gard being had to the directive principles contained in Art. 43 of the Constitution, there was no doubt that the State in differentiating between goods produced in big establishments and similar gocds pro duccd by small powerloom weavers iu a co-oprrative societ', had made a classification that was constitutiona!Jy valid.

There could, therefore, be no excessive dr.kgation of the power to grant exemption.

It \\•as fallacious to contend that exemption, if at all, had to be granted in respect of any particular specified variety of 'cotton fabrics', an<l not with reference to persons producing them.

The tax was on the production of the goods but was payable by pcnons producing them.

The exemption granted was, therefore, \vithin the ternls of the notifications.

ORIGINAL JuruSDlCTION : Petition Ko. llO of of 1961.

Petition under Art. 32 of the Constitution of India. for enforcement of Fundamonta.I Rights.

A. V. Viswanatha Sastri and R. Gopalakrishnan, for the Petitioners.

K. N. Rajagopal SaBtri, P. K. Ghatterje.e and P. D.

Menan, for the respondents.

1962. February 28.

The Judgment of the Court wa.s delivered by

SINHA, C. J.- By this petition, under Art. 32 of the Constitution, tho petitioners cha.Henge the constitutionality of certain provisions of the Central Excises and Sa.It Act (l of 1944) which will be referred in the course of this judgment as the Act, read with r.8 of the Central Excise Rules, 1944 ( 1!}60) and the notifioations thereunder, to be hereinafter set out. The first petitioner is the Orient

Weaving Mills Private Ltd. (which will be termed hereinafter as the Company), and the second petitioner is a director of the Company. The respondents .to the petition are (1) Union of India, through the Secretary to Government of India, Ministry of Finance (Department of Revenue), New Delhi, (2) Secretary, Central Board of Revenue, New Delhi, (3) Superintendent, Central Excise, Cuttack,

(4) Collector, Central Excise, Calcutta, (5) Board of Directors, Madhunagar Powerloom Weavers' Co~

operative Society Ltd., through its President (to be hereinafter referred to as the Society).

The petition is founded on the following allegations. The Company is incorporated under the Indian Companies Act, 1913, with its head office at Nayabazar, Cuttack. The second petitioner is the director of the Corn pany, which runs a weaving mill (Lt Nayabazar in Cuttack. There are 160 looms operating in the mill, and nearly 300 employees are employed in the factory, which produces, on the average, about 45 Jakh yards of cloth (4 1/2 million yards). The paid-up capital of the Company is Rs, 7, l0,000, divided into 7,100 shares of the value of Rs. 100 each. It has 8 directors, including a representative of the Government of Orissa. The Company commenced production on Octobt>r 1, 1955, and has been sustaining losses eversince it started functioning "due to adverse circumstances in the State of Orissa and due to the heavy taxation and duties".

Eversince the Company started production, it has been paying excise duty~Rs. 2,16,670 for the year 1958- 59, Rs. l,82,529 for the year 1959-60 and Rs. 2,15,500 for the year 1960-61. "Cotton fabrics"

is one of the items in the first schedule of the Act, which sets out the description of goods and the rate of duty leviab!e under s. 3 of the Act.

The petitioner's chief grievance is that the respondent No. 5, the Society, is being granted exemption

Oritrd Weaving

Milla (P) Lfd,'

Vo '1_.1-, The Union of Indi.~. ..-:,.l Sinha <':7-J.

"'l ·~

1962 ··- on.ni.JY .... .,

Millo (P) Ltd. . .. .• n. Ullia of Indio -- sa..c.J.

484 SUPREME COURT REPORTs (1962] SUPP.

from the excise duty, though, it is contended, it has installed I 00 looms in the same premises and 100 workmen are employed therein. The autho rised capital of the aforesaid Society is lts.2,40 ,000, divided into shares of the value of Rs. 100 each.

It is said to be a profit earning concern, whose profit is disposed of in accordance with its byelaw 35. The Society, it is further contended, is for all practical purpose~ aimilarly situated alongwith the petitioner Company in the matter of production, distribution and marketing of their produce. It is further stated that the weavers of the Society stand on the same or similar footing as the shareholders of the Company. The exemption was granted to the Society in virtue of the Central Government Notification Xo. 74 of 1959, dated July 31, 1959, and .N'otifioation Xo. 70 of 1960, dated April 30, 1960, iBBued by the Ministry of Finance, Government of India, (Department of Revenue). The notifications are in these terms :

"Government of India, Ministry of Finance (Dep1i.rtment of Revenue) ew Delhi. The 31st July, 1959.

G. S. R. In pursuance of sub-mle (I) of rule 8 of the Central Excise Rules 1944 as in force in India and as applied to the State of Pondicherry, the Central Govt. hereby exempt cotton fabrics produced by any co-operative society formed of owners of cotton power•

looms, which iB registered or which may be registered on or before the 31st March, I 961 un.der any law relating t0 co-operative societies, from the whole of the duty leviable thereon, subject to the following conditions:-

(a) that every member of the co-operative societies had been exempt from excise

duty for three years immediately precedin'g the date of his joining such society; I

(bl that the total number of cotton power!ooms owned by the co-operative society is not mere than four times the number of members forming such society;

( c) that a certificate is produced by each member of the co-operative society from the State Govt. concerned or such Officer as may be nominated by the State the number of cotton powerloons in his ownership and actually operated by him does not exceed four and did not tixceed four at any time during the three years immediately preceding the date of his joining the society, and that he would have been. exempt from excise duty even if he had not joined the co-operative society; and

( d) that the exemption shall be available ...

(i) for a period ending on the 31st July, 1962 in respect of registered co-operative societies which have commenced production prior to the date of this notification; and

(ii) for a period of three years from the dat.e of commencement of production in respect of co-operative societies which have been registered "but have not commenced production or which may be registered on or before the :Hst March, 1961. (No. 74/59) Sd/-Illegible S. K. Bhattacharjee, Deputy Secretary to Govt. of India.

F. N'. 74/59/F. No. 13/59-CXIII".

"Government of India, Ministry of .Finance (Department of Revenue) New Delhi. '.J.'he 10th April. 1960,

01Uni W1aViftR Mi/11 (P) Lid.

_, ' "· ' - Thi Union of lna11

Sinha o.J.

1~62

Orit'11 I\' to-Vint , , Milli (P) L<d. '

~"!t_t n.ion 3( India

Sina C • ./,

N otifiwtion

Central Exciso

GSR.

In pursuance of 8Uh-rule (I) of rule 8 of the Central Excise Rules, 1944 as in force ii) India and as applied to the State of Pondicherry and in supersession of the Notifi cation of the Govt. of India llinistry of Finance (Department of Revenue) No. 74/59- Central Excise dated the 31st July 1959 the Central Govt. hereby exeU1pts cotton fabrics produced on powerloom owned by any cooperative 8ociety or owned by or allotter! to the members of the society, which is registered or which may bo register:d on or before the :n st :lfarch 1961 under any law relating to co.operative societies from the wholo of the duty lcviable thereon, nbjr•rt to the following conditions :-

(a) that every memher of the co-operative sociPtV who has been a manufacturer of cotton fabics on powerlooms has been exempt from excise dut.r for three years immediatB!y preclding the date of his jnininir such society;

(b) that tho total number of cotton powerlooms owned by the co-operative society or owned by or allotted to its members is not more than four times the number of members forming such society. (cl that each member of the co-uporativc society pro<lu<'.e a certificate from the Stat<> Govt. concerned or such ofticer as may be nominated by the State Govt. that he is a houafide m"mber of the society and that the num bcr •lf cotton powerlooms owned b.v or allotted to him and actually opt1rated bv him doe8 not "xceed four and did not exceed four at any time during the three years immediawir preceding the date of his joining te

society, and that he would have been ee:°1pt from excise duty even if h"' had not Jomed the co-operative societies and

( d) that , the exemption shall be available ...

(i) for a period ending on the 3 lst July 1962 in respect of registered co operative societies which have commenced production prior to the date of the notification; and

(ii) for a period of three years from the date of commencement of production in respect of co-operative societies which have been registered but have not commenced production or which may be registered on or before 31st March, 1961.

No. 70/60 Sd./Illegible G. P. Durairaj, Under Secretary to the Govt. of ifndia No. 70/60/P. No. 13/1/59 CXIII"

The Company made a representation to the relevant authorities but to no purpose. As the Company is to pay excise duty on the "cotton fa 1Jrics" produced l; y it, its cost of production, as compared to that of the Society, was higher by l :?.5% in 1958 and 10% in 1959, with the result that the Company is at a disadvantage, as compared to tho Society, in the competitive market of Orissa.

Due to heavier taxation on fine cloth, the Company has abandoned the production of that quality and ha" restricted its production to coarse and medium cloth. The apprehension of the Company is that on account of the exemption granted to the Society, the Company's bn.iiness will be very adverselJ aifecteq. It is contended tqat r. 8 of the CeIJtrl

Orient Weaving

Mills (f) Ltd.

Vo The Union of India

Sinha C. J.

Orient lft2i.rin(

Mills , P) Lid.

Tlit U11io1l of India

Sinha C . ./.

