BHRIGUNANDAN PRASAD AND ORS .

THE APPELLATE OFFICER & ORS.

March 25, 1966 B

[K. N. WANCHOO, J.C. SHAH ANDS. M. S!KRI, JJ.J

Evacuee Interest (Separation) Act 64 of 1951, s. 9(1)-Mortgaged property of evacuee-Max; mum tiabilitu for interest payable to mort. gages fixed at five per cent per annum simple on principal money- C Provision c1oes not justify reopening of accounts and utilising th<f excess over five per cent towards reduction of principal.

The appellants were mortgagees of properties including a house on the basis of a mortgage-bond executed in 1928. The interest provided in the bond was 9% per annum compoundable annwrlly, In 1937 the house above referred to was sold to B subject to the earlier mortgage. In 1939 the appellants filed a suit against the original mortgagors and others including B for the amount due under the mortgage. Certain amounts towards the discharge of the liability under the

mortga:ge were received by the appellants before as well as after the filing of the suit. A preliminary decree was passed in favour of the appellants in 1942 and the final decree in 1945. In 1949, B was declared an evacuee. When in 1952 the appellants put their decree in execution the property was treated as "composite property" and the Custodian of Evacuee Property contended before the Competent Officer that the appellants were not entitled to any interest higher than five per cent per annum simple from the date of the mortgage under s. 9(1) of the Evacuee Interest (Separation) Act, 64 of 1951. The Custodian accordingly claimed that the entire transaction should be re-opened from the date of the mortgage and 'if more than five per cent simple interest had been received by the appellants the excess should be credited towards the principal amount. The Competent Officer held that the limit of five per cent could not apply before the Act came into force. The Appellate Officer however upheld the contention of the Custodian. The appellants thereupon filed a writ petition in the High Court which was dismissed in limine, By special leave they appealed to this Court.

HELD: Section 9(1) only deals with the liability of the mortgaged property which may still be due when the claim is made before the competent officer. Though the provision is retrospective in the sense that where the liability is still there, interest has to be calculated at five per cent per annum simple, there is nothing in the words of s. 9(1) which authorises the reopening of the accounts and utilising the excess over five per cent per annum simple. towards reduction of principal provided the payment of intert al l'.eady made in within the contractual rate. [61 F]

On the above view the maximum l'.ate of interest laid down in s. 9(1) was not anplicable before the date of the suit. But under s. 8(3) the decree of the Court was subject to s .. 9 and, therefore ter the date of th$ suit the said rate was applicable. rnirectlons ven B accordingly]. [61 HJ L/SiiSCl-6. 55 ,. ... ,.

SUPREME COURT REPORTS ·- (1966) SUP?'. S.C.l!.•

A CIVIL APPELLATE JURISDICTION: Civil Appeal No. !02 of 1964.

App;:al by special leave from the judgment and order dated.

July 30 ,1962 of the Punjab High Court (Circuit Bench) at Delhi in Civil Writ No. 402-D of 1962.

B .

D. Goburdhan for the appellants.

S. G. Patwardhan and B. R. G. K. Achar for the respondents. The Judgment o(ihe Court was delivered by

Wanchoo, J. The only question raised in this appeal by special leave from the judgment of the Punjab High Court is the interpretation of s. 9 (I) of the Evacuee Interest (Separation) Act, No. LXIV of 1951 (hereinafter referred to as the Act). The question arises irr this way. The appellants were mortgagees of certain properties. in-· eluding a house, on the basis of a mortgage-bond dated July 19,

1928. The consideration of the bond was Rs. 25,000 and interest

D was provided at nine per cent per annum compoundable annually.

Out of the properties covered by the bond, one of the properties was sold to Bibi Chand Tara on October 23, 1937 subject to the earlier mortgage of 1928. In October 1949, Bibi Chand Tara was declared an evacuee.

In 1939 the appe11ant filed a suit against the orignal mortgagors and others including Bibi Chand Tara for the amount due under E the mortgage. A preliminary decree was passed in their favour in March 1942 and the final decree followed in April 1945. It appears that certain sums were received by. the appellants before they had filed the suit. Certain other sums were also received after the preliminary and final decrees. It further appears that certain Zamindari properties which were also included in the mortgage had been sold after the final decree and the money appropriated towards the F decree. Another house which was also included in the mortgage bbnd was sold later and the sale money was again appropriated towards the decree. Eventually the appellants pt the decree in execution in Novmber 1952 aainst the house in dispute for a sum of Rs. 60,000 and odd. There was a sale in that execution proceeding. but it was set aside on the application of the Assistant Custodian, Patna. Thereafter the appellants made an application G before. the Assistant Custodian for the recovery of the mortgae money claimed by tl:em and in this application their clahn was for

Rs. 40,000 and: odd, This application was a.lso dismissed as it was

file~ before a wrong' authority. Eventually the appellants filed a c!a1m. for. the sa'!le:amount before the Comp=tent Officer under the

:·ct._1asmuc~ as. the .property in dispute was composite property '' m , w~1ch , the evgcuee had mortgagors interest while the appellants u ·; ho, are 'no•rH:Vl!cuees .had mortgagees• interest v; h:ch had rip.ened

mt'? a decree for sale. This application was resisted by : the Custodian on a number of grounds. In the present appeal we are only_

BHRIGUNANDAN v. APPELLATE OFFICER (Wanchoo, J.) 57

concerned with one ground based on s. 9 (!) of the Act The contention of the Custodian was that the appellants were not entitled to any interest higher than five per cent per annum simple from the date of the mortgage under s. 9 (!) of the Act. Therefore the Custodian claimed that the entire transaction should be reopened from the date of the mortgage and the amounts already received by the appellants should be taken into account after allowing interest at five per cent per annum simple to them and if more interest had been paid that should be credited towards the principal and after such accounting the sum if any due on the mortgage could be claimed by the appellants.

The Competent Officer held that though the provisions of s. 9 (I) were retrospective to a certain extent they could not be stretched to mean that if a mortgagee had already realised interest at a rate exceeding five per centum per annum simple even before the Act came into force the excess would go to liquidate the principal amount proportionately. He therefore held that in the absence of special provision to the effect that past accounts should be reopened, the amount received as interest prior to the decree could not be taken into account. The Competent Officer further held that the principal money could not be reduced on account of any excess reaFsation of interest when such excess was realised before the Act came into force. He therefore ordered that (1) the amount of interest exceeding five per cent per annum before the institution of the suit would not reduce the principal amount, (2) the appellants would be entitled to simple interest at six per cent per annum, i.e. the rate at which interest was decreed in their favour in the mortgage suit from the date of the institution of the suit till November 26, 1952 on the principal sum only, (3) the appe1'ants would be entitled to interest at five per cent per annum simple from November 27, 1952, and (4) the appellants would also be entitled to costs of the suit decreed in their favour. The actual amount due was ordered to be worked out on these principles.

The Custodian took the matter in appeal to the Appellate Officer. The Appellate Officer held that on the words of s. 9 (1) the entire account must be made afresh on the basis of interest being allowed at five per cent per annum simple on the principal amount G from the date of the mortgage, and that any sums received over and above this would go to reduce the principal. He therefore

atlowed the appeal and set aside the order of the Competent Officer and ordered account to be taken in the manner indicated by him.

The appellants then applied to the Punjab High Court by a writ petjtion, which was dismissed in Umin~. Their application fur a leave to appeal to this Court was also dismissed. Thereafter they ,·. qbtained s_qecial leave from this Court, and that is how the matter l!astomeoefore us,

L'$5SC!-6 '

1$8 Bl'PREME COURT REPORTS

(1966] SUPP. B.C.R.

