A HEit IDGHNESS MAHARANI MANDALSA DEVI AND ORS.

M. RAMNARAIN (P) LTD. AND ORS.

March 19, 1965

IK. SuBBA RAo, J.C. SHAH AND R. S. BA<CHAWAT, JJ.J

Code of Civil Procedure, 1908 (Act 5 of 1908), ss. 87, 87-B Orde1 21, Rule 50(2) and Order 30-Execution against partners of a firm-Ruler of Indian State a partner-Liability of partners- Defences available-Protection to Ruler of a State--If available to rest.

Under Order 30 of the Code of Civil Procedure the respondent No. 1 a firm sued another firm of which the appellants and a Ruler of a former Indian State were partners. The consent of the Central Government to the institution of the suit under s. 87-B of the Code of Civil Procedure was not obtained. The firm admitted the liability

and the Court passed a decree and di.reeled that the cjecretal .amount would be payable in certain instalments. On the firm's

default in paying the instalments an application was filed under Order 21 Rule 50(2) of the Code of Civil Procedure for leave to execute the decree against the appellants, excepting the Ruler as partners of the firm. The Court allowed the application. The appellants' appeal was (lismissed by the High Court. On appeal by certificate;

HELD: (i) The suit so far as it was one against the Ruler was incompetent and the decree against the firm so far as it was a decree against him personally was a nullity. In the absence of the

requisite consent ol the Central Goviernment a suit ag., inst the Ruler was barred by s. 87 read withs. 87-B. [425 F, G].

(ii) The application of respondent No. 1 under Order +1 Rule 50(2) for leave to execute. the decree against the other partners

was maintainable. (427 G].

A suit may be brought under the provisions of 0. 30 of the Code a2ainst a firm of which a partner is not capable of being sued or

being adjudged a debtor, and in such a suit a decree enforceable against the other partner and the partnership assets may be passed.

[427 B].

Case law referred to.

(iii) In an application under 0. 21 Rule 50(2) the judgmentde btor could q uest10n the decree on the ground of collusion, fraud or the hke but so as not to have the suit tried over again or to raise issues between himself and his other partners. ( 428 A].

H The Judgment-debtor was also entitled to raise a plea of special protection under the law; and might also defend the application

on the. ground that the decree sought to be executed against him

is a nullity. But m the instant case none of the appellants was entitled to any special protecmon; nor was it alleged that respondent

No. 1 was a party to any fraud or collusion or that it obtained the

decree by fraud or collusion. [ 428 B, CJ.

Gambhir Ma! Pandiya v. J. K. Jute Mi!!$ Co. Ltd., Kanpur [lg63] 3 S. C. R. 190 relied upon.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 130 of 1964.

Appeal from the judgment and order dated November 21, 1958 of the Bombay High Court in Appeal No. 31 of 1958.

D. N. Mukherjee; for the appellants.

G. S. Pathak, S. N. Andley and Rameshwar Nath, for respondent No. l.

The Judgment of the Court was delivered by

Bachawat, J. Maharaja Sir Rajendra Prakash Bahadur Maharaja of Sirmur, Maharani Mandalsa Kumari Debi Rajmata of Sirmur, Maharani Premlata Debi of Chhota Udaipur, Maiyan Sahiba Sheba Kumari Debi of Jharipani, Major Rao Raja Sirendra Singh, Jagat Pershad, Shib Chander Kumar, Praduman Kumar and Dayawati Rani carried on business in co-partnership under the firm na/ne and style of Messrs. Jagatsons International Corporation (hereinafter referred to as the firm) at New Delhi. Respondent No. !, Ramnarain (Private) Ltd. instituted Summary Suit No. 162 of l 957 against Messrs. Jagatsons International Corporation on the Original Side of the Bombay High Court claiming a money decree for Rs. 1,96,831.58 N.P. The suit wasinstituted on the allegation

that respondent No. 1 and the firm had entered into an agreement in writing dated September 26, 1956, whereby respondent No. 1 agreed to provide finance to the firm, as a result of the dealings

under the agreement a sum of Rs. 1,96,831.58 N.P. was due to respondent No. 1 from the firm, and in view of the breaches of the agreement by the firm, the agreement has stood terminated. The

consent of the Central Government to the institution of the suit

was not obtained, though the Maharaja of Sirmur is a Ruler of the former Indian. State within the meaning of s. 87B of the Code of Civil Procedure. The summons of the suit was served on Shib Chander Kumar as a partner of the firm and as a person having the control or management of the partnership business. On July 15,

1957, at the hearing of the summons for judgment taken out by respondent No. l, the firm admitted its liability as claimed in the plaint and applied for instalments. and the Court passed a decree for Rs. 1,89,643.98 N.P. and further interest, and directed that the decretal amount would be payable in certain instalments. The firm committed defaults in payment of the instalments payable under the decree. On December 13. 1957. respondent No. 1 filed an application under 0. 21 r. 50(2) of the Code of Civil Procedure for leave to execute the decree a2ainst (I) Maharani Mandalsa Kumari Debi, (2) Maharani Premlata Debi, (3) Maiyan Sahiba Sheba Kumari Debi, (41 Major Rao Raja Sirendra Singh, (5) Jagat Pershad. (6) Praduman Kumar and (7) Dayawati Rani claiming that respondent No. I was entitled to cause the decree to be executed against them

.MLNDALSA DEV1 V. RAMNARAIN (P) L1'D. j,) 423

as being partners in the firm. The opposite parties to the application filed an affidavit alleging (!) that the suit and all proceedings therein were incompetent in the absence of the requisite consent of the Central Government under s. 86 of the Code of Civil Procedure; (2) Jagat Pershad and Shib Chander Kumar entered into the agreement dated September 26, 1956 and utilised the moneys rl'- ceived under it in fraud of the other partners and without their authority, Shib Chander Kumar dishonestly and fraudulently concealed from the other partners the fact of the institution of the suit and without the authority and knowledge of the other partners submitted to a consent decree in the suit.

By an order dated March 18, 1958, a learned single Judge of the High Court rejected all the contentions in the affidavit, and

allowed the application under 0. 21, r. 50(2) of the Code of Civil Procedure. The learned single Judge held that (!) the defect of the absence of the requisite consent under s. 86 read with s. 87-B did

not render the decree a nullity, and the objection could not be taken in execution proceedings; (2) the other defences to the merits

of the claim in the suit could not be agitated in a proceeding under

0. 21. r. 50(2) of the Code of Civil Procedure. An appeatpreferred by appellants, Maharani Mandalsa Kumar_i Debi, Maharani Premlata Debi, Major Rao Raja Sirendra Singh and Maiyan Sahiba Sheba Kumari Debi was dismissed by a Bench of the High Court on November 21, 1958. The appellate Court held thai (I) though the decree against the firm was a decree against all its partners

including the Maharaja of Sirmur, and though the decree against the Maharaja of Sirmur might be a nullity, the decree against the other partners of the firm was valid, and (2) the appellants were not entitled to raise other defences to the merits of rhc claim on an application under 0. 21, r. 50(2) of the Code of Civil Procedure. The appellants now appeal to this Court under a certificate granted by the High Court.

On behalf of the appellants Mr. D. N. Muli:herjee contended that (11 the suit against the firm of Jagatsons International Corpora tion was a suit agaihst all its partners and in the absence of the

requisite consent under s. 86 read with s. 87-B of the Code of Civil Procedure. the suit was not competent against the Maharaja of Sirmur, and the decree against him was null and void: (2) consequently, the suit against the firm under the provisions of 0. 30 of the Code of Civil Procedure was not competent and the decree passed in the suit was wholly void, the decree not being a decree against the firm could not be executed by recourse to the machinery of O. 21, r. 50, Code of Civil Procedure, and the application against the appellants under 0. 21, r. 50(2), Code of Civil Procedure was not maintainable; and (3) the appellants were entitled to dispute their liability in an application under 0. 21. r. 50(2) of the Code

of Civil Procedure on all the grounds raised in the affidavit field

on their behalf and the court ought to have tried and decided all

those questions.

In answer to the first contention of Mr. D. N. Mukherjee, Mr.

Andley argued that for the purposes of a suit under 0. 30, Code of Civil Procedure, the firm of Jagatsons International Corporation is a legal entity separate and distinct from its partners, and no question of obtaining the consent of the Central Government to sue one of its partners under s. 86 read with s. 87-B of the Code of Civil Procedure to the institution of such a suit arises. Mr.

Andley relied upon the observations of Das, J. in Dulichand Lakshminarayan v. The Commissioner of Income-tax, Nagpur(') that for the sake of convenience, 0. 30 of the Code of Civil Procedure permits a firm. to sue or be sued in the firm name "as if it, were a corporate body". Consistently with this legal fiction, R. 3 permits service of the summons on a partner or a person havini: control .or management of the partnership business, R. 4 permits the institution and continuance cif the suit in the firm name in spite of death of a partner before the institution. or during the pendency of the suit without jcining the legal representatives of the deceased partner as a party to the suit, and R. 9 permits a suit between a firm and one or more of its partners and between firl)ls having one or more common partners. But the legal fiction must not be carried too far. For some purposes the law has extended a limited personality to a firm, see Bhagangi Morarji Goculda.1 v.

Alembic Chemicals Works Co.('), but the firm is not a legal entitv, see Purushottam Umedbhai & Co. v. M / s. Mani/al & Sons('), Lindley on Partnership, 12th Edn., pp. 27-28. The persons

who are individually called partners are collectively called a firm, and the name under which their business is carried on is called

the firm name: see s. 4 of the lnJian PHtncrohip Act, 1932. Order 30, R. l of the Code of Civil Procedure enables two or more perscns claiming or being liable as partners and carrying on business in India to sue or be sued in the name of the firm of which they were partners at the time of the accrual of the cause of action.

