WORKMEN OF SHRI RANGAVILAS :\IOTORS (Pl LTD.

& ANR.

SHRI RANGAVILAS MOTORS (PJ LTD. AND ORS.

February I, 1967 [M. H!DAYATULLAH, s. M. S!KRI AND c. A.

YAIDIALl~GAM, JJ.]

/ltdustrial Disputes Act (14 of 1947), s. 10(1) (c) and (d) prol'/sO (I) "Afitcted", if means "inttrested''-Order of reference-Whe1lier should s!ale why reference was niade to U1bour ('our1--:'Appropria:e GJ1rrn .. nrent," tut for deciding,

The second appellant was a \\'Orkman in the "~)rk., hop of ihc Jir-; t res- C pondent company in its Bangalore branch in the Mysore S1a10.

The head office of the Company at Krishnagiri, in the Madras State, transferred him to Krishnagiri, contrary to the agreemeru that he would not be transferred from Rangalore for ten years.

On the workman raising objections, !he Company removed him from service.

The Krishnagiri Motor Workers' Union, a oiajority of whose members numbering more than unc hundrcJ were employees of the Company, took u~ the workman's grievance, ond

the Government of Mvsore referred the rndus'rial dispute to the Labour D Court under a. IO(l)(c) of the Industrial Disputes Act, 1947.

One of the qustions referred was : whether the order of :ransfer wus illegal and if so, whether the workman was entitled to "reinstatement in the Banga lore branch with benefits of back wages".

The Labour Court ordered the reinstatement of th¢ workman in the Bangalore branch.

The Com pany challenged the award by a writ petition in the High Court.

The High Court while holding that the Mysore Government was the appro- E priate Government to make the reference, quashed the award on the grounds : (1) that the legality of the removal of the workman was not the subject matter of reference, and

(2) that the reference to the Labour Court could not be justified under s. IO(l)(c), b..:ause the dispute fell within the Third and not the Second Schedule to the Act; nor under the first proviso to s. IO(l)(d), because, the Government did not act under that proviso, and because, more than one hundred persons were interested in and the.refore likely to be affected by the dispute.

In appeal to this Court, the Company sought to support the judgment of the High Court also on the ground that the My; ore Government was not the appropriate Government to make the reference.

HELD : (I) The legality of the termination of the service of the workman wa• included in the order of reference. (532 D-E]

The words "with benefit of hack wages" coupled with the word "re G ins1atement" a .. e <1.ppropriate only to a case of removal. ()n the facls of the cac:; e, the transfer of the workman v.as illegal and so, his removal from senice should be set aside and he should be reinstated with benefits of back wa¥cs. [532 F-0)

(2) The reference to the Labour Court was valid under the first pro viso to s. IO(l)(d). (533 HJ

(a) High Court misinterpreted t~ proviso hy equating the two words interested and affected.

The members of the Union which sponsored the cnu•e of the workman were in1'rtsted in the dispute, but they would not necesserily be affected by the dispute. [533 F-0) "

(b) It is not necessary that the order of reference should expressly

stale that it was because of the proviso that the reference was being made to the Labour Court. If it could be justified on the facts, there is nothing in the Act which makes such a reference invalid. (533 B-FJ

(3) The Mysore Government was the appropriate Government to make the reference, because, the subject matter of the dispute substantially arose within the jurisdiction of the Mvsore Government. (534 HJ The proper question to raise is : where did the dispute arise and not where was the dispute sponsored : that is, whether there is a nexus between the dispute and the territory of the State making the reference.

Ordinarily, if there is a separate establishment and the workman is working in that establishment, the dispute would arise at that place. [534 A- B] Indian Cubie Co. Ltd. v. Its Workmen, [1962) Supp. 3 S.C.R. 589, followed.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1065 of 1965.

Appeal by special leave from the judgment and order dated February 27, 1963 of the Mysore High Court in Writ Petition No. 1096 of 1961.