The Act deals with separation of the interest of an evacuee A from the interest of a non-evacuee in composite properties. Under s. 2 (d) "composite property" inter alia means any property which, or any property in which an interest, has been declared to bo evacuee property and in which the interest of the evacuee is subject to mortgage in any form in favour of a person, not being an B evacuee. Under s. 2 (hi. "principal money" in relation to a mortgage deed executed by an evacuee inter a/ia means in the case t>f mortgage deed which has not been executed by way of renewal of a prior mortgage deed. the sum of money advanced by way of loan at the time of the execution of the mortgage deed. Under s. 3 the Act and the rules and orders made thereunder have effect notwith C standing anything inconsistent therewith contained in any other law fur the time bcin!! in force or in any instrument having effect by virtue of any such law. save as otherwise expressJ.y provided in the Act. Sections 4 to 8 provide for machinery for separation of the claims of evacuees and non-evacuees in composite properties. Then we come lo s. 9(1) which is in these terms: -

"(() Notwithstanding anything to the contrary in any law or contract or any decree or order of a civil court or other authority. where the claim is made by a mortgagee, no mortgaed property of an evacuee shall, subject to the provisions of sub-section (2) be liable for the payment of interest at a rate exceeding five per cent per annum simple on the princinal money advanced or deemed to have been advanced."

It is unnecessary to refer to s. 9(2\ for we are not concerned with: that provision in the present appeal.

We mav however refer to s. 8(3) which is material and in these terms:_

"(3) If there is anv dispute as to whether a liability is a mortgage debt or not or whether any claim submitted

under section 7 exists. the Competent Officer shall decide such dispute :

Provided that a decree of a civil court (other than an ex narte decree passed after the 14th day of August. 1947) shall. suhject to the provisions of sec- G tions 9 and I 0. be binding on the Competent Officer in respect of any matter which has heen finally decided by such decree: and where any matter was decided bv an ex parte decree passed by a civil court after the 14th dav of August, 1947. the Competent Officer mav decide such matter afresh and on such decision being H made the ex parte decree shall be deemed to have uo effect."

f.

A •

JlRRIGUNANDAN v. APPLELLATE OFFICER (Wanchoo, J.) 59

Section 10 provides for separation of the interest of evacuee from the interest of claimants in composite properties and lays down how that wiil be done. Clause (b) specially provides for the manner in which the claim of a mortgagee will be dealt with by the Competent Officer, but we are not concerned with the details of tha.t provision.

It will be seen from a consideration of these provisions that the Competent Officer is bound by the decree of a civil court except an ex parte decree passed after August 14, 194 7 in respect of a mortgage subject to the provisions of ss. 9 and 10. Section JO indicates how the Competent Officer is to separate the interest of an evacuee from the interest of a non-evacuee, even in the case of a decree except an ex parte decree passed after August 14, 1947.

Section 9(1) provides for interest at five per cent per annum simple, and the decree in a mortgage suit except an ex parte decree passed after August 14, 1947 which is otherwise binding on the Competent Officer is subject to the provisions of s. 9(1) as to interest. It will also be noticed that there is no provision in the Act which specifically provides for reopening of transactions relating to mortgage and taking accounts from the date of the mortgage on the basis of interest provided in s. 9(i) and for crediting anything paid as interest over and above the rate provided in s. 9(1) towards principal. Prima facie therefore in the absence of such a provision it cannot be assumed that the legislature intended that a mortgage transa.ction should be reopened from the date of the mortgage and accounts taken afresh and anything paid in excess of five per cent per annum simple interest applied towards reduction of the principal amount. We have therefore to see whether there is anything in the words of s. 9(1) which leads to this result in the absence of a specific provision to that effect in the Act.

Section 9(1) begins with a non-obstante clause and lays down that it will apply notwithstanding anything to the contrary in any law or contract or any decree or order of a civil court or other authority. It then provides that where a claim is made by a mortgagee, as in the present case, no mortgaged property of an evacuee shall be liable for the payment of interest at a rate exceeding five per cent per annum simple on the principal money advanced. The key words in the provision are "no mortgaged property shall be liable". These words indicate that the Competent Officer when he comes to deal with a liability under a mortgage must calculate this liability on the basis that interest should be allowed only on the principal amount and only at the rate of five per cent per annum simple. The liability which the Competent Officer has to determine is with respect to the amount still due to the non-evacuee. Further as the non-obstante clause includes any decree of a civil court and as such decree is subject to s. 9(1) in view of the proviso to s. 8(3), the Competent Officer would not be bound by the calculation ol

interest made by the civiJ. court and would have to determine the

SUPREJU: COl1RT_REPOBT8 (1966)

SUPP.

8.C.B.

i..-.. ..... liability still due on the mortgage himself on the basis of simple interest at the rate of live per cent per annum on the principal sum advanced. Any calculation made by the civil court m arnving at the sum decreed by it on the basis of interest at more than live per cent per annum so far as the liability still due is concerned would not be binding on the Competent Ollicer and he will have to make his own calculations on the basis of simple interest at the rate of live per cent per annum. Similarly in a case where there is no decree and there is still some liabtlity on the mortgage, the Competent Officer would not be bound by the rate of interest mentioned in the mortgage deed and will calculate the liability still due on the basis of simple interest at the rate of live per cent per <rnnum

on the principal amount advanced. But s. 9(1) clearly shows that it applies only where the liability is still due and there is nothing in the words of s. 9(1) which gives power to the Competent Officer to reopen the account under the mortgage from the date of the mortgage and for that purpose treat anything paid as interest under the contract over and above five per cent per annum simple interest as pa}ment towards reduction of the principal amount Section 9(1) in our opinion only deals with liability still due and does not contemplate that any payments made already under the contract as interest should be taken partly towards interest and

partly towards principal if they are above live per cent per annum simple interest. As s. 9(1) speaks only of the liability of the mortgaged property it can only take in liability still due, for whatever has been paid in accordance with the contract towards interest is no longer a liability. This conclusion based on the words of s. 9(1) is enforced by the fact that there is no specific provision in the Act for reopening all accounts under the mortgage from the date of the mortgage, treating any interest paid already at a rate higher than five per cent per annum simple as going towards reduction of the principal sum.

Two situations may arise before the Competent Ofiicer in such circumstances when calculating the liability under a mortgage. In one case there may be no decree already passed in favour of the mortgagee. In such a case in calculating the liability still due on the mortgage, the Competent Ofiicer will calculate that liability on the basis of simple interest at the rate of five per cent per annum on the principal money advanced and may ignore the rate of interest mentioned in the contract. But even so, the words of

s. 9(1) do not give him power to reopen the accounts and whatever has been paid towards interest, if it is not in excess of the contractual rate of interest though it may be in excess of the rate of five per cent per annum simple interest, cannot be taken into account in reducing the principal amount. But whatever is still due under the mortgage will have to be worked out on the basis of H simple interest at the rate of five per cent per annum on the principal amount advanced. We may illustrate this by an example.

...

~ '

iHRIGUNAND.Ui 'II. Al'PlilLL.i.Tlil OFFICER (Wanclioo,, J.) Ill ·- Sllppose a mortgage was entered into on January 1, 1949 and tho interest therein is nine per cent per annum. Suppose that mterest for the years 1949 and 1950 has been paid at the contractllal rate but nothing has been paid thereafter. ln such a case, the amount paid in excess of five per cent per annum for .1949 and J950 will not go to reduce the principal; but thereafter interest will be calculated at five per cent per annum to arrive at the liability on the mortgaged property or wha.t is still due.

The second case which may arise before the Competent Officer would be a case where a decree has been passed on the mortgage bond except an ex parte decree passed after August 14, 1947. ln such a case also the Competent Otlicer cannot take into account anything paid in excess of five per cent per annum simple interest before the date of the suit provided it is not at more than the contractual rate; but as the decree is subject to s. 9(1), the Competent Officer will have to cakulate interest a.t five per cent per annum simple from the date of the suit and cannot award more

interest in calculating the liability still due under the mortgage.