Rule I shows that the individual partners sue or are sued in their collective firm name. Rule 2 provides that on disclosure of the names of the partners of the plaintiff firm, the suit proceeds as if they are named as plaintiffs in the plaint. Rule 6 provides that the persons sued in the firm name must appear individually in their own names. A suit by or in the. name of a firm is thus really a suit

by or in the name of all its partners, see Rodriguez v. Speyer B1r'/:ers ('), Purushottam Umedbhai & Co. v. M /s. Manila/ & Sons(') at pp. 991, 993, 995. So also a suit against the firm is really

(') [1956J s.r.R. 156, 162.

(') [1948] L.R. 75 I.A. 147.

(') [1961] I S.C.R. 982, 994.

(') [1919) A.C. 59.

MANDALSA DEVI v. RAMNARAI!< (P) LTD. (Bachawat, J.) i25

a suit against all the partners of the firm. In Western National Bank

of City of New York v. Pere;, Triana & Co.('), Lindley, LJ. said:

"When a firm's name is used, it is only a convenient method of denoting those persons who compose the

firm at the time when that name is used, and a plaintiff who sues partners in the name of their firm in truth sues them individually, just as much as if he had set out all their names".

The decree passed in the suit, though in form against the firm, is in effect a decree against all the partners. In Lovell & Christmas v. Beauchamp(') Lord Herschell. L. C. said:

"Although the judgment Jllay be pronounced against the firm in the firm's name, it is in reality a judgment against all the persons who are in fact members of the firm; and it is because such a judgment exists that the right of execution follows".

The firm name of Jagatsons International Corporation applies as much to the Maharaja of Sirmur as to the other

partners. When respondent No. 1 sued the firm of Jagatsons International Corporation, it sued the Maharaja of Sirmur and all the other partners as if the plaint had set out their namos, and the decree passed in the suit is in reality a decree against all the partners of the firm including the Maharaja of Sirmur.

Now, the Maharaja of Sirmur is the Ruler of a former Indian State, and s. 86 read with s. 87-B of the Code of Civil Procedure barred the institution of a suit against him except with the consent of the Central Government. No such consent was given for the institution of the suit against the Maharaja of Sirmur. In the absence of the requisite consent of the Central Government, a suit, which is in reality, though not in form, a suit against the Maharaja of Sirmur, is barred by s. 86 read with s. 87-B. See

Gaekwar Baroda State Railway v. Hafiz Habib-VI-Haq(').

Consequently, the suit so far as it was one against the Maharaja of Sirmur was incompetent and the decree against the firm so far as it is a decree against him µersonally was a nullity. The first contention of Mr. Mukherjee is. therefore, sound and should be accepted.

But we think that the second contention of Mr. Mukherjoe should be rejected. Beyond doubt, in a normal case where all

the partners of a firm are capable of being sued and of being adjudged judgment-debtors. a suit may be filed and a decree may be obtained against a firm under 0. 30 of the Code of Civil Procedure, and such a decree may be executed against the orooerty of the partnership and against all the partners by following the procedure of 0. 21, r. 50 of the Code of Civil Procedure.

(') [l8Dl] l Q.B. 304.

('; "18D4] A.O. 607.

1 1U38] T,, R. 65 J.A. 182, ms.

SUPREME COURT (1965] 3 s.c.R.

But there may be abnormal cases where a suit is filed against a

A . firm under the provisions of 0. 30, of the Code of Civil Procedure, and it is found that one of its partners cannot be sued or cannot be adjudged a judgment-debtor. Thus, take the case of an infant who under the English law, can be a partner in a firm, but, though a partner, cannot contract debts by trading and cannot be adjudged to be a debtor in respect of such debts. In Lovell &

Christmas v. Beauchamp('), the House of Lords held that a B creditor of a firm of which an infant was a partner could issue a writ the firm in the firm's name, and in such a suit judgment could be recovered against the defendant firm other than the infant partner, and if a judgment had been improperly signed against the firm simply, such a judgment could C be suitably amended so as to make it a judgment against the firm other than the infant partner. The precise point decided in

this case cannot arise in this country, because under our law, a minor may not be a' partner in a firm, though he may be admitted to the benefits of the partnership. But the case shows that a creditor of a firm of which or>e of the partners cannot be D adjudged to be a debtor, may institute a suit against a firm in the firm name under 0. 30 o{ the Code of Civil Procedure, and may in such a suit obtain a decree against the firm other than the partner who cannot be adjudged a debtor. Again, take a case where the creditor of a firm institutes a suit against a firm and one of its partners at the time of the accrual of the cause of E action is dead at the time of the institution of the suit. The suit against the firm is really a suit against ail the partners who were its partners at the time of the accrual of the cause of action. including the dead partner. Order 30, R. 4 of a Code of Civil Prociedure enables the creditor to institute the suit against the firm in the firm name without joining the legal representative F of the deceased partner. The suit is, therefore, competent, but no suit can be instituted nor can a decree be obtained against a dead person. The decree passed in such a suit will, therefore,

bind the partnership and all the surviving partners. but will not affect the separate property of the deceased partner. In Ellis v.

Wadeson('), Romer, L J. observed: G ."Now consider the question of death. Suppose a partner dies before action brought. and an acltion is brought against the firm in the firm's name. The dead man is not a party to the action, so far as his private

estate is concerned. for a dead man cannot be sued, though the legal personal representative of a dead man 'H can be sued in n proper case. Tn that case the action would be an action solely against the surviving partners....

Tf the legal personal representatives of a deceased partner are not added expressly as defendants.

(') [IR941 A.O. 607. (') [lR991 l Q.R. 714 at 718.

H.!.llDALSA. DEVI V. IW!NA.lWN (P} LTJ;>. (Badiawat, J.) i27

and the action is broui; ht against the firm in the firm's name, then judgment oan only be obtained as against the surviving partners and be enforced <igainst them and against the partnership assets".

The above illustrations show that a suit may be brought under the provisions of 0. 30 of the Code of Civil Procedure against a furn of which a partner is not capable of bemg sued or being adjudged a debtor, and in such a suit a decree entorceable against the other partners and the partnership assets may be passed. Now, in the instant case, respondent No. I sued the firm of Jagatsons International Corporation under the provisions of 0. 30 of the Code of Civil Procedure. The assets of the firm as also all its partners jointly and severally are liable to satisfy the debts of the firm. Even the Maharaja of Sirmur is jointly and severally liable for the debts of the firm; only the institution of a suit against him without the consent of the Central Government is barred by s. 86 read with s. 87-B of the Code of Civil Procedure. As the suit. was instituted without the requisite consent of the Central Government, no decree could be passed in the suit against the Maharaja of Sirmur. But the suit against the firm other than the Maharaja of Sirmur was competent, and a decree could be passed against the firm other than the Maharaja of Sirmur, and such a decree could be executed against the partnership property and against the other partners by following the procedure of 0. 21, r. 50 of the Code of Civil

Procedure. It is true that respondent No. I obtained a decree against the _firm of Jagatsons International Corporation simply, but the decree should be suitabli)' amended so as to make it a

decree against the firm of Jagatsons International Corporation other than the Maharaja of Sirmur, and the decree so read is a valid decree which may be executed against the partnership property and the other partners of the firm by recourse to the machinery of 0. 21, r. 50 of the Code of Civil Procedure. The application of respondent No. 1 under 0. 21, r. 50(2) for leave to execute the decree against the other partners is, therefore

maintainable. The second of M'r. Mukherjee must, therefore, be rejected.

The third contention of Mr. Mukherjee raises the question as to what defences may be raised by a respondent to an application under 0. 21, r. 50(2) of the Code of Civil Procedure. The law on this point is now well-settled. In Gambhir Mal Pandiya

v. J. K. Jute Mills Co. Ltd., Kanpur('), Hidayatullah, J. speaking on behalf of the Court observed:

"... primarily the question to try would be whether the person against whom the decree is sought to be executed was a partner of the firm, when the cause of action accrued, but he may question the decree on the

('l [I963J 2 s.c.n. mo.

SUPREME

OOURT

BEFOBT8 (1965] 3

ground of collusion, fraud or the like but so as not to have the suit tried over again or to raise issues between himself and his other partners''.

The respondent to an applioation under 0. 21, r. 50(2) of the Code. of Civil Procedure is also entitled to raise a plea of special protection under the law, and on this ground, the learned judge at pp. 205-206 of the Report distinguished the case of Chhattoo

Lal Misser & Co. v. Naraindas JJaijnath Prasad('). We may add that the respondent may also defend the application on the ground that the decree sought to be executed against him is a nullity.

Now, in the instant case, none of the appellant is entitled to any special protection from the institution of the suit under s. 86 read with s. 87-B, Code of Civil Procedure. The Maharaja of Sirmur was entitled to this special protection, but he was not a party to the application unden 0. 21, r. 50(2) of the Code of Civil Procedure: Nor is the decree against the firm other than

the Maharaja of Sirmur a nullity. The affidavit filed on behalf of the appellants does not sufficiently raise a plea that the decree was the result of any collusion, fraud or the like. The affidavit incorrectly assumes that the decree passed on admission of the

appearing partner, was a consent dec\ree. Allegations of dishonesty and fraudulent concealment of the fact of the institution of the suit are made against Shib Chander Kumar, one of th partners of the firm, but no allegation of fraud or collusion is made against respondent No. I. It was not alleged that respondent No. 1 was a party to any fraud or collusion or that it obtained the decree by fraud or collusion. The alleged that their partners, Jagat Pershad and Shib Chander Kumar, had entered into the agreement dated September 26, 1956, and had utilised the moneys received under it in fraud of the appellants and without their authority, but the appellants are not entitled to raise these pleas in the application under 0. 21 r. 50(2) of the Code of Civil Procedure. The appellants were admittedly partners of the firm of Jagatsons International Corporation at the time when the cause of action accrued. In the absence of any plea questioning the decree on the ground of collusion, fraud or the like, respondent No. 1 is entitled to an order under O. 21, r. 50(2) of the Code of Civil Procedure giving it leave to execute the decree against the appellants as partners in the firm. The third contention of Mr. Mukherjee must, therefore, be rejected.

In the result, the appeal is dismisse, d with costs.

(') [1928] I.L.R. 56 ral. 704.

l; fB(N)1SCl--2,500-22·3 66-GIPS

Appeal dismissed.