Excise Rules, l!l44, under the Act, vests the Government with ungui<led power wholly or partially to uxempt. any goo<ls from the <luty lcviable under the Act ancl is, thernfore, dearly discrimina- ' . tory as against the petitioner. The Government notifications exr.>mpting the Society, or such other similar societies as may horcitfter come into existence, have the effPCt of viol<J, ting the petitioners' funrfa.mcntal rights under Arts, 14 and 19(l)(f) & (g) of the Constitution. It is also conten<lc<l that th" power conferred upon the Government under the Rules, afore81tid, being ungilidcd and uncontrolled, goes beyond tho permiHsi ble limits of a vnlid delegation, and is, therefore, voiri. The petitioners moved the High Court of Orissa under Art. 226 of thn Constitution, chal!Pnging the constitutionality of the Govrrnment measures aforesaid, but the Court refused to grant any relief on the ground that it. had no jurisdiction to issue any wriL to the Union Government in Xew Delhi.

In the premises, the petitioners prny for a declaration that the lovy of excise duty on the piece.goods produced by the pet.itioners be declared to be unconstitutional, and for a dirertion that tlw respondents 1-4 treat them on tho S<tme footing as the Sucit:ty and exempt them from the p/\yment of th<' excise duty, as also for an appropriate writ or order for the enforcement of their fundamental right guaranteed under ·

Arts. 14 and 19( I )(f) & (g) of the Constitution.

The application was oppoRed on behalf of the respondents l 4, and an affidavit sworn to by an

Cnder Secretary, ~Iinistry of Finance (Department of Revcnnel Govcrnm<'nt of India, was filed in opposit.ion. It was stated on behalf of the Union Government and the Rev<'UUe that the relevant

provisions of the Act and the Rules, and t.he notifications which have been impugned by the petitioners, did not. infringe any provisionH of tho Constitution, and that the exemption grant<ld to the society was in pursuance of the well recognised

principle, being acted upon by the Government, to 1962 confer self-employment benefits in the interest of 11 d d 'th ' t Orient W11r11'tig sma pro ucers, an w1 a view o encourage Mills (P}Ltd. cottage industries and small scale industries em v. ploying a limited num her of hands.

The Society, The Union •f India it was contended,· was not the owner of the power- Sinha c. J. looms, but each weaver was the owner of not more than 4 powerlooms: the Society was run on a cooperative basis for the benefit of the weavers, who shared the profits earned hy working on a cooperative basis, by sale of the cloth produced by each weaver on his looms, after paying for the services rendered by the Society to its members; hence it was not correct to characterise the Society as running a mill with an installed capacity of 100 looms. It is further stated that the , Society, as such, is not a profit earning concern, as wrongly contended on behalf of the petitioners. The Society, under the sanctioned scheme, purchases the cloth produced by the weaver on his looms at a price equivalent to the cost of the raw materials, . cost of the services rendered by the Sc.iciety and cost of labour of the weaver, plus a margin of profit for him.

The Society undertakes the sale of the piece-goods produced by the weaver without mak ing any profit to itself, except that it levies handling charges, which nre paid by the buyer. If the Society makes any savings out of the handling charges thus realised, the weaver gets a share of the savings by way of dividend. Unlike the Com- pany, the Society is not the. owner of the looms.

The Society is only a servant of the weaver-owners and renders them services, which they need, to help them to market their produce. The Society is, thus, only an organisation which assists all individual owners of looms in the production and sale of the products of their reBpective looms, for their exclusive benefit. It is, therefore, claimed thrtt the exemption granted in respect of the goods produceq in co-operative societies, of wqich tlj()

Ork11t W "'"; n1 Mill•. (P) Lid.

•• Tiu Union of India

SinAa C. J.

weavers are the owner members, each individual not possessing more than 4 looms, is in pursuance of the Notification No. 70/60 dated April :{0, 1960, issued under r. 8, under the provisions of the Act, and is based on a valid classification, and docs not infringe the provisions of Arts. 14 and 19(l)(f) & (g) of the Constitution. ·

On those pleadings, and on the arguments at the Bar, the following points ariso for decision in this case, namely, (I) whether tho power of exemption conferred upon the Union Government violates Arts. 14 and 19(l){f) & (g) of the Constitution on the ground that it is uncontrolled and unguided, and (2) whether. assuming that the power is not unconstitutional, the exemption granted by tho notifies tions, aforesaid,. is in excess of the power granted by r. 8.

Before discussing the vires of the law, or of the notification issued under the Act, read with r.8 aforesaid, it iA necessary to examine the relevant provisions of the Act and the Rules. Tho Act consolidatr, s and 11mcnds the law relating to central duties of excise on goods manufactured or produced in certain parts of India, and to salt.

Under s. 2( d), ''excisable goods" means "goods specified in the First Sohedulo as being subject to a duty of excise and includes salt". The first schedule con tains the description of goods anrl rates of duty leviablo under s. 3, which is the char!!ing section and is in these words' : -

"3(1) Th., re shall be levied and collected iri such manner as may he prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or impor ted by land into, any part of India, as, and at the rates, set forth in the }'irst

Schedule.

{lA) ............................................... . (2) ..............................•..................

' ( 3) Different tariff values may be fixed for different class or description of the same article."

Item No. 19 in the First Schedule is "cotton fabrics", and. means all varieties of fabrics manu- . factured either wholly or partly from cotton, with certain specified exemptions, including fabrics manufactured on handloom, and then follow the description of different kinds of cotton fabrics, with their relative rates of duty. Section 37 authorises the Union Government to make rules to carry into effect the purposes of the Act. By sub-s. (2) of s. 37, it is provided that mies may be framed providing for a number of matters recited therein, including

cl. (xvii), which is in these terms:

"exempt any goods from the whole or any part of the duty imposed by this Act.'' In pursuance of this rule making power, the Union Government has made Rules. For the purposes of this case, it is only necessary to quote r. 8, which is as follows:

"Power to authorise exemption from duty in special cases:

 (1) The Central Government may from time to time, by notification in the Official Gazette, exempt subject to such conditions as may be specified in the notification any excisable goods. from the whole or any part of the duty leviable on such goods,

(2) Th.e Central Board of Revenue may by special order in each case exempt from the payment of duty, under circumstances of an exceptional nature, any excisable

oods." ·

l96S

Orhnr W eavini

Mills (P) ~Id.

The Union of India

Sin!M c. J,

19fi2 o,;,.,, w 1aving

Milu (P) W

T. I e Unic.n of India

Sinha C. J.

492 SUPREME OOURT REPORTS (1962] SUPP.

In pursuan<>, e of the powers conferred on the Cr•ntrnl Governmont by sub-r.(l) of r.8, the notificatious referred t.o above were issued by the Central Gon, rnment..

By virtue of s. 38 of tho Act, all rule;; made and notifications iRsued by the Central Government, as aforesaid, are required to he published in the Official Gazette, and thereupon those rules and notifications "shall have effect a.~ if enacted in this Act". Thus it is manifest that the notifications and the rule impugned in this case h:i.vc been incorporated into th.1 Act itself, an<l have

bt, c.mie part of the taxing statute. It is also noteworthy that the petitioners have not challenged the vires of the Act. The petition is directed against r.8 ; rn; J tht' nc>tifications afore8aid, exempting the

goo!~ prorlucBd by the co-operative societies, like the 5th respondent, from payment of the excise duty.

That bcin)! so, it is a. little difficult to appreciate tlie first prayer of the petitionerP, a.skin~ for a de<:laration that the levy of excise dutv on the piec•· goods pr•>duceJ by the petitioners be declar(,~] to be unconstitutional. It is one thing t, o nttnck tho constitution1llity of the prn\'isinn8 of the Act :tut.ho

rising the levy of the excises dut.v on the petitioners; it is quite a different thing to complain of the exemption grant{ld in respoct of the good~ pro<lt1cecl by the 5th re8pundent.

A~ the vi res of th' Act itself has not been challenged, we ne1id rnt say anything more on that aspect of a fH>ssible controvNsy which ha8 not ht••n actually raised in the petition.

The petition is substantially based upto the contention that r.8 suffers from the v ic" of excessive delegation of powers to the C'..entral Gov!'rnment to exempt partly or wholly an.v excisable good~. and, secondly, thrit the pow..r even it constitutional has been invalidlv exercisPrl in so far as the notifi cations aforesaid containing the exemplion operating in favour of the 5th rospondent have been made. Iµ our opinion, there is Qo sllbsta.nce ill

either of the two contentions. Rule 8 is as much a part of the statute as s. 37(2) cl. (xvii). It is always open to the State to tax certain classes of goods and not to tax others. The legislature is the best judge to decide as to the incidence of taxation, as also as to the amount of tax to be levied in respect of different classes of goods.

The Act recognises and only gives effect to the well established principle that there must be a great deal of flexibility in the incidence of taxation of a particular kind. It must vary from time to time. as also in respect of goods produced by different processes and different agencies.

The same principle has been recognised iu s.23 of the Sea Customs Act (VIII of 187&), which bas been applied to excise duty also, by virtue of s. 12 of the Act. The latter section has authorised the Cenral Government to apply the provisions of the Sea Customs Act, to excise duty imposed by the Aot, with such modifications and alterations as it may consider necessary or desirable to adapt them to <'ircumstances. It is a function of the State in order to raise revenue for State purposes, to determine what kind of taxes shall be levid and in what manner. Its function, therefore, is to raise revenues for public purposes.

The State naturally is interested in raising all the revenue necessary for public purposes, without sacrificing the legitimate interests of persons and groups, who deserve special treatment at the hands of tile State for reasons, which the State may determine, entitling them to be placed in a special class. The Directive Principles of the Constitution, contained in Part IV .. lay down the policies and objectives to be achieved, for promoting the welfare of the people. In the context of the present controversy, the following words of Art. 43 are particularly apposite: ·

" ............ and in particular, the State shall endeavour to promote cottage industries

o, ient We.avin1 Mill• <nLttJ.