Of course in both the cases if before the suit nothing has been paid towards interest or if something has been paid but it is less than five per cent per annum simple interest on the principal amount advanced, the Competent Officer in calculating the liability still dlle on the mortgage will have to allow five per cent per annum simple interest from the date of the mortgage to make up the deficiency, if any. As we read s. 9(1), we find no provision in it for reopening the account from the very beginning and utilisinJi

any interest paid in excess of five per cent per annum simple but within the contractual rate towards reducing the principal amount.

Section 9(1) only deals with the liability of the mortgaged property which may still be due when the ciaim is made before the Competent Officer. Though the provision is retrospective in the sense that where the liability is still there, interest has to be calculated at five per cent per annum simple there is nothing in the words of s. 9(1) which authorises the reopening of accounts and utilising the excess over five per cent per annum towards reduction of principal provided the payment of interest already made is within the contractual rate.

In this view the order of the Appellate Officer by which he ordered the reopening of the accounts and which was upheld by the High Court is incorrect. At the same time we are of opinion that the order of the Competent Officer is also not quite correct, though it is more in accord with the interpretation of s. 9(1) which we have indicated above. On the view we have taken the liability will be calculated thus: Any amount paid before the date of the suit i.e. December 11, 1939, provided it is not more than the contractual rate of interest though it may be above five per cent per annum simple will not go to reduce the principal amount. From the date of the suit till the date of the final decree i.e. April 25,

62 SUPllF.l!E COURT REPORTS ll966] SUPP. s.c.R.

1945, the appellants will only be entitled to simple interest at the rate of five per cent per annum on the principal amount advanced for the decree though binding on the Competent Officer is subject, under the proviso to s. 8(3), to s. 9(1). Further from the date of the final decree also the appellants will be entitled to simple interest at the rate of five per cent per annum on the principal amount only. Any payments made after the date of the suit will be adjusted first towards interest at the rate of five per cent per annum simple and any payment made in excess thereof will go to reduce the principal. The appellants will also be entitled to the costs of the suit which was decreed in their favour, but there will be no interest on such costs. The account will be made up accordingly to determine the liability due under the mortgage. Thereafter it will be for the Competent Officer to deal with the matter as provided under s. IO(b) or (cl.

We therefore allow the appeal. The writ petition is alloweJ and the order of the Appellate Officer is set aside and the order of the Competent Officer varied in the manner indicated above. The appellants will get their costs from the Custodian Evacuee Property.

Appeal allowed.

B l

BHRIGUNANDAN PRASAD AND ORS

THE APPELLATE OFFICER & ORS

K. N. WANCHOO, J

C. SHAH

s. 9(1)

s. 9(1)

Section 9(1)

s. 9(1)

s. 9(1)

s. 8(3)

s. 9

s. 9

s. 9

s. 9

s. 9

s. 2

s. 2

s. 3

Sections 4 to 8

s. 9(1)

section 7

Section 10

ss. 9 and 10

Section 9(1)

s. 9(1)

s. 9(i)

s. 9(1)

s. 9(1)

Section 9(1)

s. 9(1)

s. 8(3)

s. 9(1)

s. 9(1)

Section 9(1)

s. 9(1)

s. 9(1)

s. 9(1)

s. 9(1)

s. 9(1)

Section 9(1)

s. 9(1)

s. 9(1)

s. 8(3)

s. 9(1)


CHARAN SINGH AND ORS.

BABULAL AND ORS.

March 25, 1966

(K. N. WANCHOO, J. C. SHAH ANDS. M. SIKRI, JJ.]

Uttar Pradesh Consolidation of Holdings Act (5 of 1954), ss. 12 & 37-Modification of award by Civil Judge-If Appealable under s. 39 of the Arbitration Act (10 of 1940).

During consolidation proceedings in a village, under the Uttar Pradesh Consolidation of Holdings Act, 1954, a question of title arose, and the Consolidation Officer referred the question to the Civil Judge who referred it to an arbitrator appointed under s. 37 of the Act. The Arbitrator submitted his award to the Court. The appellants filed objections under s. 15 of the Arbitration Act, 1940, and the Civil Judge modified the award. On appeal by the respondents, the District Court held that the appeal was maintainable and that the Civil Judge was not justified in modifying the award. A revision petition to the High Court filed by the appellants was dismissed.

In appeal to this Court, it was contended that s. 39 of the Arbitration Act, which provides for appeals does not apply to arbitrations under s. 37 of the U.P. Act.

HELD: The decision of the Civil Judge modifying, the\ award was appealaple under s. 39 of the Arbitration Act. r67 Al

The effect of s. 37 of the U.P. Act read with ss. 46 and 47 of tha Arbitration Act is, to apply ss. 15 and 39 of the Arbitration Act to the proceedings under the U.P. Act; and under s. 12(5) of the U.P. Act what is made final is the decision of the arbitrator as it emerges after oppropriate proceedings, under the provisions of the Arbitration Act. r65 G-H; 66 Hl.

Carju Prasad v. Civil Judge, Farmkhabad, I.L.R. rrn591 1 All- 354 and Sayed Ulla Khan v. The Temporary Civil Judge, Su.ltanpur, A.LR. 1959 All 331, approved.

Attar Singh v. State oj U.P. [1959] Supp, 1 S.C.R. 928, explained.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 76 of 1964 .

Appeal by special leave from the judgment and order dated the October 26, 1960 of the Allahabad High Court in Civil Revision No. 1209 of 1957.

J. P. Goyal, for the appellants.

0. P. Rana, for the respondents.

The Judgment of the Court was delivered by

Sikri, J. This appeal by special leave is directed against the judgment of Dhavan, J., in Civil Revision No. 1209 of 1957. The

SUPl\El>IE COUJIT REPORTS

(1966) BL-PP, 11.c.ii.

learned Judge, following Sarju Prasad v. Civil Judge, Farrukhabad(') held that an order of the Court on an objection against an award made under s. 12(4) uf the Cttar Pradesh Consolidation of Holdings Act (U.P. Act V of 1954! (hereinafter called the Act) was appealable under s. 39 of the Arbitration Act (X of 1940)

Mr. J. P. Goyal, learn.:d counsel for the appellant urges that this decision of the Allahabad High Court is wrong.

In order to appreciate the contentions of Mr. Goyal, it is necessary to give a kw facts and set out the relevant statutory provisions.

During consolidation proceedings in village Ohara ki-Garhi, a question of title arose.

The Consolidation Officer, acting under s. 12(4) of the Act, referred the question of title to the Civil Judge, Aligarh, who referred the same to the arbitrator, Shri Vikram Singh, who had been appointed under s. 37 of the Act. Section 12(4) reads as under:

"12(4) Where the objection filed under sub-section {1) involves a question of title and such question has not already been determined by a competent Court, the Consolidation Officer shall refer the question for determina- D lion to the Civil Judge having jurisdiction who shall thereupon refer it to the Arbitrator."

Section 37 provides:

"37. Arbitration-{!) Where any matter is, by or under this Act, directed to be referred to an Arbitrator for determination. the Arbitrator will be appointed by the State Government from amongst Civil Judicial Officers or Assistant Collector of the I class of not less than five years' standing and in all other respects the matter shall be deterrn; ned in accordance with the provisions of the Arbitration Act, 1940.

(2) The appointment of an Arbitrator under sub- F section {!) may be made either generally or in respect of any particular case or class of cases or in respect o( any specified area or areas."

The arbitrator gave his award on May 14, 1956, and submitted the same to the Civil Court for final decision.