HER HIGHNESS MAHARANI MANDALSA DEVI AND ORS

M. RAMNARAIN (P) LTD. AND ORS

March 19, 1965

IK. SuBBA RAo, J

C. SHAH

Code of Civil Procedure, 1908

ss. 87, 87

the Code of Civil Procedure

Central Government

s. 87

the Code of Civil Procedure

Order 21 Rule 50(2)

the Code of Civil Procedure

s. 87

D. N. Mukherjee

G. S. Pathak

S. N. Andley

Rameshwar Nath

Bachawat

Sirmur

Maharani Mandalsa Kumari Debi Rajmata

Maharani Premlata Debi

Chhota Udaipur

Maiyan Sahiba Sheba Kumari Debi

Jharipani

Rao Raja Sirendra Singh

Jagat Pershad

Shib Chander Kumar

Praduman Kumar

Dayawati Rani

Jagatsons International Corporation

s. 87B

the Code of Civil Procedure

July 15,

1957

December 13. 1957

the Code of Civil Procedure

Maharani Mandalsa Kumari Debi

Dayawati Rani

s. 86

the Code of Civil Procedure

September 26, 1956

March 18, 1958

the Code of Civil Procedure

s. 86

s. 87

the Code of Civil Procedure

Maharani Mandalsa Kumar_i Debi

Maharani Premlata Debi

Rao Raja Sirendra Singh

Maiyan Sahiba Sheba Kumari Debi

November 21, 1958

the Code of Civil Procedure

D. N. Muli

Jagatsons International Corpora tion

s. 86

s. 87

the Code of Civil Procedure

the Code of Civil Procedure

Code of Civil Procedure

Code of Civil Procedure

D. N. Mukherjee

Andley

Code of Civil Procedure

s. 86

s. 87

the Code of Civil Procedure

Das

the Code of Civil Procedure

s. 4

Jian PHtncrohip Act, 1932

the Code of Civil Procedure

India

L.R. 75 I.A. 147

Lindley

Maharaja of Sirmur

s. 86

s. 87

the Code of Civil Procedure

s. 86

s. 87

Mukherjee

Mukherjoe

the Code of Civil Procedure

the Code of Civil Procedure

SUPREME COURT (1965] 3 s.c.

the Code of Civil Procedure

the Code of Civil Procedure

Romer

H.!.llDALSA. DEVI

Badiawat

the Code of Civil Procedure

the Code of Civil Procedure

s. 86

s. 87

the Code of Civil Procedure

the Code of Civil Procedure

the Code of Civil Procedure

Hidayatullah

s. 86

s. 87

Code of Civil Procedure

the Code of Civil Procedure

the Code of Civil Procedure

the Code of Civil Procedure


THE TATA IRON AND STEEL CO. LTD.

D.R. SINGH March 19, 1965

[P. B. GAJENDRAGADKAR, c. J., K. N. WANCHOO AND B

V. RAMASWAMI, JJ.]

Industrial Disputes Aci, 1947 (14 of 1947), s.

Request to Tribunal to conSider workman-Rej)usal-Pro priety of.

Because certain industrial disputes were pending before the In dustrial Tribunal at the relevant time. between the appellant and its C employees, the appellant filed an application under s. 33(2) (b) asking

tor approval of action which it proposed to take against its employee- the respondent. The appellant urged that this application was made

"5 a matter of abundant caution and it wanted the Tribunal to consider the question as to whether the respondent was a workman concerned in the relevant industrial dispute at all before dealing with D the merits of the application. The Tribunal, being of the view that

if the appellant thought that s. 33 did not apply, it should withdraw the application and take the consequences, dealt with the merits of the application. In appeal by special leave:

HELD: The Tribunal was in error in not considering. the preliminary point raised by the appellant that the respondent was not a E workman concerned with the main industrial dispute and as such

the application made by it was unnecessary. [ 431E]

It is plain that in a situation like the present, where• judicial decisions differed on the construction of the words "workman concerned in such dispute", even if the appellant took the view that the workman against whom it was taking action was not a workman concern .. r ed with the main industrial disputes, it would be justified in refusing

to take the risk of deciding the said point for itself. It would ho legitimate for an employer to make an application under s. 33 without pre

judice to his case that s. 33 did not apply. [431D-E]

Case law referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 423 of

G 1964.

Appeal by special leave from the order dated October 5, 1962 of the Central Government Industrial Tribunal at Dhanbad in Application No. 53 of l.961 in Reference Nos. 45, 56, 63 and 65 of 1961.

S. V. Gupte, Solicitor-General and I. N. Shroff, for the appel- B !ant.

Jitendra Sharma and Janardan Sharma, for the respondent.

The Judgment of the Court was delivered by

Gajendragadkar, C. J. This appeal raises a very short point for our decision. The appellant, the Tata Iron & Steel Co. Ltd.,

L/P(N)6SCI 429

SUPREME COURT REPORTS

. (19651 3 B.0.B

Jamadoba, filed a.11 application under s. 33(2)(b) of the Industrial A Disputes Act, 1947 (No. 14 of 1947) (hereinafter called "the Act"), before the Central Government Industrial Tribunal, Dhanbad (hereinafter called "the Tribunal"), asking for its approval of the action

which it proposed to take against its employee, the respondent D. R. Singh. This application was made by the appellant, because certain industrial disputes were pending at the relevant time between B

the appellant and its employees under References Nos. 45, 56, 63 and 65 of 1961. This application was opposed by the respondent who filed his written statement. At the hearing of the application, the appellant urged before the Tribunal that though it had made the present application as a matter of abundant caution, its case was that it was not necessary to apply under s. 32(2), because the C respondent was not concerned with the industrial disputes which were pending between the appellant and its employees in the different References to wh, ich we have already referred. In other words, the appellant wanted the Tribunal to consider the question as to whether the respondent was a workman concerned in the relevant D industrial disputes at all, before dealing with the merits of its av.- plication. The appellant's case was that one of the conditions precedent for the applicability of s. 33 is that the workman against whom the employer seeks to take action falling under s. 33(2), must be a workman concerned in the main industrial disputes; if he is not so concerned, s. 33(2) will not apply. In order to avoid any complica· tions and with a view to save itself from the charge that it had con- E travened s. 33 of the Act, the appellant had no doubt made arl application as a precautionary measure; that is why it wanted the Tribunal to consider its contention that. s. 33 did not apply as a preliminary point. The Tribunal took the view that the appellant cocld not raise such a contention. It held that if the appellant thought that s. 33 did not apply, it should withdraw the application F and take the consequences. On that view, it refused to entertain the plea raised by the appellant and proceeded to deal with the merits of the application. In the result, the Tribunal was not satisfied that a prima facie case had been made out for the dismissal of the respondent, and so, approval was not accorded to the act; on which the appellant wanted to take against the respondent and its applica- G tion was accordingly dismissed. It is against this order that the appellant has come to this Court by special leave.

The learned Solicitor-General for the appellant contends, and we think rightly, that the Tribunal was in error in not dealing with the preliminary point as to whether s. 33 applied to the facts of this case. It is plain that in a situation like the present, even if the H appellant took the view that the workman against whom it was taking action was not a workman concerned with the main industrial disputes, it would be justified in refusing to take the risk of deciding the said point for itself. It would be legitimate for an employer like the appellant to make an application under s. 33, without prejudice to his case that s. 33 did not apply. The question

'l'ATA IRON & STEEt do. LTD. !), ]), R. SINGH (Gtrjendragadkar, O.J.) 4Sl

A about the construction of the words "a workman. concerned in such

dispute" which occur in .s. 33(1) and (2) has been the subject matter of judicial decisions and somewhat inconsistent views had been

taken by different High Courts on this point. Some High Courts canstrued the said words in a narrow way, vide New Jehangir

Vakil Mills Ltd., Bhavnagar v. N. L. Vya!' & Ors.,(') while others B put a broader construction on them, vide Ea!'tern Plywood Manufacturing Company Ltd v. Eastern Plywood Manufacturing Workers' Union('). Newton Studios Ltd. v.

Ethiraju/u

(T. R.) & Others('), and Andhra Scientific Company Ltd. v. Seshagiri Rao IA.).('). This problem was ultimately resolved by this Court in its two recent decisions, viz., New India Motors (Private) Ltd. v. 0 Morris (K.T.)('l and Digwadih Colliery v. Ramji Singh('}. In this

latter this Court considered the conflicting judicial decisions rendered" by the different High Courts and has approved of the broader construction of the words "workmen concerned in such dispute". Where judicial decisions differed on the construction of the words "workmen concerned in such dispute'', it would be idle D and unreasonable to suggest that the employer should make up his

mind whether s. 33 apphs or not, and if he thinks that s. 33 does not apply, he need not make the application; on the other hand, if he thinks that s. 33 applies, he should make an application, but then he cannot be permitted to urge that the application is unnecessary. Such a view is, in our opinion, wholly illogical and unsatisfac- E tory. Therefore, we must hold that the Tribunal was in error in not

considering the preliminary point raised by the appeilant that the respondent was not a workman concerned with the main industrial disputes and as such, the application made by it wits unnecessary.

Thal raises the question as to the course that we should adopt in dealing with the merits of the present appeal. Logically, it would F be necessary to make a finding on the preliminary point raised by

the appellant before the merits are considered, because if the appellant is right in contending that the respondent is not a "workman concerned with such disputes" within the meaning of s. 32(2), the application would be unnecessary and there would be no jurisdiction in the Tribunal either to accord or to refuse approval G to the action proposed to be taken by the appellant against the respondent. In the present case, however, we do not propose to adopt such a course. The order terminating the services of the respondent was passed on December 4, 1961 and it was to take effect from December 9, 1961. The Award was pronounced by the Tribunal on October 5, 1962, and when the appeal has come for final disposal II before us, more than three years have elapsed since the date of dismissal of the respondent. The learned Solicitor-General fairly conceded that the appellant has come to this Court not so much to enforce its order of dismissal against the respondent, as to have a

(') [19581 II LLJ 575.

(') [19521 I LLJ 628.

(') [1958] I LLJ 63.