The Union of India

Sinha c, J.

OrUnt Wuoing Mills (P) Ltd.

Thi Union of India

Sin.A• C. J.

on an individual or co-oporativc basis in rural areas." It has rightly been pointed out in the affidavit filed on behalf of the respPnucnt8 ; 4 that the exemption granted by the impugned notifications iA mrant primarily for the protctt.iun l•f petty producers of cot ton fabrics not owning more than four power looms, from unrtasonablc competition by big produc<•rs, lik" the petitioner Company. The State has, therefore, made a valid cl11ssification between goods produced in big establishments and similar goodB produced by small powcrloom weavers in the rnofas8-il, who are usually ignorant, illiterate and poor and suffor from handicaps to which big ostablishments like the petitioner Cornp1my aro not subject. It has alHo been pointed out that the ex emption was available to individual wcavern, who employed not more than five looms on their own account.

The fact thnt they have banded together in a co.operntive effort to increase their efficiency and to take advantage of State aid should not count

againt them. It must, therefore, he h1, ld that there is no room for the contention that there has been excessive delegation of power to exempt.

It was next contencJt.d that if it were helrl that r. 8 is valid an<! constitutional, the notifications are ba<l in so far as they exempt certain claSBes of persons and not classes of goods from the excise duty.

It is argued that the tax is a rluty of exoise on "any goods", and item 12 bas reforcnco to a particular variety of goods, rnimely, 'cotton fabrics'; the exemption if any could have been granted iR respect of any particular specified variety of 'cotton fabrics' and not with reference to the per8ons producing the same variety of those fabrics. There is a pparcntly a fallacy in this argument. The tax is on the production of any goods, but it is payable by per sons producing such goods. The exemption also ia

,,.,,

with reference to such goods as come within the description of excisable goods.

The respondent No. 5 has been exempted from payment of excise duty in respect of goods produced by the weavers.

It has not been exempted from tile payment of a personal tax, like Income Tax. The exemption must, therefore, have reference to the same kind of tax which would otherwise have been leviable but for the exemption. From the notifications set out above, it is manifest that the Government has exempted cotton fabrics produced on power-looms owned by a co.operative society, and in the present instance owned by the members of the Co-operative Society. It has not been contended before us that the conditions laid down for granting the exemption have not been fulfilled by the members of the Cooperative Society, the respondent No. 5. Hence, the exemption granted is within the terms of the notifications aforesaid, which have effect as if enacted as a part of the Statute. The vires of the Statute, as already indicated, has not been questioned.

It must, therefore, be held that there is no merit in this petition. It is, accordingly, dismissed with costs to the answering respondents.

Pdiflion dismissed.

Orient Wtaft"I

Mills (P) Ltd.

•• Tiit Union of Inrlia

SinhaC. J.

s. 58(c)

Transfer of Property Act

ORIENT WEAVING MILLd (P) LTD

THE UNION OF INDIA

B. P. SINHA

L. KAPUR

M. HIDAYATULLAH, J.

c. SHAH

R. MUDHOLKAR, JJ.

ss. 37(2)

Central Excise Rules, 1944

Constitution of India

Central Excise Rules, 1944

s. 37(2)

Central Excises and Salt Act, 1944

s 38

s. 3712

Art. 43

Art. 32

Constitution of India

Art. 32

Central Excise Rules, 1944

s. 3

Central Excise Rules 1944

Central Excise Rules, 1944

Art. 226

Arts. 14 and 19( I )(f)

Arts. 14 and 19(l)(f)

Arts. 14 and 19(l)

s. 2( d)

s. 3

First Schedule

Section 37

s. 37

s. 38

s. 37(2)

Customs Act

s. 12

Customs Act

Art. 43


. Match J.

496 SUPREME COURT REPoRTS [1962] stJt>i>.

THE FAZTLKA ELECTRIC >SUPPLY CO. LTD . v.

THE CO:IJMISS!ONER OF JNCO)IE-TAX, DELHI

("'. K. DA~, J. c. SHAH, .T.J.)

income Ta:r-.1Jsts81nent of }; xces8 anlount rtaliscd over 21,•riltc11 dou:n 1:uf-ue-Ellclric Supply Company-Term of license-Option for Gottrnment or local bodies to parcltasc the Company-Sale by Company, 1f sale or compulsory rzcqui,, if; on -India EIPdricity Ad 19/0JX of 1910), ,,., 3.7 Indian Income

1'ax Act 1922 (/ l of 1922), s. 10(2) (vii).

1'hc appellant carried on the business of generating and suppl)ing tlcctricity in the to\\111 of Fazilka in accordance with the tcrn1s of a license for fifteen vcars.

Clause 9(a) of the license gave the Government' an option to acquire the undertaking on expiration of fifteen years fron1 the date of the license. 'l'he said option was in accordance to sub. s. ( 1) of s. 7 of the Electricity Ar.t, 1910.

The Government of Punjab exercised its option and acquired lhe undertaking on a payment which \\aa in excess of the written down value of the building, machinery and plant of the undertaking.

For the assessrnent of the appcllanl for the rele\enl year, the Income rax Officer cOrnputed such excess realisation over the writ •en do\\'n \'i:due ;; s did not exceed the difference he tween the original cost and the written down value and held the said sum as taxable in the hands of the appellant by reason of the provisions ins. 10(2)(vii) of the Income Tax Act.

The appellant contended that no part of the excess was taxable since 1hc undcrlaking had not been voluntarily sold, but had been cornpulsorily acquired by the Govrrnment ; and on a proper construction of 1 he Electricity Act and the rules made thereunder, this so-called sale was really a compulsory acquisition of property and not a S>ie as legally understood. '

lleld, that from the provisions of the Electricity Act, 1910, read alongith thr. rules marle thereunder, it is manifest that the condition as to the option of purchase either by the local authority or Governrnent. is the result ofan agreement between the applicant who had applied for license and the Government who granted the lh:ense.

The true scope and effect of s. 7 of the Electricity Act is tha it is an enabling ::icction and merely provides for the optio11 of purchase to he exercised Cln the expiration of a certain period agreed to between rhe parties, and s. IO of the Act

3 s.c.:R.

SUPREME CobRT REPORTS 497

further provides that in an appropriate case Government may even forego the option. The scheme of the Electricity Act as indicated by the relevant provisions thereof and the rules made thcreuµder, shows beyond any doubt that the option of purchase is the result of a mutual agreement between the parties, the applicant for the license on one hand and the Government on the other.

Held, further, thats. 7 docs not provide for a compulsory purchase or compulsory acquisition without reference to and independent of any agreement by the licensee.

The expression "compulsory purchase" in the second proviso to sub-s. (1) of s. 7 is another enabling provision which enables a party to specify in the license such percentage as should be added to the value of the building, plant and machinery etc. when the option is exercised, notwithstanding the use of the expression "compulsory purchase" in the said second proviso, there is no compulsory purchase or compulsory acquisition in the sense in which that expression is ordinarily understood.

Sakalaguna Nayudu v. Chinna Munuswami Nayakar,

(1928) L. R. 55 I.A. 243, Calcutta Electric Supply Corporation

v. Commissioner of Income-tax, WMt Bengal, (1951) 19 I.T.R. 406.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 183 of 1961.

Appeal from the judgment and order dated' April 24, 1959. of the Punjab High Court in I.T.R.

No. 18 of 1954.

S. K. Kapur, Bislw, mbar Das and K.K. Jain, for the appellant. ·

K. N. Rajagopal Sa8tri and D. , Gupta, for the respondent. 1962, March 1.

The Judgment of the Court was delivered bJ

S. K. DAa, J.-On July 23, 1934 the then Government of the Punjab granted a licence under a. 3 of Indian Electricity Act, 1910 (IX of 1910) (hereinafter called the Electricity Act) to two persona named Harbhagwan Nanda and Harcharan . Dass for the generation and supply of electric energy

J96t

The Ft1;:, ilkti EJ1ctric

SupplJ Co. Lti.

v • . The Commissioner flf

Income-tax, Delhi.

DasJ.

1'ht Faillu1 J::lectric

Supp~ C•. /, Id.

Thi CommiJsiomr of

lnctmepw, D1thi

DIU J.

49S SUPREME COURT REPORTS [1962] SUPP.

in the town of .Fazilka.

The licence, which is markt•d annPxure 'A' nnd forms part oft.he >tMement of the case, contained a clause, viz. cl. !!(I)

which read 118 follows :

"9. (I) 'fht., option of purchase givt>n by sub-section (I) of section 7 of the (Elt>ctricity)

Act shall first be exercisable 011 the expiration of 15 years from the date of the notification of this licence and on the expiration of every subsequent period of 10 years. The percentage of the value to be determined in accordance with and for the purpose of sub-&•ction (I) of section 7 of the (Electricity) Act of lands,

buildings, works, materials and plant of the licensee therein mentioned to be added under the second proviso of that sub-section to such value on account of compulsory purchase shall be 20 percent." Under this clause, read with a. 7 of Electricity Act, the Government ha<l an option of purchasing the undertaking on tho expiration of 15 years from the date of the license and on the expiration of eve, ry subsequent period of ten years. In 1935, about a year after the grant of the license, a public limited company under the name and style of the Fazilka Electric Supply Co. Ltd., which is the appellant herein, was incorporafod, and it acquired the rights and previleges of the license known as the Fazilka Electric License, 1931.