On May O 19, 1956, Charan Singh. Dungar Singh, Maharaj Singh and Lajja Ram, appellants before us, filed objections before the Civil Judge.

Aligarh. The Civil Judge. on September 8,

1956. modified the award dated May 14. 1956.

Bahu Lal, Mohar Singh and Ram Piyari filed an appcal before the District Judge against the order of the Civil Judge, dated September 8, 1956.

Before the District Judge, a preliminary objection was raised that no appeal lay B -----

(') 1.1..1{. [ 195~] I "'.U. 354.

A •

CHARAN SINGH V. BABULALjSikri, J,) 65

against the order of the Civil Judge. The District Judge overruled the objection. On the merits, the District Judge held that the Civil Judge was not justified, under s. 15 of the Arbitration Act, in modifying the award merely because he disagreed with the finding. He, therefore, allowed the appeal and set aside the order of the Civil Judge modifying the award, and the award announced by Shri Vikram Singh was accepted.

Charan Singh, Maharaj Singh, Doonger Singh and Lajja Ram filed a petition before the High Court under s. 115 of the Civil Procedure Code. As stated above, Dhavan, J., dismissed the petition on the ground that an appeal lay under s. 39 of the Arbitration Act. This Court granted special leave and now the matter is before us.

Mr. Goyal contends that s. 37 of the Act applies the provisions of the Arbitration Act only as far as procedure is concerned, and s. 39 of the Arbitration Act which provides for appeals does not apply to arbitrations referred to in s. 37 of the Act. He relies strongly on s. 12(6) of the Act which provides that the decision of the arbitrator under sub-s. (4) shall be final.

We have already set out s. 12(4). He, however, does not contend that the provisions of s. 15 of the Arbitration Act do not apply because the appellants had apparently applied under s. 15 of the Arbitration Act to the Court to modify the award made by Vikram Singh and they had succeeded in getting an order modifying the award in their favour.

In our opinion, the High Court arrived at the correct conclusion in Sarju Prasad v.

Civil Judge, Farrukhbad(') and Sayeed Ullah Khan v. The Temporary Civil Judge of Sultanpur.(') Section 12(4) of the Act provides for a statutory arbitration and s. 37 of the Act provides for the appointment of an arbitrator by the State Government. It seems to us that apart from the question of appointment of the arbitrator, in all other respects the matter referred to, i.e. the question of title referred to under s. 12(4), shall be determined in accordance with the provisions of the Arbitration Act.

Section 37 of the Act does not make any distinction between provisions like s. 39 and s. 15 of the Arbitration Act.

Further, the eITect of s. 46 ands. 47 of the Arbitration Act is that all the provisions of the Arbitration Act except sub-section (!) of section 6, ss. 7, 12, 36 and 37, apply to arbitrations under the Consolidation of Holdings Act. Section 37 of the Act cannot be held as providing anything inconsistent with this. In our opinion, the effect of s. 37 of the Act, read with ss. 46 and 47 of the Arbitration Act, is inter alia to apply ss. 15 and 39 of the Arbitration Act to the proceedings under the Act. It is not necessary to rely

(') I.I,.R, (1959) I All. 354. (') I.L.R. (1959) I All. 331.

CG BUl'RiYE COURT REPORTS

[1966) SUPP. 8.C.R.

on rr. 63 and 64 of the littar Pradesh Consolidation of Holdings A Rules, 1954, but we may mention that they proceed on the basis that ss. 15, 16 and 30 of the Arbitration Act apply to the arbitration proceedings under the Act.

Mr. Goyal then urges that this Court in the case of Altar Singh v. The State of U.P.(') understood s. 37 of the Act to mean B that it makes the Arbitration Act applicable to the proceedings before the arbitrator in the matter of procedure only.

It is true that at p. 935 of the judgment, Wanchoo, J., observed:

"Further s. 12 provides that where there is a dispute as to title and such question has not already been determined by any competent Court, the Consolidation Officer c has to refer the question for determination to the Civil Judge who thereat'ter will refer it to the arbitrator. The arbitrator then proceeds in the manner provided by r. 73 (<ic 63) and gives a hearing to the parties and takes evidence both oral and documentary before making his award; and s. 37 of the Act makes the Arbitration Act applicable to the proceedings before the arbitrator in the D matter of procedure."

We are unable to agree with Mr. Goyal that this passage in any manner decides the point which is before us.

This Court in Attar Singh's(') case was concerned with the validity of the Act, and ground No. 2 which was urged before the Court was:

"Sections 8, 9 and 10 read with s. 49 of the Act provide a procedure for the correction and revision of revenue records for villages under consolidation, which is vitally different from that applicable to villages not under consolidation, and there is thus discrimination which offends art. 1-l of the Constitution."

In dealing with this ground, Wanchoo, J., made the observations which have been set out above. There was no quection there of considering the effect of ss. 46 and 47 of the Arbitration Act. nr considering whether s. 39 of the Arbitration Act applies to arbitrations under s. 12(4) of the Act.

Mr. Goyal also laid a great deal of emphasis on s. 12(6) of

the Act which provides that the decision of the arbitrator under • sub-s. (4) shall be final. In our opinion, s. 12(6) must be read with

&. 37 of the Act, and if it is so read it is quite clear that what is made final is the decision of the arbitrator as it emerges after appropriate proceedings. if any, have been taken under the pro- '"" visions of the Arbitration Act.

H -------·-···--------- - -·--· (') [19~9] Supp. l SCI\ 92S.

' ! .

"'I

CHARAN

SINGH V.

BABULAL (Sikri, J.) 67

In the result we hold that the High Court is right in holding that the decision of the Civil Judge modifying the award was appealable under s. 39 of the Arbitration Act. The appeal accordingly fajls and is dismissed with costs,

Appeal dismissed,

CHARAN SINGH AND ORS

BABULAL AND ORS

K. N. WANCHOO, J.

C. SHAH ANDS. M. SIKRI, JJ.

ss. 12 & 37

s. 39

s. 37

s. 15

Arbitration Act, 1940

s. 39

s. 37

s. 39

s. 37

ss. 46 and 47

ss. 15 and 39

s. 12(5)

s. 12(4)

s. 39

s. 12(4)

s. 37

Section 12(4)

Section 37

Arbitration Act, 1940

s. 15

s. 115

s. 39

s. 37

s. 39

s. 37

s. 12(6)

s. 12(4)

s. 15

s. 15

Section 12(4)

s. 37

s. 12(4)

Section 37

s. 39

s. 15

s. 46

section 6

ss. 7, 12, 36 and 37

Section 37

s. 37

ss. 46 and 47

ss. 15 and 39

ss. 15, 16 and 30

s. 37

s. 12

s. 37

Sections 8, 9 and 10

s. 49

art. 1

ss. 46 and 47

s. 39

s. 12(4)

s. 12(6)

s. 12(6)

s. 39


RAM K15HORE A

STATE OF U.P.

March 28. 1966 B

IK. N. WA?>CHOO, J. c. SHAH AND s. M. SIKRI, JJ.)

Trade and Merclumd'se Marks Act, 1958 (Act 43 of 1958) .. ss. 77, 92-Time prescribed for launching pro.<ecution-Date of first discover!/ of infringPT7!€nt of trade mark whether relevant for Teckc.:riing such time-Plea of acquiescence uihen can be raised.

In 1955 the complainants protested to the appellant that he was infringing their trade-mark but no futher action was taken by them at that time. In November 1960 the appeJlant was found in pos'5sion of labels and tobacco tins carrying marks deceptively similar to the complainants' trade mark. After investigation the police lodged in March 1961 a charge-sheet against the appellant in respect of aJleged offences under s 78 read with "· 77 and s. 79 of the Trade and Merchandise Mark• Act 1958. The trial M3gistrate convicted the

appellant who was however acquitted by the Ses.sions Judge principally on the ground that the prosecution w>as barred as it was not instituted within the per:od prescribed bv s. 92 of the Act. In appeal against the orde" of acquittal the High Cou"t convicted him but granted him a certificate under Art. 134 of the Constitution.