(') [1959] II LL.J 717.

(') [1960] I LLJ 551.

(') [1964] II LLJ 143.

. 432 SUPBBllll: OOUBT Bl!PORTS [19611] S 1.0.a.

decision from this Court on the point of law raised by it before the A Tribunal. Accordingly, we have decided that point in favour of the appellant; but having regard to the long passage of time between

the date of the impugned order and the date when we are pronouncing our judgment in the present appeal, we think it would be in expedient and unjust to send 'the matter back to the Tribunal with a direction that it should decide the preliminary point raised by the

JI appellant as to whether the respondent is a "workman concerned in such disputes" within the meaning of s. 33(2) of the Act. That is

why though we have reversed the finding of the Tribunal on the preliminary point, we do not propose to give this litigation any further lease of life.

In the result, without examining the merits of the findings G recorded by the Tribunal for not according approval to the dismissal of the respondent, we direct that the appeal fails and is dismissed. There would be no order as to costs.

Appeal dismissed.

THE TATA IRON AND STEEL CO. LTD

R. SINGH March

P. B. GAJENDRAGADKAR

K. N. WANCHOO

V. RAMASWAMI, JJ.

s. 33(2)

s. 33

s. 33

s. 33

S. V. Gupte

I. N. Shroff

Jitendra Sharma

Janardan Sharma

Gajendragadkar

Tata Iron & Steel Co. Ltd.

Jamadoba

s. 33(2)(b)

Industrial A Disputes Act, 1947

D. R. Singh

s. 32(2)

s. 33

s. 33(2)

s. 33(2)

s. 33

s. 33

s. 33

s. 33

s. 33

s. 33

'l'ATA IRON & STEEt do. LTD

R. SINGH

Gtrjendragadkar

s. 33(1)

s. 33

s. 33

s. 33

s. 32(2)

December 4, 1961

December 9, 1961

October 5, 1962

S 1

s. 33(2)


RAI SAHIB DR. GURDITIAMAL KAPUR

MAHANT AMAR DAS CHELA MAHANT RAM

SARAN AND ORS.

March 19, 1965

[K. N. WANCHOO, J.R. MUDHOLKAR AND S. M. S11w, JJ.)

Mverse possession-Doubtftul whether Akhara, or its Mahant was oc<:Upancy tenant-Forfeiture of tenancy-Right of Mahant's successor to sue for possession,

The appellant was the owner of the suit land. Alleging that the 2nd respondent, who was the Mahant of an Akhara, was the occupancy tenant and that he had allowed his lessee to dig it up and rendered it unfit for cultivation, the. appellant evicted the 2nd respondent from a part of the land in 194-0, and from the rest of it in

1943. In 1950, the 2nd respondent was removed from tbe office of Mahan!, in proceedings under s. 92, C.P.C., and in 1953, the 1st respondent was appointed in his place. In 1957 the 1st respondent filed a •uit for possession ot the land, alleging that the Akhara itself was the occupancy tenant. The trial court decreed :the suit and the High <:ourt confirmed the decree. In the appe"l to this Court, the appellant contended that the suit was barred by limitation.

HELD: Upon the eviction of the 2nd respondent the occupancy right in the land merged in .the right of ownership of the appellant.

Apart from it, the actual physical possession of the land having been continuously wi.n the appellant to the exclusion of the occupancy tenant, . whether it was the 1st respondent or the Akhara itself, for a period of more than 12 years before the institution of the suit, the occupancy right was extinguished. If the 2nd respondent reJ)Tesented the Akhara in the eviction proceeding the decrees therein would bind the 1st respondent as his successor. If the 2nd respondent.did not represent the Akhara, the possession of the appellant under those decrees would be adverse to the Akhara. The 2nd respondent as the Mahant, or the Receiver appointed by the Court in the s. 92 J)Toceedings, could have filed a suit on behalf of the Akhara, and so, the 1st respondent's suit after 12 vears of adverse possession by the appellant was barred. [ 436D"E; 438F-H]

Sudaram Das v. Ram Kirpal, L.R. 77 I.A. 42 and Subbaiya v.

Mustapha, L.R. 50 I.A. 295, applied

Dwi; endra Narain Roy v. Joges Chandra De, A.I.R. 1924 Cir!, 600, referred to.

CML APPELLATE JURISDICTION: Civil Appeal No. 471 of 1963. .

Appeal by special leave from the judgment and decree dated November 9. 1960 of the Punj:tb High Court in Regular Second Appeal No. 1627 of 1960.

SUPREME COURT REPORTS [1965] 3 s.c.it.

S. V. Gupte, Solicitor General, B. K. Khanna, R. K. Garg, A D. P. Singh, S. C. Agarwal and M.K. Ramamurthi, for the appellant.

N.C. Chatterjee and M.S. Gupta, for respondent No. 1.

P.K. Chatterjee and RH. Dhebar, for respondent No. 11.

The Judgment of the Court was delivered by

Mudholkar, J. 'fhe short point which falls to be considered in this appeal by special leave from a judgment of the High Court of Punjab dismissing the appellant's appeal in limine is whether the

suit for possession instituted by the plaintiff-respondent No. 1 is within time. There are ten respondents to the appeal out of whom only two, the plaintiff-respondent No. 1 Amardas and respondent No. 11 Union of India are represented .. While the appeal is contested by the first respondent it is supported by the Union of India.

The facts which are not disputed before us are briefly these:·

The appellant has a share of 122! /143! in the land in suit.

The occupancy tenant of this land is Akhara Nirbansar of Sultanwind Gate, Amritsar. The second respondent Ram Saran Das was Mahant of this Akhara till the year 1950 when he was removed by virtue of an order made by a civil court in a suit under s. 92 of the Code of Civil Procedure, confirmed in appeal on September 11,

1950. On December. 29, 1953 respondent No. 1 was appointed as Mahant in place of respondent No. 2.

On September 15, 1939 the appellant instituted a suit in a revenue court under ss. 38 and 39 of the Punjab Tenancy Act (hereafter referred to as the Act) for possession of 141 kanals 8 marlas of land on the ground that he had granted a sub-lease thereof for the manufacture of bricks to someone by utilising earth dug up from that Janet This, according to the appellant, was in contraven- tion of the provisions of s. 39 of the Act and entitled him to eject

respondent No. 2. The Revenue Court held that out of the land sub-leased by respondent No. 2 only a certain portion was dug up

by the sub-Jessee and, therefore, the ejectment of the second respon- . G dent was confined to that area of land which had been dug up. The date of the ejectment decree was June 3, 1940. The second respon- . dent preferred an appeal before the Collector from that decree

which was dismissed on October 19, 1940. Shortly thereafter the appellant obtained possession of the land from which the second

respondent was ordered to be ejected The lessee of the second respondent, however, continued to dig up the rest of the land and, therefore, the appellant instituted a second suit for the ejectment of the second respondent therefrom. The Assistant Collector who tiied the suit granted a decree to the appellant in respect of the e1,1tire land which was left with the second respondent after he was d1Spossessed from a part of the land leased to him unde rthe earlier decree. In appeal, however, the Collector modified the order of

KAPUR v. AMAR l>A8 (Mudholkar, J.) 430

A ejectment by leaving out of the land 29 kanals and 14 marlas. This order was made on May 31, 1943. Shortly thereafter the appellant obtained possession of the land with respect to which the Collector

had confirmed the order of ejectment in the appeal.

On March, 18, 1957 the first respondent instituted a suit n against the appellant and the second respondent. According to respondent No. I Akhara Nirbansar was not bound by the actions of Mahant Ram Saran Das, the second respondent, which were tanta mount to alienation of the land which, according to him, were neither for legal necess; ty nor for the benefit of the estate. He contended that on the contrary the action of Ram Saran Das in alienat- . O ing the land was unauthorised and illegal and because what he did

was not for legal necessity nor for conferring any benefit on the estate.

The appellant contested the suit on two main grounds. The first was that the land in question was never attached to the Akhara D hut that Mahant Ram Saran Das, the second respondent, was it.5 occupancy tenant and that as the sub-lessee of the land had dug it up and rendered it unfit for cultivation the appellant as the owner of the land was entitled to eject respondent No. 2 by forfeiting the lease. He denied that the land was wakf property and contended that the occupancy rights existing in favour of the second respon- E dent were extinguished by the orders of the revenue courts which still hold good. The second point was that as the appellant was in continuous possession of the .land in suit as owner in his own right for more than 12 years preceding the suit openly and to the exclusion of the second respondent and respondent No. I the suit was barred by time.

In his replication respondent No. I reiterated that the property in suit belongs to and is owned by the Akhara Nirbansar as its occupancy tenant and that the second respondent was never its occupancy tenant. Therefore, according to him, there was no question of extinguishment of occupancy rights in consequence of the two decrees made by the revenue courts. He contended that the action of !he second respondent in leasing out the land for digging

up earth was a transfer which, not being for legal necessity nor for the benefit of the estate, was unauthorised. According to him the mere fact that the appellant was in possession of. the land for more than 12 years makes no difference to the suit and that the land being trust property a suit for its recovery could be brought within 12 years from the date of "death, resignation or removal" of the manager of such a property. He added that there was no question of the appellant being in possession in his own right of the land for more than 12 years. The suit was decreed by the trial court and

its decision was uoheld in aopeal by the second Additional District Judge, Amritsar. The appellant's second appeal was dismissed in limine by the High Court, ·

. 436

SUPREME COURT REPORTS [1965] 3 S.C.Re

Upon the view which we take on the question of limitation it has become unnecessary to decide the other points.

The learned Solicitor General who appears for the appellant relies strongly upon the averments of the appellant in his written statement that he is occupying the land in suit for a period of over 12 years from the date of the institution of the suit as owner in his own right and not as an occupancy tenant and that even if his occupation is regarded to be that of an occupancy tenant as alleged by the first respondent, he has acquired the proprietary rights in this property by operation of statute. The Solicitor General relies on the further averments to the effect that the original occupancy tenant of the land was the second respondent and not the Akhara and also contended that whether it was one or the other made no difference. For, the tenant's occupancy rights were extinguis)led by

the decrees passed in the ejectment suits and consequently there was no cause of action for the present suit As pointed out by the learned Solicitor General, respondent N:o. 1 in his replication has not disputed the fact that the appellant was in possession for more than 12 years before the institution of the suit and that the only way dn which he tried to meet it was by saying that this fact made

no difference to his case.