The appellant carried on the busineBB of generating and supplying electricity in the town of Fazilka in accordance with the terms of the license for 15 years.

On the expiration of 15 years from the date of license, the Government of the Punjab exercised its option and acquired tho undertaking on July 23, 1949 on a total payment of Rs. 3,'l!..COO/-, which was in excess of the written down valut of the building, machinery and plant of tho undertaking.

In connection with the assessment of the appellant for the year 1950-51, the

Income-tax Officer computed such excess realisation over the written down value as did not exceed the difference between the original cost and the written down value, at Rs. 77, 700/- and held that this sum of Rs. 77,700/- was taxable in the hands of the appellant by reason of the provisions ins. 10(2)(vii) of the Indian Income-tax Aot, 1922. The appellant contended that no part of the excess over the written down value was taxable since the undertaking had not been voluntarily sold, but haq been compulsorily acquired by the Government; therefore, the transaction was not a sale within the meaning of the provisions in s. 10(2)(vii) of the Income-tax Act.

Both the Income-tax Officer and the Appellate Assistant Commissioner repelled this contention of the appellant. On au appeal to the Income-tax Appellate Tribunal, the Tribunal also held against the appellant and came to the conclusion that there was a sale of the building machinery and plant of the undertaking within the meaning of s. 10(2)(vii) of the Income-tax Act. The appellant then moved the Tribunal for a reference of the following question of law which it said arose out of the Tribunal's order ;

"Whether on the facts and in the circumstances of this case, and on a true interpretation of section 7(1) of the Indian Electricity Act and clause 9 of the Fazilka Electric License, 1934, the transaction, by which the Government acquired the undertaking, could 'be regarded as a sale within .the meaning of section 10(2)(vii) of the Income-tax Act?" The Tribunal referred the question to the High Court.

The High Court answered the question against the appellant. The appellant then asked for a certificate under s. 66A(2} of the Income-tax Aot and having obtained such a certificate, has preferred the present appeal to this Court.

The Fari/k4 Electric

Su.pply Co. Ltt.

The Commissio1Ur of

Income-tax, Del hi

T1rt Fa.zilka EltCtric

Supply C.. f.td.

The Commissi01lt'r of

lncom•laJt, Del/11

Das J.

500 SUPREME oouitT REPoRTs [1962] sui>i>.

t:iection 10(1) of the Income-tax Act states that Income-tax shall be payable by an assesec undor the head "Profits and gains of business, profession or vocation" in respect of the profit or gains of any business, profession or vocation carried on by the assessce. Suh-sectiun (2) of the said section states that such profits or gains shall be computed after making certain allowances referred to in els.

(i} to (xv).

Clause (vii) relates to an allowance in respect of any building, machinl'fy or plant wbirh has been sold or discarded or demolished or des troy(,'<I, the allowance being the amount by which the written down value thereof exceeds the amount for which the building, machinery or plant. as the case may be, is actually sold or its scrap value ; the second proviso to the clause states that where the

amount for which any such building, machinery or plant is sold, whether during the continuance of the business or after the cessation thereof, exceeds the written down value, so much of the excess as does not exceed the difference between the original cost

and the written down value shall be deemed to be profits of the previous year in which the sale took place. It is not disputed before us that if what took place on .July, L3, 1949 in exercise of the option given to the Government under cl. 9 of the licenAe read with s. i and other provisions of the Electricity Act, was a sale within the meaning of clause (vii), then the amount which the Incometax Officer determined to be Hs. 77 , iOO/- would be taxable in the hands of the appellant as profits within the meaning of the said clause. Therefore, the answer to the question which was referred to the High Court depends on whether them was a sale of the

building, machinery and plant of the undertaking in question.

The learned Advocate for the appellant has contented before us that the High Court was in error in holding that there was a sale of the building, machinery and plant of the appellant's

undertaking. He has submitted that a sale involves mutual agreement and a contract of sale of goods is a contract whereby the seller transfer;; or agrees to transfer the property in goods to the buyer for a price. He .has argued that on a proper construction of the provisions of the Electricity Act and the rules made thereunder, the so-called sale in the present case was really a compulsory acquisition of property and not a sale as legally understood ; therefore, s. 10(2)(vii) of the Income-tax Act was not attracted to the transaction in question and the excess over the written down value could not be deemed to be profits in the hands of the appellant.

It is necessa.ry to read here some of the provisions of the Electricity Act and rules made thereunder. Section 3 of the Electricity Act states in effect that the State Government may; on application made in the prescribed form and on payment of the prescribed fee, grant to any person a license to supply (electric) energy in any specified area.

Sub-section (2) of s. 3 states that in respect of every such license and the grant thereof certain

proviions shall have effect : one of these provisions is that any person applying for a J icensc shall publish a notice of his application in the prescribed manner and with the prescribed particulars, and no license shall be granted until all objections received by the. State Government with referencs thereto have been considered by it ; another provision is that the provisions contained in the Schedule to to the Electricity Act shall be, deemed to be incorporated with and to form part of every license granted save in so far as they are expressly added to, varied or exempted by the license. Sections 5 and 7 deal with the purchase of the undertaking in certain circumstances and s. 10 empowers the State Government to vary the terms of purchase. Notwithstftnding ss. 5, 7 and 8, the State Government may, in any license to be granted under the Elecricity Act, vary te terms ad conditions upo~

The Faz.ilka Ele ctric

Supply Co. Ltd. v.

The Commissioner of lncomr.tax, De/hi

Das , f.

Tht Fa::ilka Efr.cl-ric

Sunry Co. Ltd. v.

The r.ouunis.1fontr of

fnc1mltu, Delli i --

502 SUPREME COURT REPORTS [1962] SUPP . . which, and the periods on the expiration of which, the licensee shall ho bound to sell his undertaking, or direct that subject to such conditions 11nd restrictions, if any, as it may think fit to impose, the provisions of the said sections or any of them shall not appl.v.

Xow, we may rP, ad s. 7 so far as it is relevant for our purpose.

"7. (!)Where a license has been granted to any person not being a local authority, and the whole of the area of supply is included in the area for which a single local authority is constituted, the local authority ehall, on the expiration of such period, not exceeding fifty years, and of every such subsequent period not exceeding twenty years, as shall be specified in this behalf in tho license, have the option of purchasing the undertaking, and if th1i local authority, with the previous sanction of the State Go\ernmcnt, elects to purchase, the licensee shall sell the undertaking to the local aul hority on payment of the value of all lands, buildings, works,. materials .and plant of the licensee suitable to, and used by him for, the purposes of the undertaking, other than a generating station declared by the license not to form part of the undertaking for the purpose of purchase, such value to be, in case of difference of dispute, determined by arbitration :

Provided that the value of such lands, buildings, works, materials and plant shall be deemed to be their fair market-value at the time of purchase, duo regard being had to the nature and condition for the time being of such lands, buildings, works, materials and plant, and to the state of repair t.hereof, and to the circumstance that they are in such a position as to be ready for immediate working and to the suitability of the

ljarne for the urposee of the underta~ :

Provided also that there shall be added to such valu~ as aforesaid such percentage, if any, not exceedmg twenty per centum on that value as may be specified in the license, on account of compulsory purchase.

(2) Where-

( a) the local authority does not elect to purchase under sub-section (1), or

(b) the whole of the area of supply is not included in the area for which a single local authority is constituted ; or

( c) a license supplies energy from the same generating station to two or more areas . of supply, each controlled by its own local authority, and has been granted a license in respect of each area of supply,

the State Government shall have the like option upon the like terms and conditions.

(3)

(4)

(5)

x x x

x x

The section gives to the local authority and if the local authority does not elect to purchase, to the State Government, an option to purchase the undertaking. If neither is willing to exercise the option on the expiry of periods referred to therein then the license may be revoked on an application or by consent of the licensee.

In that case s. 8 lays down that tl; te licensee has the option to dispose of his undertaking to any other person within six months. If the licensee fails to do this, then the Government may remove the works at the cost of the licensee as laid down in s. 5 of the Electricity Act. ·

The Fll1:.ilka 11/ectric

Sup; ty Co, Ltd .

•• Tire Commissiorur of

lneume-tax, Delhi

Das J.

Tk .. F1U.ilka Ekttr i:

Supply Co. lid.

Tiu Co111mi1Mnt-r Gf

/ncnme-tnx, Delhi

Das.!.

504 SUPREME OOURT REPORTS [1962] SUPP

\Vo may now turn to tho rules in so far as they are relevant to the point under consideration.

The rules lay down that every application for a license shall be accompanied by copies of a draft license

as proposl'l.l by the 11pplicant, and the draft licenRC 8hall contain, among other particulars, tho proposed periods after which tho right to purchase is to take effect and a statement of any special terms of purchase or orders proposed to be made under s. 10 and any proposed modification of the Schedule to bo made under s. 3, sub-s.(2), ol. (f). The applic(tnt shall then publish a notice of his application by public advertisement, and such advertisement shall include inter alia the draft license. Where any person desires to have any amendment made in tho draft license, ho shall deliver a statement of the Sil.me.

The rules further provide for a local flnquiry if any person locally interested objects to'. the gmnt ; if a.nd when Government has approved of a draft license, either in its original form or in a modified form, a duty is cast on Government to inform the applicgnt of such approval and of tho form in which it is proposed to grant the licens1i and if the applirant is willing to accept the licen.e in the .form proposed, then Government shall on reenipt of an intimation in writing of such .qcceptance publish the liconso and notify that it has been granted.