HELD: The period under s. 92 cf 1ho Trade and Merchandise Marks Art. 1958 commences to run from the date of the commission of the off.r..r:-e chRrj!rd or fTom thed<)te of dlscmery1 b,1 the prosecutor of the a/fence charged. The period docs not have to be reckoned from the first discovery of infringcm•nt of trade-mark by the prosecutor. Tn this respect s. 92 of tho Act of 1958 is matcr:allv difTcrent from s. 15 of toe Merchandise Marks Aot 4 of 1839. [73A-D]

Ruppell v. Ponnusami Tava-i and Anr., I.L.R. 22 Mad 488 and Dau Dayal v. State of Uttar Pradesh, A.LR. 1959 S. C. 433, distinguished.

Abdulsatar Khan Kamruddin Klian v. Ratan!al Kislienalal, T.L.R. 59 Born. 551 anrl Emperior v. Chhotalal Amarchand, J.L.R. (1937) Born. 183, referred to.

There was nothing to •ubstantiate the appellant's plea based on •

1. 77 of the AM that tho complainants h'd acquiesced in his use of the deceptive trade-mark.

CRl}fi~AL APPELLATE JURISDICTION: Criminal Appeal No. 37 G

cl!%~ ·~

I ' '

Appeal from the judgment and order dated November 26. , 1963 of the Allahabad High Court in Government Appeal No. 782 of 1962.

S. P. Sinha. G. L. Sanghi, Ganpat Rai, E.

C. Agarwala, S. S. Khanduja for P. C. Agarwala, for the appellant.

B Atiquor Rehman and O. P. Rana, for the respondent.

' A

:a:

The Judgment of the Court was delivered by

Shah, J. The appellant was charged before a Magistrate, 1st Class, at Varanasi with being, on November 25, 1960, in possession of counterfeit labels which could be used to pass off his "tobacco tins" as the goods of Mis Nandoo Ram Khedan Lal bearing "Titli" (butterfly) trade-mark, and with being in possession for sale of "tobacco tins" bearing counterfeit trade marks of the genuine "Titli" brand trade-mark of Mis Nandoo Ram Khedan Lal. The Trial Magistrate convicted the appellant and sentenced him to suffer simple imprisonment for three months for offences under s. 78 read with s. 77 and under s. 79 of the Trade and Merchandise Marks Act 43 of 1958, and directed the two sentences to run consecutively. In appeal to the Court of Session, Varanasi, the order passed by the Trial Magistrate was set aside and the appellant was acquitted principally on the ground that the prosecution was barred because it was not instituted within the period prescribed by s. 92 of the Act. The High Court of Judicature at Allahabad however set aside the order of acquittal and restored the conviction, but reduced the sentence on each of the charges to a fine of Rs. 1,000 i-. With certificate granted by the High Court under Art. 134 of the Constitution, this appeal has been preferred.

Mis Nandoo Ram Khedan Lal-who will hereinafter be called "the complainants"-carry on in the town of Varanasi, business in "chewing tobacco". They were marketing their product for the last many years under a trade-mark styled "Titli" (butterfly). The label on the containers of "chewing tobacco" shows figures of three butterflies on yellow-green background and the legend "Titli" in Devnagari and English characters. The appellant who carried on business also in "chewing tobacco" commenced market his goods in the name of "Tilli"

(partridge). The label on the containers had figures of four butterflies on leaf-green background, and the legend "Titli" in Devnagari and English characters. The colour schemes of the butterflies in the complainants' label and of the butterflies in the appellant's label were substantially similar .

The complainants gave information to the police in November 1960 that the appellant had infringed their trade-mark by marketing his goods under a trade-mark calculated to deceive the purchasers into believing that they were purchasing the product of the complainants. The police submitted a charge sheet against the appellant for offences under s. 78 read with s. 77 and s. 79 of the Trade and Merchandise Marks Act, 1958. The Trial Magistrate observed that there was close resemblance between the labelused by the complainants and the label used by the appellant, . a13,~ th.at a vast. majoriW. '?f user~ 9( sue~. lqaco bipg illiterte

were likely to be "camea away by a p1ctonal device of "Tilli"

SUPREME COURT RF.PORT [1966]

SUPP.

S.C.R.

(butterfly)" since they were incapable of reading and understanding the "descriptions on the label in Dcvanagri and in English".

With this view the Sessions Judge and the High Court agreed.

Before us, no substantial argument has been advanced which would justify us in taking a different view on this question.

It was however contended for the appellant that the case against him must still fail because the prosecution was barred by s. 92 of the Trade and Merchandise Marks Act, 1958, and also because there was such acquiescence on the part of the complainants as would justify an inference that they had assented to the appellant using the trade-mark under which his product was marketed. To appreciate these two contentions, it is necessary to refer to certain facts.

Some time before 1955 the appellant had started marketing his goods under the trade-mark "Tit Ii": there is however no evidence about the general get-up of the label on the containers of "chewing tobacco" marketed by him at that time.

On January 6, 1955 the complainants wrote a letter to the appellant claiming that they were the sole proprietors of "Tit/i" brand. that "Titli" was their registered trade-mark, and the appellant had "with criminal intention started making illegal and unlawful use of that trade-mark" and had copied their trade-mark and was using it on similar but inferior "chewing tobacco" and was passing off his goods in the market as the product of the complainants; and on those allegations the complainants called upon the appellant to desist from selling or disposing of any of the goods with labels resembling to the complainants' trade-mark and thereby deceiving the public into purchasing the appellant's product when the public desires to purchase the complainants' product and making several other incidental requisitions.

In reply, the appellant denied that the complainants were the sole proprietors of "Titli"

trade-mark and that in any event the appellant had not used the trade-mark "Titli" on any goods manufactured by him.

The appellant also claimed that he had been marketing his goods in the name of "Titli" for many years and that the complainants were seeking to pas< off their product as that of the appellant.

After thi~ correspondence no steps were taken by the complainants against the appellant till November 1960.

The apnellant was on information loded bv the complainants prosecuted for offences under s. 78 read with s. 77 and s. 79 of the Trade and Merchandise Marks Act.

1958. The appellant submitted that whereas the complainants bad on their own admission learnt about infringement of their trade-mark in 1955, criminal proceedings started in November 1960 were barred under s. 92 of the Trade and Merchandise .Marks Act, 1958. It may be p.oti.ced however that the offences chlZl'!Jed against the appellant

.. --

were alleged to have been committed on November 25, 1960, ant. the charge-sheet was lodged in the Court of the Magistrate, !st Class, on March 22, 1961. Section 92 of the Trade and Merchandise Marks Act, 1958, insofar as it is material, provides:

"No prosecution for an offence under this Act ........ . .. .. . .. .. .. . .. . .. . shall be commenced after the expiration of three years next after the commission of the offence charged, or two years after the discovery thereof by the prosecutor, whichever expiration first happens." In substance the appellant in relaying upon the bar of s. 92 seeks to substitute for the words "after the discovery" the words "after the first discovery", and for the words "after the commission of the offence charged" the words "after the commission of the first infringement of trade-mark". The Legislature has deliberately not used those expressions, and there is no warrant for substituting them in the section and thereby substantially modifying the section.

Counsel for the appellant however submitted that in interpreting s. 15 of the Merchandise Marks Act 4 of 1889, which is similar to s. 92 of Act 43 of 1958, the Madras High Court had in Ruppe/I v. Ponnusami Jevan and Another(') held that a prosecution under s. 15 of the Merchandise Marks Act 4 of 1889 commenced after the expiration of the perioi:! prescribed by the Legislature from the date when the infringement was first discovered, is barred and that this Court had in Dau. Dayal v. State of Uttar Pradesh(') affirmed that view.