It seems to us clear that upon the eviction of respondent No. 2 from a part of the land in the year 1940 and the rest of it in the year 1943 the occupancy right with respect to the land merged In the right of ownership of the appellant. Apart from that it is clear that the actual physical i; ossession of the land having been continuously with the appellant to the exclusion of the occupancy tenant, whether it was respondent No. 1 or the Akhara itself. for a period more than 12 years before the institution of the suit that right was extinguished.

Mr. Gupta, learned counsel for respondent No. 1, however, sought to meet this position by urging that the second respondent's act amounted to an alienation, that it was not established that it was for legal necessity and that, therefore, respondent No. 1 as the successor of respondent No. 2 to the office of Mahantship of the

Akhara could institute a su, it within 12 years of his succession to the office. This succession to his office must, according to him; be deemed to have occurred when upon the dismissal in the year 1950 of the appeal preferred by respondent No. 2 against the decision of the trial court removing him from Mahantship; later the respondent No. 1 was appoinfed a Mahant. That was on December 12, 1953.

The suit having been filed within 12 years of that date, so Mr.

Gupta contends, must be held to be within time. The simple answer

to this contention is that what happened in this case was the forfeiture of the occupancy tenancy by t)le appellant as landlord .. In no sense can this be regarded as, or even likened to alienation, which is a voluntary act of the alienor in favour of the aEenee. The appellant is thus not an alieriee from the respondent No. 2 Ram Saran Das.

, .

KAPUR v. AMAR DAS

J.) 437

A Mr. N. C. Chatterjee who also appeared for the first respondent raised a novel contention. According to him, adverse possession against the Akhara, which was the real occupancy tenant, could not commence till respondent No. 1 was appointed as Mahant because during the interval there was no person who was competent to institute a suit on behalf of the Akhara for the possession of the B lands of which the appellant was in adverse possession. In support of the contention he has placed reliance upon the decision in Dwijendra Narain Roy v. loges Chandra De('). In particular learned counsel has relied upon the following observations of Mookerjee J., who delivered the judgment of the.Court. They are:

"The substance of the matter is that time runs when the cause of action accrues, and a cause of action accrues, when there is in existence a person who can sue and another who can be sued ......... The cause of action arises when and only when the aggrieved party has the right to apply to the proper tribunals for relief. The statute (of limitation) does not attach to a claim for which there is as yet no right of action and does not ruri against a right for which there is no corresponding remedy or for which judgment cannot be obtained. Consequently the true test to determine when a cause of action has accrued is to ascer- 'tain the time when plaintiff could first have maintained his

action to a successful result." (p. 609).

He further brought to our notice that these observations have received the approval of this Court in F. Lakshmi Reddy v. L. Lakshmi Reddy('), at p. 206. In the case which came up before this Court

the facts which are set out in the head note were as follows:

"V died an infant in 1927 and H, an agnatic relation filed a suit for the recovery of the properties belonging to V which were in the possess; on of third parties, on the ground that he was the sole nearest male agnate entitled to all the properties. During the pendency of the suit a Receiver was appointed for the properties in February, 1928.

The suit having been decreed H obtained possession of

the properties from the Receiver on January 20, 1930, and after his death in 1936, his nephew, the appellant, got into possession as H's heir. On October 23, 1941 the respondent brought the present suit for the recovery of a oncthird share of the properties from the appellant on the footing that he and his brother were agnatic relations of V of the same degree as H, that all th_e three were equal co-heirs of V and that H obtained the decree and got into possession on behalf of all the co-heirs. The appellant resisted the suit and contended that the respondent lost his right by the adverse possession of H and Ii.is successor and that for this purpose not only the period from

(') A.I.R. 1924 Ca.I. 600.

(1) [1957] S.C.R. 195.

SUPREME COURT REPORTS [1965) 3 s.c.R.

January 20, 1930 to October 23, 194i was to be counted but also the prior period when the Receiver was in possession of the properties during the pendency of H's suit.

It was found that the respondent's case that H obtained the decree and got possessfon from the Receiver on behalf of the other co-heirs was not true."

The facts of that case were different and it was on these facts that B

this Court held that the respondent did not lose his right by adverse possession. It is in the context of these facts that the learned Judges cited with approval the observations of Mookerjee J., which we have set out. Assuming these observations are sound, it cannot be

said in the case before us that i:t any point of time there was no person who was competent to institute a suit on behalf of the C Akhara. Respondent No. 2 was still the Mahant and could well have instituted a suit on behalf of the Akhara if in fact there was any cause of action for such a suit. Further, in the course of the suit the possession was with a Receiver who had been appointed

by the court and was thus competent in law to institute a suit.

We may point out that a Mahant of an Akhara represents the D Akhara and has both the right to institute a wit on its behalf as also the duty to defend one brought against it. The law on the subject has been stated very clearly at pp. 274 and 275 in Mukherjea's Hindu Law of Religious and Charitable Trust, 2nd, ed. It is poinied out that in the case of an execution sale of debutter property it

is not the date of death of the incumbent of the Mutt but the date E of effective possession as a result of the sale from which the commencement of the adverse possession of the purchaser is to be computed for the purposes of art. 144 of the Limitation Act. This is in fact what the Privy Council has laid down in Sudarsan Das v.

Ram Kirpal ('). A similar view has been taken by the Privy Council

in Subbaiya v. Mustapha('). What has been said in this case would F also apply to a case such as the present. Thus if respondent No. 2 could be said to have represented the Akhara in the two earlier suits, decrees made in them would bind the respondent No. l as he

is successor in office of respondent No. 2. On the other hand if respondent No. 2 did not represent the Akhara, the possession of the appellant under the decree passed in these suits would clearly be G adverse to the Akhara upon the view taken in the two decisions of the Privy Council just referred to. The first respondent's suit having been instituted after the appellant has completed more than 12 years of adverse possession must, therefore be held to be barred by time.

For these reasons disagreeing with the courts below we set aside the 'decrees of the courts below and instead dismiss the suit of respondent No. 1 with costs in all the courts. 11

(1) L. R. 77 I:A. 42. {') L.R. Ill) I.A. 295.

Appeal allowed,

RAI SAHIB DR. GURDITIAMAL KAPUR

March 19, 1965

K. N. WANCHOO, J

R. MUDHOLKAR

s. 92

C.P.C

s. 92

L.R. 77 I.A. 42

L.R. 50 I.A. 295

S. V. Gupte

B. K. Khanna

R. K. Garg

A D. P. Singh

S. C. Agarwal

M.K. Ramamurthi

N.C. Chatterjee

M.S. Gupta

P.K. Chatterjee

RH. Dhebar

Mudholkar

High Court of Punjab

Amardas

Union of India

Union of India

Akhara Nirbansar

Amritsar

Ram Saran Das

s. 92

the Code of Civil Procedure

September 11,

1950

December. 29, 1953

Mahant

September 15, 1939

ss. 38 and 39

s. 39

June 3, 1940

October 19, 1940

May 31, 1943

March, 18, 1957

Akhara Nirbansar

Mahant Ram Saran Das

Ram Saran Das

SUPREME COURT REPORTS [1965] 3 S.C.Re

Gupta

Akhara

December 12, 1953

N. C. Chatterjee

Akhara

Mookerjee

January 20, 1930

October 23, 1941

October 23, 194i

Mukherjea

art. 144

Limitation Act


A COMMISSIONER OF INCOME-TAX, WEST BENGAi.,

CALCUTTA

GUNGADHAR BANERJEE AND CO. (P) LTD.

March 22, 1965 IK. SUBBA RAo. J. C. SHAH AND S. M. SIKRI, JJ.J Indian Income-tax Act, 1922 (11 of 1922), s. 23A-Dividend-Distribution-Burden of showing whether low-Circumstances to be considered-"Smal!ness of profit"-Meaning of-"Accountino profits" and "assessable profits", distinction between.

As the dividend declared to be distributed by the respondentcompany at its General" Body Meeting was below 60 per cent of the profits available for distribution, the Income-Tax Officer, with the previous approval of the Inspecting Assistant Commissioner, passed

an order under s. 23-A of the Income-Tax Act directing that a certain higher amount shall be deemed to have been distributed as dividends as on the date of the annual general meeting"of the Company. He found that, having regard to the profits earned in the earlier years and the capital and taxation reserves, payment of larger dividend would not be unreasonable. This was affirmed, on assessee's appeals by the Appellate Assistant Commissioner, and ihe Income-tax Appellate Tribunal. The Tribunal referred the question to the High Court under sec.

66(1) of the Act, which concluded that having regard to the smallness of the profits. the order of the Income-tax Officer was not justified and answered the question in the assessee's favour. In appeal by certificate.

HELD: Section 23A of the Income-tax Act is in the nature of a penal provision. In the circumstances mentioned therein, the entire undistributed portion of the assessable income of the company is deemed to be distributed as dividends. Therefore, the Revenue has strictly to comply with the conditions laid down thereunder. The

burden therefore, was upon the Revenue to prove that the conditions laid down thereunder were satisfied, before the order was made.

Thomas Fattorini (Lancashire) Ltd. v. Inland Revenue Commis sion L.R. [1942] A.C. 643 applied.

In the present case the Revenue failed to discharge the said burden: indeed, the facts established stamp the order of the Income-tax Officer as unreasonable .. [ 446F, Gl

Though the object of the section is to prevent evasion of tax, the provision must be worked not from the stand point of the tax collector but from that of a. businessman. The reasonableness or the unreasonableness of the amount distributed as dividends is judj!ed by business considerations, such as the previous losses, the present profits, the availability of surplus money and the reasonable requirements of the future •nd similar others. It is neither possible nor advisable to lay down any decisive tests for the guidance of the Income-tax Officer.