If, therefore, the provisions of the Electricity Act arc read along with tho rules made thereunder, it bocomes manifest that the condition as t.o the option of purchase, either by the local authority or Government, is the result of an agrel.'mcnt between the applieant who has applied for the license and Government who grnts the license. Section 7 of the Electricity Aot is morcly an enabling provision which allows the parties t.o specify in the license the periods on tho expiration of which the right of option shall be cxcroiscd, su hjcct to the maximum periods mentioned therein.

The true scope and etfect of s. 7 is not what the appellant suggeeU!.

It merely provides for an option of purchase to be

I96Z exercised. on the expiration of certain periods Tho F..uks El . agreed to between the parties, and ~· 10 further - SupplJ co. Lff."' provides that in an appropriate case Government ~··c v; .• £ h .

Th' t' d ,,,. omm1mooerol may even orego t e opt10n.

IS sec 10n oes Inoom•'tax, Delhi not provide for a compulsory purchase or compul- -- sory acquisition without reference to and indepen- Dos J, dent of any agreement by the licensee. Our attention has been drawn to the use of the expression "compulsory purchase" in the. second proviso to sub-s. (I) of s. 7 and it has been argued that the use of that expression indicates the intention of the Legislature. The se ond proviso is another enabling provision which enables the parties to specify in the license such percentage,. if any, not exceeding twenty per centum, as should be added to the . value of the building, plant, machinery etc. when the option of purchase is exercised. No doubt, the expression used in the proviso is "compulsory purchase" ; but in substance what it provides for is that the parties may agree to increase the market value of the building, plant etc. by a certain percentage when the option of purchase is exercised and the price has to be paid.

The use of the expression "if any" after the word

"percentage" shows that the parties may agree not to increase the market value at all. If the whole scheme of the Electricity Act and the rules made thereuuder, is kept in miud, it becomes obvious that notwithstanding the use of the expression "compulsory purcha>e" iu the second proviso to subs. (I) of s. 7, there is no compulsory purchase or compulsory acquisition in the sense in which that exp\ession is ordinarily understood. The High Court has rightly pointed out that the scheme of the Elctricity Act as indicated by the relevant provisions thereof and therules made thereunder, shows beyond any doubt that the option of purchase is the result of a mutual agreement between

Tht F•u1k• Euctric

Suplf; i C1. Ltd. • .. . 'The Co11U11is1ioner of

lncoMelox, D1/hi

DasJ.

506 SUPREME COURT REPORTS [1962] SUPP.

tho parties, the applicant for the license on one hand and Government on the other. The High Court rightly observed :

"The rules show that a draft license has to be sent by an applicant for license containing definite and specific terms on which the license is sought. This amounts to an offer.

The Government accepts it or rejects it. If it modifies it in any way, then the applicant or offerer must accept the modification. If the Government accopts the .offer with or without modification, then it grants a license.

In my view a license granted by the Govern - ment in such circumstances amounts to a contract between the parties."

On behalf of the appellant it ha~ been contended, somewhat faintly, that all the elements necessary to constitute a contract are not present here. We are unabl(! to agree.

There was an undertaking on the part of the applicant for the Iioense to sell the undertaking to the local authority or Government upon certain terms set out in the license, and the time at which the option was to be exercised and the price which was to be paicl for the property were specified. There was consideration for the contract as the license was granted on thoso terms.

Therefore, all elements necessary for a contract were present, and the sale in pursuance thereof wn, s not a compulsory purchase or acquisition. (8cc Sakalar1una Nay11d1i

v. Chhinna Munusu•amy Nayafoi t').)

We are, therefore, of the l>pinion that the High Court correctly allJlwered the question referred to it.

There was a. sale in the present case of tho building, machinery and plant within the meaning

( \) ( 1928) L, R. 55 I.A. 243.

of cl. (vii) of s. 10(2) of the Income-tax Act. In view of this conclusion it is unnecessary to deal with a somewhat larger question which was canvassed before us on behalf of the respondent that s. 10(2 )(vii) of the Income-tax Act is attracted even to a compulsory sale. Nor do we consider it necessary to examine the decisions bearing upon the question whether a compulsory transfer to and vesting of property in Government, constitute a sale within the meaning of the relevant provisions of the Indian or English Statute. It is sufficient to point out that Calcutt, a Electric Supply Corporation

v. Commissioner of Income-wx, West Bengal (') related to a transaction by which Government acquired the plant etc. and it was held that such acquisition could not be regarded as a sale within the meaning of s. 10(2)(vii) of"the Income-tax Act.

In the result, the appeal fails and is dismissed with costs.

Appeal dismissed.

(1) [1951] 19 I.T.R. 406.

The F<U:.ilka E/ec!tic Supply Go. Lid,

The Commissioner OJ

lncnme•ta*, Delli.i -- DasJ

THE FAZTLKA ELECTRIC >SUPPLY CO. LTD

c. SHAH

s. 10(2)

Clause 9(a)

s. 7

Electricity Act

Electricity Act, 1910

s. 7

Electricity Act

Electricity Act

s. 7

(1928) L. R. 55 I.A. 243

Indian Electricity Act, 1910

Electricity Act

section 7

section 7

Electricity Act

s. 10(2)(vii)

Income-tax Act

s. 10(2)(vii)

Income-tax Act

section 7(1)

Electricity Act

clause 9

section 10(2)(vii)

Income-tax Act

Income-tax Act

cl. 9

Electricity Act

Electricity Act

s. 10(2)(vii)

Income-tax Act

Electricity Act

Section 3

Electricity Act

s. 3

Electricity Act

Sections 5 and 7

s. 10

ss. 5, 7 and 8

s. 7

s. 8

s. 5

Electricity Act

s. 10

s. 3

Electricity Act

Section 7

s. 7

sec 10

s. 7

Electricity Act

s. 7

s. 10(2)

Income-tax Act

s. 10(2 )(vii)

Income-tax Act

s. 10(2)(vii)

Income-tax Act


508 SUPREME COURT REPORTS (1962] SUPP.

STATE OF ASSAf

TULSI SINGH

(B.P. Sr:nIA, c .. J., K. SusBA RAO N. ltA.JAGOPALA

AYYANGAR, J. R. MuDHOLKAR and T. L.

VF.NKATAR~MA AIYAR, JJ.)

Fcrry-Seltlement nf by auction-!11t!es-01tl~ of officer canduc!1'.ng s1!e -Spe:iri! I.Ji'>~ 1nJ.in!ained by Assci1n aovernmcnt of -persons su, pccted or coafit1w:, d l'J b"- c:>nn '!c!ei 1oit-li sn1.11,7glin'} activilies-Nat?Lre of document-If could be "died on for sdtlinq f!ivil right-tJ-High Court if CtJ1t'd (lcirle m:11t-r, r entr1t., fed fo execulive authoritie•-lndian Evid-.nce .4cl, 1872 (I of 1872). •.35-Norlhern India Ferrie.• Act, 1878 (17 of 1878), as. 4,8,12, r. 19.

Under s. 4 of the Northern India Ferries Act, 1Ri8, the ferry at N was declared to be a puhlir ferry.

Rule I 9 framed under s. 12 of the Act provided that a s>le of frry w.lS generally to ho auctioned to the highest bidder, and the acceptance of a hid by the officer conducting the sale was subject to the approval of the Chief Enginet-r \vho had to see v.rhcthcr that officer had taken into consideration all the factors mentioned in r. 19.

Ferry at N \Vas put up tQ auction and sold to the second rcspo11dent whose bid \''as the lo.vcst, Though the first respondent's hid was the highest, the officer conducting the S<lle, \vithout funning an opinion about the suitability of the first respondent on his o\vn appreciation of matrrials as required under r. 19, rejected first respondent's hid straight -a\vay as his natne. appeared in the. "Speci; ll List"'.

This "Special List" was prepared and maintained by the Government of Assain of persons suspected or confirmed to be connrctcd v.•ith smuggling activities so that no permit or license may be o/anted to such pcrso ts. 'fiiis was in pursuance of thr. prohibition policy of the G )Vernricnt.

The first respondent applied to the Chief Enginrcr for accepting his bid and settling the ferry on him which was rejected, whereupon he moved the High Court of Assam under Art. 226.

The High Court set aside the settlement of the ferry in favour of the second respondent as bein~ violative of s. 8 of the Act and r. 19 and further dr.clarecl that tl1e first rcpon dent was entitled to the scttleinerit as the highest bidder.

Assam Government ca1ne up in appeal by special lea\'c to tlt<: Surreme C.ourt. ·

3 s.c.it.

SUPREME COURT REPORTS 509

The question is whether a bid of a person at the auction of ferry can straightaway te rejected by the officer conducting the sale merely for the reason _that his name appears in the special list and w bet her the H1h Court cc;>ld decide a , question was entrusted to the executive authorities under the Act and make setdement of the ferry.

Held, that the discretion conferred on the officer conduct ing the sale under s. 8 of the Northern Ferries Act read with r. 19 framed under the Act is wide but not unrestricted.

The discretion must be based on the material before him and rrlevant for his consideration and if, on a consideration thereof, he declines to exercise his discretion to accept the bid, his decision is not liable to be reversed by the courts,.

But where there is no material before him on basis of which he rejects a bid his action amounts to non-compliance with the provisions of r. 19 and cannot be upheld.

Held, further, that the "Special List" maintained by the Government of Assam of persons suspected or confirmed to be connected with smuggling activities is not a document falling withins. 35 of the Indian Evidence Act and while such list might serve a purpose in guiding Criminal Intelligence Department, it will be unsafe to re1y on it for deciding civil rights of a person.