In Rupell's case(') the accused was charged with committing an offence punishable under s. 15 of the Indian Merchandise Marks Act, 1889, on a complaint that the accused had infringed the complainant's trade-mark. It appeared at the trial that the complainant had discovered in 1893 that goods were sold by the accused marked with a trade-mark which was similar to his trade-mark, and the complainant had called upon the accused to discontinue user of the counterfeit trade-mark and to render an account of sales made by him.

In 1898 the complainant prosecuted the accused for infringing his trade-mark.

The High Court of Madras held that as the complainant did not show that he believed the use of the alleged counterfeit trade-mark had been discontinued after the first discovery and protest in 1893, prosecution of the accused in 1898 under s. 15 of the Indian Merchandise Marks Act, 1889, was barred. This view was followed by the Bombay High Court in A bdulsatar Khan Kamruddin Khan

v. Ratanlal-Kishenlal,('): The Court observed in that case that under s. 15 of the Indian Merchandise Marks Act, 1889, if the offence of infringement of a trade or property mark is a continuing one, and if no discontinuance is proved, time runs from the first

(') I.L.R. 22 Mad. 468.

('I A.I.R. 1959 S.C. 433. 1a) I.L.R. 59 Born. 551.

SUPREME OOURT REPORTS [1966] BUPP. s.o.a.

instance of infringement or from the first discovery of the infringement.

Abdu/satar Khan's case(') was however overruled by a full bench of the Bombay High Court in Emperor v. Chhotalal Amarchand.(') In that case the Court dissenting from the judgment of the Madras High Court in Ruppe/l's case(') and overruling the decision in Abdu/satar Khan's case(') held that under s. 15 of the Indian Merchandise Marks Act, 1889, starting point of limitation in all cases is the date of the offence charged.

In Dau Dayal's case,(') Venkatarama Aiyar, J., incorporated substantially the whole of the judgment in Ruppe/l's case:(') but in Dau Daya/'s case(') the matter in dispute was entirely different.

In that case the accused was prosecuted for offences punishable under ss. 420, 482, 483 & 486 I.P. Code on the allegation that he was in possession of Bidis which bore counterfeit trade-marks. A complaint was filed against the accused on March 26, 1954, and after investigation by the police, a charge-sheet was filed in the Court of the Magistrate on September 30, 1954. The accused contended that the offence was discovered on April 26, 1954, and since process was issued by the Magistrate on July 22, 1955, i.e. more than one year after discovery of the offence he could not, because of s. 15 of the Merchandise Marks Act, 1889, be prosecuted. This Court rejected the plea raised by the accused. An excerpt from the judgment in Ruppe/l's case(') was incorporated only to indicate the general tenor of s. 15, and not with a view to express approval of all that was observed therein.

We are however in this case not called upon to consider whether Ruppe/l's case(') was correctly decided. That case was decided on the interpretation of s. 15 of the Merchandise Marks Act,

1889. Suffice it to say that the Legislature has in enacting the Trade and Merchandise Marks Act 43 of 1958 made a substantial departure from the language used in s. 15 of Act 4 of 1889. For the sake of convenience the material parts of the two sections may be set out in juxtaposition:

Section 15 of Act 4 of 1889

No such prosecution .......... ehall be commenced after the expiration of three years next after the commission of the offence, or one year after the first discovery thereof by the prosecutor. whichever expiration first happens.

Section 92 of Act 43 of 1958

No prosecution for an offence under this Act ............ shall be commenced after the expiration of three years next after the commission of the offence charged, or two years after the discovery thereof by the prosecutor, whichever expiration first happens. ---------- ---------------------

('} I.J,, R. 59 Rom. 551. ('! l.J,.R. 22 !!ad. 4BB.

(') J.L.R. (1937) Dom. 183.

(') A.I.R. 1959 S.O. 433,

I _r--

' 1

• A

The Legislature in enacting s. 92 of Act 43 of 1958 has clearly made departure from s. 15 of Act 4 of 1889 in important respects.

Whereas under s. 15 prosecution had to be commenced within three years next after the commission of the offence or within one year after the first discovery thereof by the prosecutor, under s. 92 the prosecution must be commenced before the expiration of three years next after the commission of the offence charged, or two years after the discovery by the prosecutor of the offence charged, whichever expiration first happens. Under s. 92 it is plain the period commences to run from the date of the commission of the offence charged or from the date of discovery by the prosecutor of the offence charged. The argument which could be raised under s. 15 and was approved in Ruppe/l's case(') that the Legislature intended to provide that the period shall commence from the first discovery thereof by the prosecutor is plainly not open to the offender infringing the provisions of the Trade and Merchandise Marks Act under s. 92. The period has to be computed for the purpose of the first part of the section from the date of the com mission of the offence charged, and under the second part from the date of discovery of the offence charged, and not from the first discovery of infringement of trade-mark by the prosecutor.

The plea that the complainants had assented to the use of the trade-mark by the appellant, and on that account the latter could not be said to have falsified a trade-mark or to have falsely applied the trade-mark, is without substance. Section 77, it is true, provides that a person shall be deemed to falsify a trade-mark who either-

(a) without the assent of the proprietor of the trade mark makes that trade mark or a deceptively similar mark; or

(b) falsifies any genuine trade mark, whether by alteration, addition, effacement or otherwise.

If there is assent of the proprietor to the use by the accused of a trade mark which is deceptively similar, there would be no falsi fication or false application of the trade mark: but protest against infringement of the complainants' trade mark cannot be regarded as assent to the use or application of the false trade mark.

The High Court has on a review of the evidence held that there was no acquiescence by the complainants from which assent may be inferred, and we see no reason to differ from that finding.

The appeal therefore fails and is dismissed.

Appeal dismissed.

(') I.L.R. 22 Mad. 488.

L/S5-7(a)

A

STATE OF U

c. SHAH

s. M. SIKRI, JJ.

Marks Act, 1958

ss. 77, 92

s 78

s. 79

s. 92

Art. 134

s. 92

Art. 1958

s. 92

s. 15

s. 78

s. 77

s. 79

s. 92

Art. 134

s. 78

s. 77

s. 79

Trade and Merchandise Marks Act, 1958

s. 92

Trade and Merchandise Marks Act, 1958

s. 78

s. 77

s. 79

s. 92

Marks Act, 1958

Section 92

Trade and Merchandise Marks Act, 1958

s. 92

s. 15

s. 92

s. 15

s. 15

Indian Merchandise Marks Act, 1889

s. 15

Indian Merchandise Marks Act, 1889

s. 15

Indian Merchandise Marks Act, 1889

s. 15

Indian Merchandise Marks Act, 1889

ss. 420, 482, 483 & 486

s. 15

Merchandise Marks Act, 1889

s. 15

s. 15

Merchandise Marks Act

s. 15

Section 15

Section 92

s. 92

s. 15

s. 15

s. 92

s. 92

s. 15

s. 92

Section 77


MIS. OM OIL & OILSEEDS EXCHANGE LTD., DELHI v.

TIIEIR WORKMEN

March 28, 1966

[ K. N. W ANCllOO, J. C. SHAH A!>'D S. M. SIKRI, JJ. J

Industrial Law-Retrenchment-Rule of "first come last oo".

When can be departed frcmi-Empl.oyees properly retrenched-Ccmi pensation payable.