It depends upon the facts of each case. The only guidance is his capacity to put himself in the position of a prudent businessman. It is difficult to say that the Income-tax Officer cannot take into consideration any circUrnstances other than losses and smallness of profits. This argument ignores the expression "having regard to" that precedes

the said words in s. 23A of the Act. [ 444B-E] ,39

440 SUPREME COURT llEPOllTS [19e5] S s.c.11.

Commissioner of Income-tax v. Williamson Diamond Ltd. L.R.

A (1958] A.C. 41, applied.

Sir Kasturchand Ltd. v. Commissioner of Income-tax, Bombay City, (1949) 17 I.T.R. 493, referred to. ' 'Ihe words "smallness of profit" in s. 23A of the Act refer to actual accounting profits in comparison With the assessable profits of the year. The two concepts "accounting profits" and '"assessable profits" are distinct. In arriving at the assessable profits the Income-tax Officer may disallow many expenses actually incurred by the assessee; and in computing his income he may include many items on notional basis. But the commercial or accounting profits are the actual profits earned by 1 an assessee calculated on commercial principles.· [ 445F-HJ

Commissioner of Income-tax, Bombay City v. Bipinchandrc.

Magan!a! and Co. Ltd. (1961) 41 I.T.R. 296, followed.

In a case whe<re an Income-tax Officer takes action under s. 23A of the Act before the tax for the relevant period is assessed, only the estimated tax can be deducted; but, there is no reason why, when the tax had already been assessed before he takes action under this sec• tion. the estimated tax and not the real tax shall be deducted from. [ 445H-446B]

There is no provision in the Income-tax Act. which makes the Balance Sheet final for the purpose of s. 23A of the Act or even for the assessment. It no doubt affords a prima facie proof of the financial position of the company on the date when the dividend was declared.

But nothing prevents the parties .in a suitable Gase to establish by cogent evidence that certain items were,· either by mistake or by design. inflated or deflated or that there were some omissions.

[446B-D]

OVIL APPELLATE JURISDICTION: Civil Appeal No. 807 of

' Appeal from the judgment and order dated September 4, 1961 of the Calcutta High Court Income-tax Reference No. 85 of 1956.

C.K. Daphtary, Attorney General,. R. Ganapathy Iyer and R. N. Sachthey, for the appeilant.

F A. V. Viswanatha Sastri and S. C. Muzumdar, for the respondent.

The Judgment of the Court was deiivered by Sobba Rao, J. This appeal by certificate raises the question of the construction of the provisions of s. 23A of the Indian Income>- tax Act, 1922, hereinafter called the Act, before it was amended by the Finance Act. 1955. ·

The relevant and undisputed facts may be briefly stated.

Messrs. Gungadhar Banerjee & Co. (Private) Ltd., the respondent herein, is a private limited company. At the General Body Meeting of the Company held on December 6, 1948, the Directors declared a dividend at the rate of 5! per cent. per share. The said distribution of dividends related to the accounting year 1947-48 which ended on April 13, 1948. According to the balance-sheet of the Company for that year the net profit for the said year was Rs .. l,28,112/7 /5. The taxation reserve was Rs. 56,000. The profit

left was Rs. 72,000. The Directors declared a dividend at the rate of 51 per cent. per share thus making a total distribution of Rs. 44,000.

On that basis the profit that was available for further distribution was Rs. 28,000. Though under the balance-sheet the estimated tax was Rs. 66,000, the tax assessed for the year was Rs. 79 ,400. If the difference between the tax assessed and the estimated tax was also deducted from the profits, there would only be a sum of Rs. 4,000 that would remain as undistributed profits.

The income-tax Officer assessed the total income of the assessee for the year 1948-49 at Rs. 2,66,766. After deducting the tax payable under the two heads, namely, LT. of Rs. 81,517/1310 and C.T. of Rs. 33,345/12/0, he held that a sum of Rs. 1,51,902/7 /0 was ava; lable for distribution to the shareholders as dividends. As the amount distributed by the Company was below 60 per cent. of the profits available for distribution. the Income-tax Officer, with

the previous approval of the Inspecting Assistant Commissioner of Income-tax, passed an order under s. 23-A of the Act directing that the 'amount of Rs 1.07,902 (i.e., Rs. 1,51,902 minus Rs. 44,000= Rs. 1,07,902) shall be deemed to have been distributed as dividends as on the date of the annual general meet'ng of the Company. He found that, having regard to the profits earned in the earlier years and the capital and taxation reserves, payment of larger dividends would not be unreasonable.

The assessee preferred an appeal to the Appellate Assistant Commissioner against the order made by the Income-tax Officer

under s. 23A of the Act. By the time the appeal came to be disposed of, in an appeal against the order of assessment the assessed income was reduced by a sum of Rs. 80,926. Notwithstanding the said deduction, as the amount of Rs. 44,000 distributed by the Company was less than 60 per cent. of the balance of Rs. 1,64,440 arrived at on the basis of the revised calculation, the Appellate Assistant Commissioner held that an action under s. 23A of the Act

was justified. He further held. that the assesee incurred no losses in the previous years, that in almost all the past assessments the assessee showed substantial profits, that the profits disclosed in the year of account were not small and that, therefore, the direction to pay a higher dividend was not unreasonable.

On a further appeal, the Income-tax Appellate Tribunal held that the amount of profits should be judged only from the balancesheet and that judged by the figures given thereunder a dividend to

the extent of Rs. 64,000 being 60 per cent. of the assessed profits less income-tax, could be distributed and that such distribution was

not unreasonable.

The Tribunal referred the following question under s. 66(1) of the Act for the decision of the High Court of Calcutta :

"Whether on the facts and in the circumstances of the case any larger dividend than that declared by the company could reasonably be distributed within the meaning

of Section 23A of the Indian Income-tax Act and the application of Section 23A of the Indian lncome-tax Act was in accordance with law." The High Court held that the Tribunal went wrong in taking consideration the past profits instead of the past losses, the taxation reserves without considering the past liabilities for taxat10n, the profits for the year in question disclosed in the balance-sheet, 1gr:oring the actual tax assessed for that year. It came to the conclusion

that, having regard to the smaUness of the profits, the order of the Income-tax Officer was not justified. In the result, it answered both parts of the question referred to it in the negative. Hence the appeal.

Learned Attorney-General, appearing for the Revenue, con tended that the balance-sheet of a company on the basis of which dividends were declared was final and the profits disclosed thereunder would be the correct basis for the Income-tax Officer acting under s. 23A of the Act; and, as the balance-sheet of the company for the relevant year showed a sum of Rs. 1,05,950 as "capital reserve brought forward'', a sum of Rs. 5,73,161 as taxation reserve, and a sum of Rs. 56,000 as estimated tax, the Income-tax Officer rightly held that the financial condition of the Company was sufficiently sound to warrant an order under s. 23A of the Act. Alternatively he contended that if the respondent could be permitted to go behind the balance-sheet to ascertain the real profit, the Depart ment should also be likewise allowed to go behind the balance-sheet. to show that the commercial profit was larger and the reserves were in excess of the past liabilit; es and that in that event to remand the case for ascertaining the true state of facts.

Mr. AV. Viswanatha Sastri, appearing for the assessee-Company, contended that the burden lies on the Revenue to establish that .the dividend declared was not a reasonable one and that in the present case it had not discharged that burden. He further argued that for the purpose of "testing the smallness of the profit" the Income-tax Officer had to take into consideration not the assessable income but the commercial profit of the Company and that in

the present case, having regard to the commercial profit, a declaration of a higher dividend would be unreasonable. He pleaded that, should this Court hold that the Income-tax Officer could establish that the reserves were more than the liabilities, the assessee should also be permitted to prove what were its real, commercial profits

that the reserves were far less than the demands.

The contentions of learned counsel turn upon the provisions of s. 23A of the Act, before it was. amended by the Finance Act of

1955. The mater'al part of that section reads:

"(1) Where the Income-tax Officer is satisfied that in respect of a'lY previous year the profits and gains distributed as dividends by any company up to the end of the

sixth month after its accounts for that previous year are

laid before the company in general meeting are less than

sixty per cent of the assessable income of the company of that previous year, as reduced by the amount of incometax and super-tax payable by the company in , respect

thereof he shall, unless he is satisfied that having regard to losses incurred by the company in earlier years or to the smallness of the profit made, the payment of a dividend or a larger dividend than that declared would he unreasonable, make with tqe previous approval of the Inspecting

Assistant Commissioner an order in writing that the undistr; buted portion of the assessable income of the company

of that previous year as computed for income-tax purposes and reduced by the amount of income-tax and super-tax payable by the company in respect thereof shall be deemed to have been distributed as dividends

amongst the shareholders as at the date of the general meeting aforesaid, and thereupon the proportionate share thereof of each shareholder shall be included in the total. income of such shareholder for the purpose of assessing his total income."

The section is in three parts: the first part defines the scope of the

jurisdiction of the Income-tax Officer to act under s. 23A of the Act; the second part provides for the exercise of the jurisdiction in the manner prescribed thereunder; and the third part provides for the assessment of the statutory dividends in the hands of the shareholders. This section was introduced to prevent exploitation of

juristic personality of a private company by the members thereof for the purpose of evading higher taxation. To act under this section the Income-tax Officer has to be satisfied that the dividends distributed by the Company during the prescribed period are

less than the statutory percentage, i.e., 60 per cent., of the assessable income of the Company of the previous year less. the amount of Income-tax and super-tax payable by the Company in respect

thereof. Unless there is a deficiency ; n the statutory percentage, the

Income-tax Officer has no jurisdiction to take further action thereunder. If that condition is complied with, he shall make an order declaring that the undistributed portion of the assessable income less the said taxes shall be deemed to have been distributed as d'vidends amongst the shareholders. But before doing so, a duty is cast on him to satisfy himself that, having regard to the losses 'ncurred by the company in earlier years or "the smallness of the

profit made," the payment of a dividend or a larger dividend than that declared would be reasonable. The argument mainly centred

on this part of the section. Would the sat'sfaction of the Income-tax Officer depend only on the two circumstances, namely, losses and smallness of profit? Can he take into consideration other relevant circumstances? What does the expression "profit" mean? Does it

mean only the assessable income or does it mean commercial or

SUl>REME COliR't REPORTS

(1965] 3 S.C.R.

accounting profits? If the scope of the section is properly appreciated the answer to the said questions would be The Income tax Officer, acting under th's section. is not assessing any mcome t( tax: that will be assessed in the hands of the shareholders. He only does what the directors should have done. He puts himself in the

place of the directors. Though the object of the section is to prevent evasion of tax, the provision must be worked not from the standpoint of the tax collector but from that of a businessman.