Held, also, that even though the order of authorities is riot in accordance with Jaw, it was for the appropriate authorities. to deal with the matter and the High Court could not itself decide '\'hat is entrusted to the executive authorities.

Verappa Pillai v. Raman & Raman Ltd., [1952] S.C R. 583, followed.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 14 of 1962.

Appeal by special leave from the judgment and decree dated July ll, 1961, of the Assam High

Court in Civil Rule Nu. 64 of HJ6l.

Naunit Lal, for the appellantB.

The respondent did not appear.

State of.A.ssrm

•• Tulri Singh

Slate of .A.ss.im

Trdsi Sm1h

Ai1arJ.

io SUPI~EME COURT REPORTS [1962] SUPP.

1962. March I. The Judgment of the Court waa delivered by

VENKATARAMA. AlYAJt, J.-The short question that arises for our decision in this appeal is whtether the settlement by the Executive Engineer, Golaghat in the State of Assam, of the ferry at N'opcrpatty

c>D the second respondent, Phuka Chandra. Gohain, on January 23, Hi61 was in accordance with the provisions of the orthern India Ferries Act, 1878, hereinafter roferred to as "the Act", and the rules framed thereunder.

The relevant provisions of the Act bearing on this question might now be referred to. Under s.4., the State Government may, from time to time, declare what ferries shall be deemed public ferries.

Section 8 of the Act is as follows :-

"8. The tolls of any public ferry may, from time to time, be let by public auction for a term not exceeding five yea.rs with the approval of the Commisioner, or by public au<'lion, or otherwise than by public auction, for any term with the previous sanction of the State Government.

The leSBee shall conform to the rules made under this Act for the management and coutwl of the ferry, and may be ea.lied upon by the officer in whom the immediate superintend<•nce of the ferry is vested, or, if the ferry is managed by a municipal nr other public body under section 7 or section 7 A, then by that body, to give Ruch security for his good conduct and for the punctual payment of the rent as the officer or body, as the tho case may be, thinks fit.

When the tolls are put up to public auction, the said officer or body, as the case may be, or the officer conducting the sale on his or its behalf, w "'v, for reasons recorded in

writing, refuse to accept the offer of his high est bidder, and may accept any other bid, or may withdraw the tolls from auction."

Rule 19 framed under s.12 of the Act is as follows:-

"The sale shall generally be by auction to . the highest bidder. The Officer conducting the sale for sufficient reason recorded in writing under his hand may refuse to accept the offer of the highest bidder or any bid. The Officer shall in accepting the bid consider the following factors among others :-

( i) Whether the bidder is a native or domicile or an outsider.

(ii) Whether the bidder bas experience of the ferry business.

(iii) Whether he has landed property in his own name within the district or State. can apeak the regional language, is finacially sound and of good conduct, etc." The ferry at N eparpatty has been declared to be a public ferry under s.4 of Act.

On January 23, 1961, the Executive Engineer, Colaghat, put up the lease of the ferry for the year 1961-62 for public auction under s.8 of the Act. At the auction, Tulsi Singh, the first respondent, gave a bid for Rs. 4,200/-,

one Indra Deo Singh for Rs. 4,050/- and Phukan Chandra Gobain, the second respondent for Rs. 3,000/-. The Executive Engineer then made the following Order :-

"Sold to Shri Phukan Chandra Gohain at Rs. 3,000/. (Rupees Three thousand) only es the two other highest bidders fall in special List."

Under Rule 19(a), the acceptance of the bid by the

St•te of .Assam

Tulsi Singh

iyarJ.

S1at1 of Assam

Tu/Ji SU1gh

A(1ar J,

conducting Offioer is subject to the approval of the Chief Engineer, and Rule W(b) provides tho.tho must, in doing so, "consider among others whother the Officer conducting the sale has taken into account and considered a.II the factors m!'ntioned in Rule 19 above." The Chief Engineer approved of the decision of tho executive Engineer dated January 23, 1961, and the sale totbe second respondent was confirmed. Thereupon, on February 6,1!161, t.he first respondent applied to the Chief Engineer for accepting his bid and Rettling the ferry on him.

By his Order dated April i, l!lfil, the Chief Engineer rejected this petition.

On .\fay 9, 1961, the first respondent filtd in the High Court of Assam a writ Petition uwler Ar-t. :!26 attacking the Order of the Executive Engineer datecl .January 2;1, 1961, settling the lease in favour of tho second respondent as contrary to the Act and the Rules, and praying that it might be Hett.led on him. The learned Judges accepted this l'oritention aml set aside the settlement in favour of the soeond respondent as violative of s.8 and Rule 19, and further declared that the first respondent was untitled to the settlement under R:ile 19 as the highest bidder. It is against this Judgment that this appeal by special leave is directed.

The power of tho Executive Enginncr to settle public ferries is derived from s.8 of the Act and the

H.ule~ framed thereundn, and it has theroforo to be exercised in accordance therewith. Under Rule! 9, the sale should genera.Hy be by auction to the highest bidder 9-ml under this provH<Jn the ferry should normally have boen settled wih the first respondent, who gave the bighPst. bid. Section 8, provides that the Officer eon ducting the sale may, for reasons recorded in writing, refuse to accept the offer of the highest bidder and accopt any other bid.

The discretion thus conferred on tho Officer, is wide hut not indefinite or unrestricted.

Rule I 9 provides that in accepting the bid, he has to take into

account certain factors; and under Rule 19(b), the Chief Engineer has to satisfy himself that these factors have been taken into consideration by the conducting Officer when he accepted the bid. It is contended for the appellant that, if there are materials before a conducting officer on which he could refuse to accept the highest bid and he on a consideration, thereof declines, in the exercise of his riiscretion, to accept it, his dicision is not one which is liable to be reviewed by the Court. That is undoubtedly so but when there are no materials before him on which he could act under Rule 19, then that il a case not of exercise of discretion but of want of authority to settle under the Act. Now the only ground given in .the Order dated January 23, 1961, for rejecting the bid of the first respondent which was the highest, is that his name is in the "special list". It appears from the affidavit of the Chief Engineer that in pursuance of the policy of prohibition followed in the State of Assam, the Government or Officers .of the Government have prepared ''lists of persons suspected or confirmed to be connected with smuggling activities", and that it was "the policy of the Governm<'nt not to grant taxi permit, stage carrier permit, fisheries, ferries etc. to persons who are listed to be suspected or confirmed opium smugglers". It is this list that is referred to as the "special list" in the order of the Executive Engineer. It is argned for the appellant that if a person is a. smuggler, then he is not a person of good conduct, and the rejection of his bid would be justified under Rule 19(iii). The contention is perfectly sound, and the authorities would be exercising their discretion properly in refusing to accept the bid of a smuggler, because, to put such a person in charge of ferries must help to evade the prohibition laws, and that would be a relev1tnt factor under Rule 19(iii). But the difficulty of the appellant is that there are no materials nu which the first respondent could be held to ' .. . ' ' ,- . .

State of Assam

Tulsi Singh

A'._yarJ.

Stalt n(. !.~1m11

•• I'ul1i Si., :h

.4 '_'fd' .! •

be a smuggler. It appears that he was!proseouted

under s. 4 of tho Assam Ganja and Bhang Prohibit.ion Act but that ended in his discharge. It is argued thllt though the materials llvailable might have been insufficient to sustain a conviction under the Ad, the~· might be sufficient for the authorities to take action under Rule 19. That is possible hut th:tt i~ not the position in this casc. The Executive Engineer did not form any opinion about the first respondent on his own appreciation of the materials. He found his name in the "special list'' and straightaway rejected his bid.

Now the question is whether on this mawi-ial an Orcler rejecting the highest hid could be made under Rule 19. It is not ancl cannot he argued that the 'special list" is a document falling within s. 35 of the Evidence Act. It is said to be a confidential document. It does not appear on what information it is prepared or from what sources the information is received. Nor is anyhing disclosed 88 to the procedure adopted by tho Government Officers in preparing the list.

While such lists might servn a purpose in guiding Criminal Int-Olligence Department, it will be unsafe to rely solely on thorn for deciding civil rights of persons. If the "special list" is thus ruled out as not material on which an opinion could be formed, then thnre was nothing else on which the conducting Officer could have rejected the offer of the highest bidder under Rule 19. We are accordingly of opinion that the decision of the learned , Judges or the High Court that the rejection of the offer of the highest bidder is not in a.coordance with s. 8 or Rule 19 is corrent.

The result of this conclusion is that the authorities under the Aet would have to be directed to consider the matt{lr a.fresh and give a decision in accordance with law, but the learned Judges have proceeded further and observed that under Rule

~ 9, the offer of "the tir1t resrondent, being te

...

3 S.C.lt.

SUPREME COURT REPORTS 515

highest, ahould be accepted. The appellant con tends that even on the view that the Order of the Executive Engineer dated January 23, 1961, is not in accordance with law, it was for the appropriate authorities to deal with the matter and make a fresh settlement and that the Court could not itself decide what is entrusted to the executive authorities undfT the Act. This, in our opinion, is correct.

In Verappa Pillai v. Raman & Raman Ltd.(') the quest!on arose with reference to the grant of permits under the Motor Vehicles Act. The au thorities constituted under the Act had made an Order granting permits to one Verappa Pillai, and its validity was disputed by a rival applicant M/s Raman and Raman Ltd., in an application under Art. 226.