The respondents (workmen of the appellant) raised on industrial dispute and pleaded before the Labour Court that the appellant's

action in retrenching some of its employees was mala fide, as the appellant did not follow the "first come, last go" rule. The appellant justified its action on the ground that the appellant had recorded valid reasons for departing from the rule. The reasons were that, one of the employees retained was the only pers0n capable of looking after the appellant's share work and court work, another was the only typ!st with the appellant, a third was the record keeper who alone knevl where the different types of records were kept, and the other two were peons who were retained as chowkidars because, there was no other person who could do that work. The Labour Court accepted the respondents' contention, ordered the reinstatement of those employees who were affected by the departure from the rule, and directed that thooe employees who were properly retrenched should be paid in additi0n to the retrenchment compensation under s. 25F of the Industrial Disputes Act, l!M7, which had been paid by the r.ppellant 50'1. of their wages as compensation till the date when the award became enforceable.

In appeal to this Court.

HELD: (i) The Labour Court was in error in inferring mala fl.des merely because the management departed from the rule of "firgt come, last go,"

Where other things are equal, the ordinary industrial rule has to be followed by the employer, but the rule is not immutable. It is for the management to ascertain who, on retrenchment, should be retained in the interests of the business, and the industrial tribunal will not interfere with the decision of the management, unless preferential treatment L' actuated by mala fides.

Preference given to the retained employees on the ground of mere experience may justify an inference of mala tides; but in the present case. the employees retained had, beside experience. special skill. or aptitude In the particular branch of the business of the appellant they were attending to, and the management had retained them because of that skill, or aptitude. [76 E-Fl 79B-E).

S1oadesamitran Ltd. v. Their Workmen, [1960] 3 S.C.R. 144 and J.K. Iron and Steel Company Ltd. v. Its Workmen. [1960} 2 LL.J. 64, referred to.

(ii) Where retrenchment has been properly made and that order has not been set aside, there is no justification for directing oayment oJ compensation to empoyees properly retrenched in addition to the retrenchment compens&tion statutorily payable.

[80 E].

-r'

-+-

,..

OM OIL v.a. WORKl!EN (Shah, J.}LT 76

-A CIVIL APPELLATE JURISDICITON: Civil Appeal No. 131of1966.

Appeal by special 1leave from the Award dated the September 10, 1965 of the Labour Court, Delhi, in I.D. No. 23 of 1965 .

M. C. Setavad, B. P. Maheshwari and M. S. Narasimhan, for the appellant..

Madan Mohan, for the respondents.

The Judgment of the Court was delivered by

Shah, J. The appellant is engaged in carrying on the business of regulating forward trade in groundnut oil and mustard-seed. and is recognised as an Exchange under the provisions of the Forward Contract Act, 1952. On June 1, 1964 the Government of India issued an order prohibiting trading in diverse commodities including groundnut oil and mustard-seed, and in consequence thereof no further business could be carried on through the appellant Exchange. On July 17, 1965 the appellant served notices of retrenchment upon 30 out of its 37 employees and paid thew salary for the period of notice and retrenchment compensuuon under s. 25F of the Industrial Disputes Act 14 of 1947. The workmen then raised an industrial dispute. Conciliation proceedings to solve the dispute having failed, the Delhi Administration referred to the Labour Court the dispute whether retrenchment of the workmen by the appellant was unjustified and illegal. The workmen pleaded that retrenchment "on the ground of the ban imposed on forward trading in groundnut oil and mustard-seed was mala fide" and that in retaining seven workmen the appellant did not follow, without any adequate ground, "the first come last go" rule, and on that account all the workmen were entitled to be reinstated with full wages from the date of determination of employment and with continuity of service. The appellant denied that in retrenchjng the workmen the management had acted mala fide, or tha.t retrenchment amounted to an unfair labour practice. The appellant further submitted that retrenchment of the workmen was not liable to be challenged, because some junior members of the staff were retained, since the Company had recorded in the resolution its reasons for departing from the rule "first come, last go'', and had

"adhered to the principles contained in s. 25F of the Industrial Disputes Act as far as possible".

At the hearing of the reference before the Labour Court, Delhi, counsel for the workmen conceded tha.t the appellant was justified in retrenching its employees and that the number of employees required to carry on the work after the imposition of a B ban against the business of the appellant could not exceed the number retained by the appellant. Counsel however contended that since the appellant fai!ed in effecting retrenchment of the workmen

SUPREJ{)! COURT REPORTS

[1966] SUPP, 8,0,1'..

to observe the principle of "first come, last go'.', the order in its entirety was illegal. The Labour Court accepted the contention of the workmen and held that departure from a principle which was part of the law relating to industrial employment rendered the retrenchment of all workmen unjustified and improper and on that account retrenchment of clerks and peons who were affected by the departure from the rule was "illegal and ma/a fide''.

In the view of the Labour Court, workmen Nos. 1 to 14 and 16 to 23 in Ext. W-1-the List of Seniority-were so affected. The Labour Court ordered that as the appellant required only four clerks including the Accountant R. N. Seth, the Accountant and three senior clerks Shiv Das Sharma, Kishan Lal Grover and Surinder Singh be retained, and that the senior clerks named be reinstated with full "back wages", subject to adjustment of compensation money paid to them against their salary. The Court also directed that clerks Nos. 4 to 14 be paid, in addition to the retrenchment compensation received by them "50 per cent of the wages as compensation for the period they remained in unempk>yment uptil the date when the award became enforceable", but they may not be reinstated, and that peons Tara Shanker and Om Prakash be reinstated with full wages and peons Nos. 18 to 23 in Ext. W-1 be paid in addition to the retrenchment compensation, "50 per cent of the wages they would have been entitled to." With special leave, the Company has appealed to this Court.

It is an accepted principle of industrial Jaw that in ordering retrenchment ordinarily the management should commence with the latest recruit, and progressively retrench employees higher up in the list of seniority. But the rule is not immutable, and for valid reasons may be departed from. It was observed by this Court in Swadesamitran Ltd. v. Their Workmen(') that if a case for retrenchment is made out, it would normally be for the employer to Jecide which of the employees should be retrenched; but there can be no doubt that the ordinary industrial rule of retrenchment is "first come, last go", and where other things are equal, this rule has to be followed by the employer in effecting retrenchment.