The yardstick is that of a prudent businessman. The reasonableness or the unreasonableness of the amoqnt distributed as divi dends is judged by business considerations, such as the previous

losses, the present profits, the availability of surplus money and the reasonable requirements of the future and similar others. He must take an overall picture of the financial position of the bueyiness. It is neither possible nor advisable to lay down any decisive tests for the guidance of the Income-tax Officer. It depends upon the facts of each case. The only guidance is his capacity to put himself in the position of a prudent businessman or the director of a company and his sympathetic and objective approach to the difficult problem that arises in each case. We find it difficult to accept the argument that the Income-tax Officer cannot take into considera

tion any circumstances other than losses and smallness of profits.

This argument ignores the expression "having regard to" that precedes the s 1id words.

On the interpretation of the words "having regard to" in s. 23A of the Act, the decision of a Division Bench of the Bombay High Court, consist; ng of Chagla C. J., and Tendolkar J., in Sir Kasturchand Ltd, v. Commissioner of Income-tax, Bombay City(') was relied upon by the appellant. Chagla C.J., speaking for the Court. held in that case that "the reasonableness or unreasonableness of the payment of a dividend or a larger dividend has to be judged only with reference to the two facts mentioned in the section, viz., losses incurred by the company in earlier years and the smallness of the profit." To put the contrary construction, the learned Chief Justice said, "would be to import into it words which the Legislature did not think fit to insert in that section and to expand the ambit of the discretion exercised by the Income-tax Officer." But the learned Chief of Justice did not expressly consider the scope of the expres sion "having regard to" found in the section. The Judicial Com mittee in Commissioner of Income-tax v.

Williamson Diamond Ltd.(') had to consider the srope of s. 21(1) of the Tanganyika In come-tax (Consolidation) Ordinance, 27 of 1950, which was pari materia with s. 23A of the Act. Adverting to the argument based

upon the words "having regard to", their Lordships observed:

"The form of words used no doubt lends itself to the suggestion that regard should be paid only to the two mat ters mentioned, but it appears to their Lordships that it is

(1) (1949] 17 I.T.R. 493.

(') L.R. [1958] A.C. 41, 49.

c. I. T. v. GUNGADHAR BANEBJEE (Subba Rao, J. 445

impossible to arrive at a conclusion as to reasonableness by considering the two matters mentioned isolated from other relevant factors. Moreover, the statute does not say "having regard only" to losses previously in9urred by the

company and to the smallness of the profits made. No answer, which can be said to be in any measure adequate, can be given to the question of "unreasonableness" by considering these two matters alone. Their Lordships are of the opinion that the statute by the words used, while making sure that "losses and smallness of profits" are never lost sight of, requires all matters relevant to the question of unreasonableness to be considered. Capital losses,

if established, would be one of them." With great respect, we entirely agree with this view. The contrary view unduly restricts the discretion of the. Income-tax Officer and compels him to hold a particular dividend reasonable though in fact it may be unreasonable.

The expression "smallness of profit" came under the judicial scrutiny of this Court in Commissioner of Income-tax, Bombay City v. Bipinchandra Magan/al & Co. Ltd.(') Therein, Shah, J., speaking for the Court observed thus:

"Smallness of the profit in section 23A has to be adjudged in the light of commercial principles and not in

the light of total receipts, actual or fictional. This view

a pp ears to have been taken by the High Courts in India without any dissentient opinion." The learned Judge laid down the following test: "Whether it would be unreasonable to distribute a larger dividend is to be judged in the light of the profits of the year in question." If the assessable income

was the test and if the commercial profits are small, the learned Judge pointed out, the company would have to fall back either upon

lts reserves or upon its capital which in law it could not do. This decision is binding on us and no further citation in this regard is

called for. These tivo concepts, "accounting profits" and "assessable profits", are distinct. In arriving at the assessable profits the Income-tax Officer may disallow many expenses actually incurred by the assessee: and in computing his income, he may include many items on notional basis. But the commercial or accounting profits are the actual profits earned by an assessee calculated on commercial principles. Therefore, the words "smallness of profit" in the section refer to actual accounting profits in comparison with the assessable profits of the year.

H Another incidental question is whether for the purpose of ascertaining the net commercial profits the tax estimated or the tax actually assessed shall be deducted. In a case where an Income-tax Officer takes action under s. 23A of the Act before the tax for the

relevant period is assessed, only the estimated tax can be deduct-

(') (1961) 41 I.T.R. 290, 296,

L P(N)4SCIed; but, there is no reason why, when the tax had already been assessed before he takes action under this section, the estimated tax and not the real tax shall be deducted therefrom. In this view, in the present case to ascertain the commercial profits what should be deducted is not the tax shown in the balance-sheet but the actual tax assessed on the income of the Company.

Another question raised is whether the balance-sheet is final and both the parties are precluded from questioning its correctness in any respect. There .js no provision in the Income-tax Act which makes the balance-sheet final for the purpose of s. 23A of the Act or even .for the assessment. It no doubt affords a prima facie proof of the financial position of the company on the date when the dividend was declared. But nothing prevents• the parties in a suitable case to establish by cogent evidence that certain items were, either by mistake or by design, inflated or deflated or that there were some omissions. It does not also preclude the assessee from proving that the estimate in regard to certain items has turned out to be wrong and placing the actual figures before the Income-tax Officer. But in this case no attempt was made before the Tribunal to canvass the correctness of the figures either on the debit side or on the credit side and we do not think we are justified to give another opportunity to either of the parties in this regard. Before the Tribunal there was no dispute that the actual tax assessed for the relevant year was much higher than the estimated tax shown in the balancesheet.

Section 23A of the Act is in the nature of a penal provision.

In the circumstances mentioned therein the entire undistributed portion of the assessable income of the Company is deemed to be distributed as dividends. Therefore, the Revenue has strictly to comply with the conditions laid down thereunder. Th11 burden, therefore, lies upon the Revenue to prove that the conditions laid down thereunder were satisfied before the order was made: see Thomas Fat torini (Lancashire) Ltd. v. Inland Revenue Commissioners('). In the present case the Revenue failed to discharge the said burden: indeed, the facts established stamp the order of the Income-tax Officer as unreasonable.

The assessment orders passed by the Income-tax Officer are not before the Court. The balance-sheet shows a net profit of Rs. 1,28,112/7 /5 whereas the Income-tax Officer has computed the assessable income at Rs. 2,66,766, which was later reduced in appeal by'Rs. 80,925. There is no evi.dence on the record that the real commercial profits were artificially reduced in the balancesheet. Nor is there evidence to show what part of the income assessed represents commercial profits, and what part the notional income. In the circumstances it must be assumed that the amount mentioned in the balance-sheet correctly represented the commercial profits.

(!) L.R. [1942] A.C. 643.

C. I. T. V •. GUNGADHAR BANERJEE (Sub/Ja Rao, J.) 447

From the figures already extracted at an earlier stage it is manifest that the net commercial profit was barely Rs. 4,000 and it is not possible to hold that it not unreaso.nable for the Income-tax Officer to make an order to the effect that the additional sum of Rs. 64,000 should be deemed to have been distribut ed as dividends amongst the shareholders.

In the result we hold that the order of the High Court is correct and dismiss the appeal with costs.

Appeal dismissed.

COMMISSIONER OF INCOME-TAX, WEST BENGAL CALCUTTA

GUNGADHAR BANERJEE AND CO. (P) LTD

1965 IK. SUBBA RAo

C. SHAH

S. M. SIKRI, JJ

Indian Income-tax Act, 1922

s. 23A

s. 23

Income-Tax Act

sec.

66(1)

Section 23A

Income-tax Act

s. 23A

s. 23A

s. 23A

is no provision in the Income-tax Act

s. 23A

OVIL APPELLATE JURISDICTION

C.K. Daphtary

R. Ganapathy Iyer

R. N. Sachthey

F A. V. Viswanatha Sastri

S. C. Muzumdar

Sobba Rao

s. 23A

Gungadhar Banerjee & Co. (Private) Ltd.

April 13, 1948

s. 23

s. 23A

s. 23A

s. 66(1)

High Court of Calcutta

Section 23A

Income-tax Act

Section 23A

s. 23A

s. 23A

AV. Viswanatha Sastri

s. 23A

s. 23A

s 1

s. 23A

Chagla

Tendolkar

s. 21(1)

s. 23A

Subba Rao

section 23A

India

s. 23A

Income-tax Act

s. 23A

Section 23A

GUNGADHAR BANERJEE

Ja Rao


EMPJ, OYERS IN RELATION TO DIGW ADIB COLLIERY A v.

THEIR WORKMEN

March 22, 1965

[P. B. GAJENDRAGADKAR, C. J., K. N. W ANCHOO.: M. HIDAYATULLAH

AND V. RAMASWAMY, JJ.] Ind.w; trial Disputes Act (14 of 1947), ss. 25B and 25F-Continuous servi'ce, meaning of.

A bad!i workman worked as the appellant's employee for more than 240 days, with interruptions in each of the calendar years 1959 and 1960. He was retrenched in 1961. An industrial dispute having arisen, it was referred to the Tribunal, which held, that the appellant was not justified in terminating the services of the workman as the provisions of s. 25F of the Industrial Disputes Act, 1947 were not complied with.

Tn its appeal to this Court, the appellant contended that the section could a.pply only if the workman had put in 240 days' conti. nuous service in any of the years 1959 and 1960.