The High Court of Madras had held that the title of the applicant would prevail over that of Verappa Pillai and accordingly set aside the order of the authorities and direct grant of the permits to the applicants.

On appeal to this Court, it was held that such a direction was elearly i11 excess of the powers and jurisdiction of the High Court. We must accordingly hold that the order of the High Court, in so far as it declared the rights of the highest bidder, is erront'- ous.

But, in view of the fact, that the lease was only for the period 1961-62 and that would shortty be expiring, there is no need to direct a fresh consideration of the matter by the authorities. In the result, the appeal is dismissed.

Appeal dismissed.

(I) [l9i2J S.C.R, 583,

Stati of Assan1

Tulsi Singh

SUPP.

STATE OF ASSAf

TULSI SINGH

K. SusBA RAO

AYYANGAR, J.

R. MuDHOLKAR

s. 4

Northern India Ferries Act

s. 12

Art. 226

s. 8

s. 8

Indian Evidence Act

India Ferries Act, 1878

Section 8

section 7

section 7

Section 8

s. 4

s. 35

s. 8

Motor Vehicles Act

Art. 226


:50 SUPREME COGRT REPORTS [1962] SUPP.

THE BOARD OF REVENTE, U. P. AND

OTHEHS

t'.

SARDARXI VIDYAWATI AND ANOTHER

(S. K. DAS, A. K. SARKAR, K. SFnBA R, w, K. N.

WANCrroo and N'. RA.JAGOP.U.A AYY A :\GAR, J, J.)

Stamp Dulylmpoundinq of document - llcferrn•:clleVl!n?t-! /Joard, if mlUif lu11r the pflrly f1[f~/rirrp1/ - /nrlirzn Stamp Act, 1899 (2 of !89Y), ss. 33, 5G(2).

The respondents sought permission of the Court to with. dra\v certain moneys on furnishing security which \\as granted.

A security bond was executed by the respondents by v..hich a house v•as given as security.

The Inspector of Stan1p; rcpnrtd that the security bonrl ,, as inc:ufficicntly starnpt:d and therefore it should he in1p0undcrl anrl a deficit stamp duty of Rs. 4B2;1 I !and a penalty of Rs. 4,82G:I ~!-should he le\'icd. 'I'hereupor1 thr: ])cputy Con11nissionrr, acting as Collector, called for objcr.tinns. 'J'hc judicial officr hefurf! \\'horn the security bond , .. , as filed in1pnundcrl the bond and for\\'ardcd it to the Deputy Comrnissioner.

Afi.cr further ohjcctLJns herc filed by the respondents before the Stan1p Offirrr, the latter submitted a report to the l)tputy Co1nmissiuner upholding the order of the Inspector of Stamps.

Therc:upon the Deputy Commissioner passed an order ''realise". rhe responrlnents filed a re.vision petition against the order of the Deputy Commissioner before the Board of Re\'en1H~ and \\hile that petirion 'vas pending the Deputy Commission,.r referred the 1nat1er to the Boarrl of Revenue under s. j() (2) of the Stamp ;\ct and the Board of Ile.venue passed an order upholding the orrh.:r of the Deputy Cuminissioner. 'J'hc respondent:.; then filer! ; i \\rit petition-under Art. 226 of the (on!'-titution before the High Court. 1, heir 1nin contention \\'as that they were 11nt ghen a hearing f":ither hy the Board of Revcnur: <ir the J)cputy Commissioner. '!'he ptition \Va!! heard by a Single Judge vvhn dismissed the petition on the ground that ncith~:r t!ie Stan1p i\ct nor the Rules franied thcreundr-r providr-d that a hearing should be given to the aggrieved person.

Thrt>aficr the appeal Court creatl"d the m; i.ttcr as a rcfer('ne hrfore the R("venue Boar<l 11ndCr s. 51) (2) of the 1\ct and h~Jd that the Act or Rules did not require. tl:at a hearing sliculd be given by the authorities acting under s. :)G but that although they \\'Crc acting only ad1ninistrativcly they \\'ere hound to give a hear~ ing according to the principle~ of natural justice. 'fh(' appeal was allowed.

3 S.C.R.

SUPREME COURT REP0RT3 51

Held, that it is clear that s. 56 (2) deals with cases where there is a doubt in the mind of the Collector in regard to an instrument as to its construction and the provisions of the Act applicable to it.

Sucb doubt itself shows that the point rais. ed for the Collector's decisions is a difficult point of law and from the very nature of the duty to be performed in such circumstances it appears clear that the Chief Controlling Revenue Authority has to decide the matter judicially and would thus be a quasi-judicial tribunal.

w Where .the provisions of the Act are silent, the duty to act judicially may be inferred from the provisions of the statute or may be gathered from the cumulative effect of the - nature of the rights affected, the manner of the disposal provided the objective criterion to be adopted and the phraseology used and other indicia afforded by the statute.

The questions before the Board under s. 56 (2) being one of construction of an instrument and the application of the Act to it being a pure questions of law which may result in payment of large amounts by the executani of the document, the Board should give, for the determination of such question, a hearing and it should act judicially in determining a pure question of law.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 29 of 1958.

Appeal from the judgment and order dated May 3, 1956, of the Allahabad High Court in Special Appeal No. 48of1954.

Veda Vya.sa and 0. P. Lal. for the appellant.

A. N. Goyal, for the respondents.

1962. February 6, The Judgment of the Court was delivered by

WANCHOO, J.-This is an appeal on a certificate granted by the Alla.habad _High Court. The brief facts necessary for present purposes are these.

Certain decretal moneys were deposited in the then

- Chief Court of Oudh at Lucknow. The respondents applied to the Chief Court for permission to withdraw the mone, i.s on furnishing security and were permitted to do so. Thereupon a registered security bond was [executed and registered. in Simla in 1949 by which

196t

The Board of Revenue, U.P. v. .

Sardarni Vidyawati

Wanc~OD J'.

The Board or RttJtT---Ue, u. P.

Sard, rni Vid;-awali

11'o'1thoo J,

a house there was given in security for withdrawal of the money.

Befere, however, the mon<'V cotild be withdrawn, th'3 Inspector of Stamps reported on March 15, 1!)50, that tho so called security bnnd

wits in reality a mortgage deed without possession and waa insufficiently stamped. He therefore reported that it should be impounded and the deficit stamp duty of Rs. 482/11 /- and a penalty amounting to Rs. 4,826/14/· should be levied with respect to that document. Thereupon on April ~.

1950, the Deputy Commissioner, Kheri, acting as Collector passed the following order :-

"In case the parties have any objection, they put it in writing which will be referred to the Board of Rcv('nue." It seems that on July 5, J!l;)O, t-he respondents objected that the document wail not a mortgagedeed and that no duty or penalty was paynblo, and further that as the dooument had not been till then accepted by the court, it was only a tentatin• document. On August 3, 1950, the judidal oft1c('I' before whom the security bond was filed impounderl it under s. 33 of the Indian Stamp Act, Xo. II of 1898, (hereinafter referred to as the Act).

and apparently forwarded it to the Deputy Commis sioner, Kheri, under s. 38 of the Act.

It. seems thereafter that in November 1950 the respondents filed further objectionR before Stamp Officer (Treasury Officer), Kheri, from whom the Deputy Comm is sioncr who acts as a Collector for the purposPs of the Act had called for a report. In December 19.'iO,

the Treasury Officer made a report to t.he Ptfe, t that. the view of the Inspoctor of St.ampH was correct. and duty and penalty as reported by the latter were due. The respondents' case was that the Treasury Officer did not give them any hearing bcfor<' making tho said report. It eeems that on thiR report tlw Deputy Commissioner made the order "Realist,". He also is said to have given no hearing to the respondenta. In anuary 1951, the respond@ts filed a

. .: --

revision against the order of the Deputy Commissioner before the Board of Revenue. It appears however that in March 1951 the Deputy Commissioner referred the matter to the Board of Revenue under s. 56(2) of -the Act. In July 1951 the Board of Revenue disposed of the maUer and upheld the order of the Collector. But the respondents' complaint waR that the Board of Hevenue also did not give them a hearing. Consequently they filed a writ petition in the High Court in November 1951.

That" petition was dismissed by the learned Single Judge on the ground that neither the Act nor the Rules made thereunder provided that any hearing should be given to the person who was liable to pay the deficit stamp duty and the penalty. He further held that in any case the Collector had given an opportunity to the respondents to urge their objections in writing, and that the Board of Revenue had also considered the grounds taken by the respondents in their .revision-petition and there was no provision in the law requiring the Board of Revenue to give a personal hearing or a hearing through counsel in a case of this kind. ·

The respondents then went in appeal. The appeal court seems to have treated the matter before the Board as if it were a reference under s. 56(2) of the Act. As •the learned Single Judge has pointed out, though the order of the Collector of December 1950 would usually be final. it appeared that he had chosen to make a reference to the Board of Revenue under s. 56(2). We must therefore proceed on the assumption that this case has been disposed of by the Board under s. 56(2) and not by the Collector under s. 40( 1) or by the Board under s. 56(1).

The appeal court under ss. 40 and 56 leave the entire matter to the opinion of the person before whom the insufficiently stamped document is produced and do not lay down any procedure for calling upon the party concerned to show cause why the document be not held to be

The Board ()f Re1enue, U.P.

Sariarni Vidyaw1t i

Wanchoo J.

i9Gl

T•,, Boe.rd of lfern;111, l./. P. v.