The question then is whether in departing from the rule, the management had acted ma/a fide, or that its action amounted to an unfair labour practice. The Tribunal has to determine in each case whether the management has in ordering retrenchment acted fairly and properly and not with any ulterior motive: it cannot assume from mere departure from the rule that the management was actuated by improper motives or that the management had acted in a manner amounting to an unfair labour practice. Nor has the Tribunal authority to sit in appeal over the decision of the management if for valid and justifiable reasons the management has departed from the rule that the senior employees may be retrenched before his junior in employment

~~~~~~~~~~~~~~~

(') [1960] I L.L.J. 6114.

11 •

A -·

OM OIL LTD. V. WORKMEN (Shah, J.) 77

The management of the appellant has recorded a resolution which sets out the reasons for retention of the employees Ram Lal Sethi, Jagdish Pershad, Kidar Nath Thukral, Om Prakash Juneja, Jai Narain, Budhpal Singh and Laljimal. About Ram Lal Sethi the Company has stated that he was looking "after the account~" and income-tax cases of the Company and he was the only Accountant in the service of the Company and the senior-most employee in the Accounts Section. The Labour Court has upheld his retention, and nothing more need be said about him.

J agdish Pershad was, it was stated, looking "after the share work, collection of building rent and court work and the realisation of rents" and that he was "in charge of the share work for the last many years".

The Labour Court was of the view that a clerk employed in general office duties may be styled as a general assistant, and that the posts of clerks are interchangeable and since clerks are not trained to handle any particular kind of work, the reasons given by the management for retaining this and other clerks cannot be accepted. However there was not in the employment of the Company any other clerk who could competently handle "share work" and attend to "court work". Clerical work ordinarily does not require specialisation and clerks may be transferred from one department to another without detriment to the business. But if a clerk has been working in a branch of the business and he is shown to possess special aptitude for a particular duty, performance of which requires application and experience, the management may in the interests of the business while retrenching others retain him even if he is junior to others. The rule of "first come, fast go" is intended to secure an equitable trea, trnent to the employees when, having regard to the exigencies of the business, it is necessary to retrench some employees. But in the application of the rule the interests of the business cannot be overlooked. The rule has to be applied where other things are equal. The management of the business must act fairly to the employees, where however the management bona fide retains staff possessing special aptitude in the interests of the business, it cannot be assumed to have acted unfairly merely because the rule "first come, last go" is 'not observed. If retention of a clerical employee is regarded as necessary by the management in the interests of the business, that opinion cannot be discarded merely on the ground that the clerk concerned is not the seniormost. There is nothing on the record to show that there was, among the senior employees, a clerk possessing the aptitude which Jagdish Pershad possessed. Kidar Nath Thakural was doing "typing work" and he was retained because he was the only typist with the Company. Our attention has not been invited to any evidence that there were other typists who were senior to him and they had been retrenched. A typist is undoubtedly a clerk in a business concern, but tha, t does not mean that every clerk, unless specially trained, can become a competent typist. Om Prakash Juneja was

SUPREME COURT REPORTS fl 966} SUPP. 8.C, R

retained because he was looking after the records of the Company and was "fully conversant as to where different type of records" were ".lying", and that this employee was doing the work sa.tis

factorily. A record-keeper's work in a business cannot be perform ed efficiently without special training or long experience. It would be difficult to hold that in retrenching employees, if the management retains an efficient record-keeper in preference to a senior clerk who has no training or experience in record-keeping, the managment acts ma/a fide or improperly, or perpetrates an unfair labour practice.

The Labour Court was of the view that retention of junior clerks in service could not be sustained on the ground that they had gained experience in a particular branch of clerical work. To accept that ground of preference, observed the Labour Court, was to destroy the rule "first come, last go" itself, since clerks are not specially trained to handle only a particular kind of work, and their work is easily convertible and one can replace another without dislocation in the department. For ordinary clerical work this is undoubted1y true, but even among the clerical staff if a degree oft specialisation is necessary for discharging clerical duties efficiently retention of a junior clerk on the ground that the duty performed by him requires experience, and aptitude, will not expose the management to a charge of ma/a fide. or perpetration of an unfair labour practice.

It was submitted than in J. K. Iron and Steel Company Ltd. v.

Its workmen(') this Court has he'd that in the matter of 1etrench ment of clerical staff. departure from the rule "first come, last go" may not be recognised when it is sought to be justified on the ground that the workman retained has experience of a particular branch of the clerical work, and reliance was placed upon the following observations of Subba Rao, J.

"But if the preferential treatment given to juniors ignores the well recognized principle in the industrial law that the "first come. last go" without any acceptable "or sound reasoning, a tribunal or an adjudicator will be well justified to hold that the action of the management is not bona fide .... In regard to the clerks. what is the ground of preference given by the management? It is said that junior clerks. who were retained, have experience in a particular branch of clerical work. To accept thLq ground of preference without more is to destroy the prin ciple itself. It may be that the clerks entrusted with such works may continu e to do the same work till a readjust ment of the work is made. There is no particular or scientific skill required in one class of work rather than ; n another. Clerks are not specially trained to handle

(') {1"60) 2 L.L.J. r.4.

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OM OIL LTD. V, WORKMEN (8/tah, J.) 79

A only a particular kind of work. Their work is easio/ con vertible and one can replace another without any dislocation in the department."

But the judgment does not enunciate a different principle. Ordinarily it is for the management to ascertain who on retrenchment should be retained in the interests of the business and the lndustrial Tribunal will not interfere with the decision of the management, unless preferential treatment is actuated by mala fides.

Where those retrenched and those retained are doing substantially the same kind of work and no special skill or aptitude is required for doing the work which the retained clerk is doing, preference given to the retained clerk on the ground that he has some experience in the branch may justifiably raise an inference of mala fides. Apparently in J.K. Tron and Steel Company's case,(') the work required to be done by the clerks retained needed no special aptitude, and the clerks retrenched could as well do the work which was done by the clerk retained. It was in those circumstances that the Court held that mere experience in a particular branch requiring no special aptitude was not sufficient to justify departure from the rule "first come, last go".

In the present case the four clerks retained had, beside experience, special skill and aptitude in the paricular branch of the business of the appellant they were attending to, and the management had retained them 'because of that skill or aptitude. The Labour Court inferred mala fides merely because the management departed from the rule "first come, last go". Whether the management in departing from the rule has acted mala fide, must depend upon the crcumstances of the case : it cannot be inferred merely from departure from the rule.

We may turn to the cases of the three peons, Jai Narain, Budhpal Singh Laljimal. Retent!ion of Jai Narain has been upheld by the Labour Court and nothing more need be said about him. The other two peons are Budhpal Singh and Laljimal who were working as chowkidars. They are said to be "the senior-most chowkidars'', and there is no evidence to show that there were in the employment of the Company other persons who could have worked as chowkidars. Peons Budhpal Singh and Laljimal were retained because they were the "senior-most chowkidars". Retention of the "senior-most chowkidars" would not be interfered with by the Tribunal in the absence of clear proof of ma/a fides.

It cannot be assumed without more that every peon can do the work of a chowkidar. The management may ordinarily require the chowkidar to possess good physique and ability to maintain watch over the building and its assets. There is no evidence that the two peons Tara Shanker and Om Prakash had ever worked as chowkidars or were suitable for work as chowkidars. The order

(') [1960] 2 L.L.J. 04.

80 BUPllKIUI COURT RF.PORTS

(1966] SUPP. ~.C.11.

of reinstatement of Tara Shanker and Om Prak.ash will stand vacated.

The second part of the order directing that clerks from Nos. 4 to 14 and peons from Nos. 18 to 23 in the seniority list, shall be entitled in addition to the retrenchment compensation already paid to them 50 per cent of the wages as compensation for the period they remained unemployed is wholly indefensible.

These employees had been properly retrenched: that was conceded before the Labour Court. It was also conceded that for carrying on the business of the appellant after imposition or the ban by the Central Government, not more than seven employees were required. If the management was entitled to retrench 30 workmen and did so after paying wages for the period of notice and retrenchment compensation, we fail to appreciate the grounds on which an order for payment of 50 per cent of the wages in addition to retrenchment compensation may be made. Retrenchment compensation is paid as solatium for termination of service resulting in unemployment and if that compensation be paid there can be no ground for awarding compensation in addition to statutory retrenchment compensation. If the Industrial Tribunal comes to the conclusion that an order of retrenchment was not properly made and the Tribunal directs reinstatement. an order for payment of remuneration for the period during which the employee remained unemployed, or a part thereof may appropriately be made. That is because the employee who had been retrenched for no fault of his had been improperly kept out of employment, and was prevented from earning his wages. But where retrenchment has been properly made and that order has not been set aside, we are not aware of any principle which may justify an order directing pay. ment of compensation to employees proper.ly retrenched in addi tion to the retrenchment compensation statutorily payable.

The appeal is therefore allowed and the a.ward made by the Labour Court is substituted by the following award:

"That retrenchment of the workmen was not unjustified or illegal and the workmen are not entitled to any relief'.

In the circumstances of the case, there will be no order as to costs.

Appeal allowed.

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M/S. OM OIL & OILSEEDS EXCHANGE LTD., DELHI

C. SHAH A!>'D S. M. SIKRI, JJ.

s. 25F

Industrial Disputes Act

[1960] 3 S.C.R. 144

s. 25F

Industrial Disputes Act

s. 25F

Industrial Disputes Act