HELD: Section 25B says that, for the purpose of s. 25F a workman who, in a period of 12 calendar months has actually worked for not less than 240 days shall be deemed to have completed one year of continuous service. Service for 240 days in a period of 12 calendar

months is equal not only to service for a year but is to be deemed continuous service even if interrupted. Therefore, though s. 25F speaks of continuous service for not less than one year under the. employer, both the conditions are fulfilled if the workman has actually worked for 240 days during a period of 12 calendar months. It is not necessary to read the definition of continuous service in s. 2(eee)

into s. 25B, because, the fiction converts service of 240 days in a period of the twelve calendar months intn continuous service for one complete year. [451C-E]

The amendments introduced by the Industrial Disputes (Amendment) Act, 1964 into ss. 25B and 25F only removed the discordance between the unamended sections 25B and 25F (b) and vagueness which existed previously. But neither before the amendments nor after, is uninterrupted service necessary, if the total service is 240 days in a period of 12 calendar months. [ 452D-E]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 43 of 1964.

Appeal by special leave from the award dated August 3, 1962 of the Central Government Industrial Tribunal, Dhanbad in Reference No. 56 of 1961.

B. Sen and I.N. Shroff, for the appellants.

The respondent did not appear. ;, ; Sfhe Judgment of the Court was delivered by 'ifldayatullah, J. This is an appeal by special leave against the Award dated August 3, 1962, of the Central Government Indus- -··- tria} Tril:>unal Dhanbad, under the Industrial Disputes Act 1947

,! -- 448 ..

DIGWADIH COLLIERY v. WOI\KME-'< (llidayatuUah, J.) 449

The appellants are the Employers in relation to Digwadih Col liery and the respondents their workmen. The workmen did not appear in this Court. The dispute was whether the management of the colliery was just'fied in terminating the services of Jaldhar Singh with back wages.

Jaldhar Singh was a 'bad!i' workman which means (as defined hy the Standing Orders of the colliery) a person appointed in the post of a permanent employee or probationer who is temporarily absent. He worked as badli in the cafondar years 1959 and 1960 in d; fferent capacities. His employment was, of course, not continuom

and there were six breab of one day to a week in 1959 and eight hreaks of one day to a week in 1960. However, he worked for more

than 240 days in each calendar year though with these interruptions.

In January 1961 the colliery terminated Jaldhar Singh's services

without notice to him or payment of wages ; n lieu of notice or compensation. A dispute arising, conciliation was attempted but foiled and the reference followed.

Before the Tribunal the workmen claimed that Jaldhar Singh was a permanent wh'le the Employers contended that he was temporary. The Employers stated that as some of the perma nent staff had become surplus, there was no need of badli workmen and the term'nation of Jaldhar Singh's service was justified.

The workmen attempted to prove that Jaldhar Singh was permanent from 1960 and produced some documents from which they

asked that this inference be drawn but the Tribunal did not agree.

The workmen relied in the altcrnat; ve upon s. 25F of the Act be

cause Jaldhar Singh had put in service of 240 days in each of the years and contended that as the Employers had failed to comply with the provisiocs of s. 25F the termination of service was illegal' and unjust'fied. The Employers submitted that s. 25F could apply only if Jaldhar Singh had put in 240 days' continuous service in any of the years 1959 or 1960.

The service of Jaldhar Singh was admittedly terminated as there was no work for him and not on account of disciplinary action or voluntary retirement, superannuation or ill-health. This

was thus a case of retrenchment as defined in s. 2(00) of the Act.

Section 25F, which was inserted as part of Chapter VA, with effect from October 24; 1953 by the Industrial Disputes (Amendment)

Act 1953 (43 of 1953) provides:

"25F. Conditions precedent to retrenchment of workmen.

No workman employed in any industry who has been in

cont; nuous service for not less than one year under an employer shall be retrenched by that employer until-

(a) the workman has been given one month's notice in

wrting indicating the reasons for retrenchment and

the period of notice expired, or the workman bas

SUPREME COURT REPORTS [1965] 3 e.c.R,

been paid in lieu of such notice, wages for the period A of the notice:

Provided that no such notice shall be necessary if the retrenchment is under an agreement which specifies a date for the termination of service;

(b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to .fifteen days' average pay for every completed year of

service or any part thereof in excess of six months; and

(c) notice .in the prescribed manner is served on the appropriate Government."

The section, if it applied, had plainly not been complid with in

respect of any of the conditions precedent. faldhar Singh, as seen already, had not been given any notice or wages in lieu of notice or paid compensation and no notice had been served on the appro priate Government. The termination of service would, in these circumstances, be illegal. But the Employers pointed out that s. 25F required two conditions: (a) continuous service and (b) service for

not less than one year, and contended that these conditions were not fulfilled as the service was not continuous but broken.

They relied on the definition of "continuous service" in s. l(eee) which was introduced by the same amending Act:

"2(eee) continuous service means uninterrupted service, and includes service which may be interrupted merely on account of sickness or authorised leave or an accident or a sqike which is not illegal, or a lock-out or a cessation of work which is not due to any fault on the part of the workman;"

The workmen, on the other hand, relied upon the provisions of s. 25B which read:

"25B. Definition of one year of continuous service.

For the purposes of sections 25C and 25F, a workman who, during a period of 12 calendar months, has actually worked in an industry for not less than two hundred and forty days shall be deemed to have completed orie vear of continuous service in the industry.

Explanation.-In computing the number of days on which a workman has actually worked in any industry, the days on which-

{a) he has been laid off under an agreement or as permitted by standing orders made under the Industrial Em ployment (Standing Orders) Act, 1946, or under this Act or under any other law applicable to the industrial establishment, the largest number of days during

DIGWADIH COLLIERY v. WORKMEN (Hidayatullah, J.) 451

which he has been so laid-off being taken into account for the purposes of this clause,

(b) he has been on leave with full wages, earned in

previous year, and

(c) in the case of a female, she has been on maternity

leave; so however that the total period of such maternity leave shall not exceed twelve weeks, shall be included."

The definit'.ons in s. 2 of the Act do not apply if there is any thing repugnant in the subject or context and the question is whether the definition of "continuous service" can at all apply in considering s. 25F when what is incant by the expression "one year of continuous service" in s. 25F is, by s. 25B specially stated. If s. 25B had not been enacted the contention of the Employers would

have been unanswerable for the words of s. 25F would then have plainly meant that the service should be for a period of 12 months without interruptions other than those stated in s. 2(eee) itself. But

s. 25B says that for the purpose of s. 25F a workman who, in a period of twelve calendar months has actually worked for not less than 240 days shall be deemed to have completed one year of cQntinuous service. Service for 240 days in a period of twelve calendar

months is equal not only to service for a year but is to be deemed continuous service even if interrupted. .Therefore, though s. 25F

speaks of continuous service for not less than one year under the employer, both conditions are fulfilled if the workman has actually

worked for 240 days during a period of twelve calendar months.

It is not necess"ry to read the definition of continuous service into s. 25B because the fiction converts service of 2@ days in a period of twelve calendar mon.ths into continuous service for one complete year.

Mr. B. Sen drew our attention to the Indul; trial Disputes <Amendment) Act 1964 which was passed last December. By s. 2(iii) of the amending Act of 1964 clause (eee) of the second sec

tion of the principal Act was omitted and bys. 13, for s. 25B in the princ; pal Act the following was substituted:

"25B. For the purposes of this Chapter,-

(!) a workman shall be said to be in continuous service

for a period if he is, for that period, in µninterrupted service, including service which may be intermptei on account of sickness or authorized leave or an accident or a strike which is not illegal, or a lock-out or a cessation of work which is not due to any fault on the part of the workman;

(2) where a workman is not in continuous service within

the meaning of clause (!) for a period of one year

452 SUl'llEME COURT REPORTS tl965j 3 3.C, It.

, he shall be deemed o be in continuous service under an employer-

(a) for a period of one year, if the workman, during

a period of twelve calendar months preceding the date with reference to which calculation is to

be made, has actually worked under the employer for not Jess than-

(i) one hundred and ninety days in the case of

a workman employed below ground in a mine; and

(ii) two hundred and forty days, in any other

case;

The Explanation to s. 25B is the same, mutatis mutandis as before.

Mr. Sen contended that the change in the Jaw brought out his contention. We do not agree. The amended s. 25B only consolidates the previous, sections 25B and 2(eee) in one place, adding some other matters which are not relevant to the present purpose, but the purport of the new provisions is not different. In fact the amendment of s. 25F of the principal Act by substituting in cl. (bi the words "for every completed year of continuous service" for the words "for every completed year of service" now removes a discordance between the unamended section 25B and the unamended

cl. (b) of s. 25B. Neither before these several changes nor after is uninterrupted service necessary if the total service is 240 days in

a period of calendar months. The only change in the new Act is that this service must be during a period of twelve calendar months preceding the date with reference to which calculation is to be made. The last amendment now removes a vagueness which. existed in the unamended s. 25B.

We accordingly hoH that the decision under appeal is correct. rhe appeal fails' and is dismissed. ·

Appeal dismis, sed. ·

EMPLOYERS IN RELATION TO DIGWADIH COLLIERY

THEIR WORKMEN

March 22, 1965

P. B. GAJENDRAGADKAR

K. N. W ANCHOO.: M. HIDAYATULLAH

ss. 25B and 25F

s. 25F

Industrial Disputes Act, 1947

Section 25B

s. 25F

s. 25F

s. 2(eee)

s. 25B

ss. 25B and 25F

sections 25B and 25F

B. Sen

I.N. Shroff

ifldayatullah

Industrial Disputes Act 1947

Digwadih Col liery

Jaldhar Singh

s. 25F

s. 25F

s. 25F

s. 2(00)

Section 25F

faldhar Singh

s. 25F

s. 25B

sections 25C and 25F

s. 2

s. 25F

s. 25F

s. 25B

s. 25B

s. 25F

s. 2(eee)

s. 25B

s. 25F

s. 25F

s. 25B

s. 2(iii)

s. 25B

s. 25B

Sen

s. 25B

sections 25B and 2(eee)

s. 25F

section 25B

s. 25B

s. 25B