S111dami l'idy-awotl

54 SlJPHE:IIE COURT REi'ORTS [I !J62] SUPP.

insufJiciently stnmpecl and there was n<> provision

undr the Act or the Rules which re4uired the authorifies concerned to gini imy h"aring to tlw person executing the documtmt.

The appeal cour1, therefore hel<l that tho authoritit" cunc, rncd when acting either under s. 40 or s. ;)li were not acting judicially or quasi judicially. Tho :ippcal cuurL further helcl th"'t e\"cn thvugh tlw authorities were acting mt, fl!ly a<lmiuistratindy under s. 40 and s. 56(2) they were bound to give a bearing a"corcling to the principle:'! of natural justice, in accordance with the decision of tl:iat court in Special Appral No. 2\J l of I 9ii5, Gluinshyamdas Uuµta v. 'l'h'!- Board of 11 iyh Schlj()l and I 11te1111r:di<lte Lducati<m,

U. P.

They thercforn set asicl" the order of the Board of Hevcnuc on the ground that. uo hearing had been giveu to the rcspondent8. Thereupon on application for leave to appeal to this Court; was made to the High Court, which was allowed ; und that is how the mD, Lter has come before us.

The main rontention of the appellant before us is that. thn High Court having heir! that, the Boarrl was acting nwrely administr:itivcly when proceeding under s.5fi (2) of the Act went wrong in holding that it was bound under the principles of natural justice to give a heari1ig to the rcspondnnts. In effect the appel11111t in this cast' impugned the correctness of the view taken in Special Appeal No. 291 of 1955 (supm).

That casp, has come up before us in appeal (C. A. 132 of 1959 Board of High School anrl lnlermed£ate Aduwtian v. G. IJ. G?Jpla), judgment in which is being deliv<red today.

We have in that Cll8e held that t.he examinations' committee is under a duty tu act jullicially when proceecling under r. I( I) of Chap. VI of the Hegulations framed under the C. P. Intermediate Education Act, (No. II of 1921 ), and have not upheld the view taken by the High Court that it acts administratively. A similar question arises in the present

appeal, viz., whether the Board of Revenue when dealing with a proceeding under s. 56(2) of the Act acts administratively or quasi-judi0ially. We must make it clear that we are proceeding in this appeal on the basis that the matter before the Board was under s.56( 2) on a reference by the Collector and not under s.56(1) on the application filed by the respondents inviting it to exercise its power of control thereunder. The contention on behalf of the respondents is that when the Board is acting under s. 56(2) of the Act it is acting quasi-judicially.

Let us therefore first look to the scheme whiuh leads up to the reference under s. 56(2) of the Act. That sub-section provides that if any Collector, acting under s. 31, s.40 or s.41, feels don ht as to the amount of duty with which any instrument is chargeable, he may draw up a statement of the case, and refer it, with his own opinion thereon, for the decision uf the Chief Controlling Revenueauthority. Section 31 deals with the case when auy instrument is brought to the Collector, and the person bringing it applies to have the opinion of that officer as to the duty (if any) with which it is charg0able. It is then the duty of the Collector either to determine the duty (if any) with which, in his judgment tho instrument is chargeable or to refer the case to the Chief Controlling Revenue-authority nnder s.56(2) if he has any doubt in the matter.

Section 40 deals with the case where an instrument is impounded under s.33 or the Collector receives any instrument sent to him under s.38(2), (subject to certain exceptions) and gives power to the Collector either to certify that the instrument is duly stamped or that it is not chargeable at all, or if he is .of opinion that the instrument is chargeable with duty and is not duly stamped to require the payment of proper duty or to make up the same together with a penalty. But if the Collector is doubtful in the ma.tter he has been given power under s.56(2} to

/9C2

The B 06111 •f

lttvenu~, U.P.

Sarda.rni Vidyawari

Tf anchoo J,

Thi l1oarti of Ret'1!1uc. u.r.

S'J"dorni Viclyawati

lt 'n:uhoo ,/.

56 SUPREME COURT REPORTh (1962) SUPP.

refer the question to the Chief Ccntrolling Revenueauthority. Lastly under s.-11, if any instrument chargeable with duty and not d:uy stamped (subjrct to certain cxceptious) is producea by any perEOn

of his own motion before the Collector within one year from the date of its uxecution of first execution, and such person biings to the notice of the Collector the fact that such i11su ument is not duly stamped and offers to pay to the Collector the amount of the proper duty, or the amount to make up the same, and the Collector is satisfied that the omission to duly stamp such instrument has been occasioned by accident, mistake or urgent necessity, he may, inst-0ad of proceeding undt•r ,;s.33 and 4(1, receive such amuuut and under s.42 certify by endorsement thereon that the p1oper duty has been paid. But even in such a case it the Collector is doubtful in the matter, he has been given the power to make a reference to the Chief Controlling Hevenue-authority. It is clear therefore that s .. :J6(2) deals with cases wlwro there is a doubt in the mind of the Collector in rogard to an i11strnme11t which comes up before him under the above provisions of the Act as to the construction of the instrument and

the provisions of the Act applicable to it. Such doubt itself shows that the point raised for the Collector's decision is a difficult point of Jaw and from tho very nature of the duty to be performed in such circumstances it appears olear that the Chief Controlling He venue-authority has to decide the matter judicially and would thus be a quasijudicial tribunal.

As pointed out by us in l'.A. l ::2 of JO;'i!J, the question whether an authority, like the Hoard of Hevenue, acts judicially i~ to be gathcr2d from the express provisions of the Act in tho first instance.

Wllcre however the provisions of the Act arc silent, the duty to act judicially may he inferrnd from the provisione of the statute or may bo gathered from the cummulative effect of the naturo of the

rights affected, tho manner of the disposal provided, the objective criterion to be adopted, the phraseology used and other indicia nfiorded by the statute. It is true that in the present case the Act and the Rules framed thereunder do not provide for a hearing by the Board of Revenue, when it is dealing with a matter under s.56(2) of the Act.

But the question that is before the Board of Revenue under s.55(2) is of the construction of an instrument and the application of the Act to it. In many cases the decision of the Board, if it goes against the person executing the instrument, may result in payment of large amounts as deficit stamp duty and even larger amounts as penalty.

The question is purely a question of law in the circumstances. It seems to us, considering the nature of the duty cast on . the Board of Revenue under s.56(2) requiring it to construe instruments submitted to it thereunder and the application of the Act to them which may result in payment of heavy amounts of deficit duty and even heavier amounts as penalty, that the legislature intended that the Board of l{evenue should hear the person executing the document before saddling him with large pecuniary liability. The question before the Board under s.56(2) being one of construction of an instrument and the application of the Act to it being a pure question of law which may result in payment of large amounts by the executants of the document, it would not in our opinion be improper to hold that for the determination of such a question the legislacure intended that the party affected by the decision of the Board of Revenue should be given a hearing, and that the Board should act judicially in deciding a pure question of law. The fact that tbe decision will depend upon the opinion of the Board cannot in any way make any difference for the determination of questions of law must always depend upon the opinion arrived at judicially of the person or authority who has to determine it, and the.t will not

The Boord oj lfevem1e, U. P. ,., Sardarni Vidyowati

Jf anchoo J.

Jf62

The /!-; o, d rd R , rnw", U. I'.

v. 8 ·.rJarr:i, f'it/_JO/r~I!

IV ancoo J

nccessnrily mean that tho pcrwn determining' it

cannot. po~:; ibly be required to act judicially be cause he has lo act upon l1is opinion. Further, s.5i c11forc<s the above conclusion. That section providrs that the Chief Controllii1g H.evrnueauthority may state any case rtforn'd lo it. under s.56(2), er litherwi8e coming lo its notice, ancl rrfer such case, with its own opini<m thereon to the High Court,· and every such case shall be decidl'd by not lest:

than three .Judges of the High Court lo which it fr referred.

This proYision shows ti.mt questions referred to the Board under s.56(2) may he sul'h complicatPd question~ of Jr, w that the Board may not be able t-0 make up its mind and mn, y be in doubt and in such a rn1se the Board has the power to n:for the matter to the High Court along with its opinion, and the question has to he decided by u Bench of three Judges, where undoubtedly the hearing could not but be judicial. If therefore the bearing under s.5i is judicial it would in our opinion be proper to infer that the hearing under s.56(:!) which deals with similar questious must also Le judicial.

We are therefore of opiuio11 that, eonsidering the totality of circumota11ces and the nature of the matter to be determined Ly the Board of Reveuue under s.56(2), the Board has to act judicially when proceeding under s.5G(2) and must therefore on principles of natural justice give a hearing to the other party, namely, the exccutimt of the instru mcnt. The Board of Hcvcnue therefore acts as a quasi-judicia! body under s. 56(2) and the respondents wore entitled to a hearing. 'Ye therefore uphold the order of tho High Court, though on a different ground.

'l'l•<i appeal is hereby dismissed with costs.

A ppenl dismissed.

THE BOARD OF REVENTE, U. P. AND

OTHEHS

SARDARXI VIDYAWATI AND ANOTHER

S. K. DAS

A. K. SARKAR

Stamp Act, 1899

ss. 33, 5G(2)

Art. 226

s. 51

s. 56

s. 56

s. 33

Indian Stamp Act

s. 38

s. 56(2)

s. 56(2)

s. 56(2)

s. 56(2)

s. 40( 1)

s. 56(1)

ss. 40 and 56

s. 40

s. 40

s. 56(2)

Intermediate Education Act

s. 56(2)

s.56( 2)

s. 56(2)

s. 56(2)

s. 31

Section 31

Section 40

s. 56(2)