M. K. Ramamurthi, for the appellants.

O. P. Malhotra, P. C. Bhathari and O. C. Mathur, for respondent No. I.

Te Judgment of the Court was delivered by

Slkri, J, This appeal by special leave is directed against the judgment of the Mysore High Court in Writ Petition No. 1096 of 1961 by which the High Court allowed the Writ Petition and quashed the impugned award dated June 30, 1961, made by the Labour Court, Bangalore, in Reference No. 51 of 1960. Jn order to appreciate the points raised before us it is necessary to give the relevant facts.

The second appellant before us, R. Mahalingam, was engaged as a Foreman in the workshop of Sri Rangavilas Motors (P) Ltd., the first respondent, hereinafter referred to as the Company, in the month of April, 1956. By an order dated January 21, 1960, Mahalingam was transferred from Bangalore to Krishnagiri where the head office of the Company is situated. Mahalingam entered into correspondence with the Company alleging that according to the conditions of his employment he could not be transferred from Bang!\lore to Krishnagiri. Ultimately, the Company framed charges against Mahalingam and removed him from service by an order dated April 7, 1960.

On April 8, 1960, Mahalingam complained in writing to the Assistant Commissioner of Labour who was functioning as "the Conciliation Officer at Bangalore. Later on; one Selvaraj took part in the conciliation proceedings on the authority of the resolution dated July 21, 1960, pa8'ed at the General Body

530 SUPRBMB roURT llBPORTS

(1967] 2 S.C.R.

meeting of Krishnagiri Motor Workers' Union, among whose members 112 out of 170 were employees of the Company. Selvaraj filed a statement of claims before the Conciliation Officer on September I, 1960. The Conciliation Officer reported to the Government that the conciliation proceedings had failed, and thereupon the State Government by its order dated N ovembcr I, 1960, made in exercise of the powers conferred by cl. (c) of sub-s.

(I) of s. 10 of the Industrial Disputes Act, 1947 (XIV of 1947)-hereinafter referred to as the Act-referred for adjudication by the Labour Court, Bangalore, the following points in dispute :-

"I. Whether the order of the management of Sri Rangavilas Motor (Private) Ltd., in transferring the workman Sri R. Mahalingam, Foreman, from their branch at Fort, Bangalore, to Krishnagiri, is illegal or uajustificd. If so, is the workman entitled to reinstatement in Bangalore

Branch with benefits of back wages or to any other relief ?

2. Is Sri R. Mahalingam, Foreman, entitled to arrears of increments and overtime wages, if so, what is the amount he is entitled to ?

Selvaraj, inter alia. prayed in his statement of claims, filed on behalf of Mahalingam, as follows :- ..... .it is prayed that the Hon'ble Court may be pleased to direct the second party (the Company) to cause the payment of overtime wages due, increments due (as mentioned in the annexurc to this statement) as also the arrears of wages from 1-2-60 to 15-3-1960 and order payment of back wages with effect from the date of termination of service by setting aside the said order of termination and to reinstate the workman with continuity of

service."

The Company, in reply, contended that the reference was limited only to the question of transfer, and hence no question of reinstatement or back wages could be adjud'.cated upon. Further, the Company contended that the reference was bad because it did not fall under any of the items enumerated in the Second Schedule to the Act. It was also contended that the dispute was an individual

dispute. One further objection was raised to the effect that the reference should have been made to the National Tribunal and not to the Labour Court.

The Labour Court overruled all the objedons regarding jurisdiction raised by the Company and made the award holding that both the transfer as well as the removal from service of Mahalingam were illegal and that he was entitled to overtime wages as well as

increments. The Labour Court made the following further direction: -

"The workman Sri Mahalingam should be reinstated in Bangalore branch with full back wages in continuity of the past service and with same emoluments. The second party should also pay the arrears of Rs. 4629 /27 towards the overtime wages and as well as the increments due Rs. 384". (sic.)

As stated above, the company filed a writ petition challenging the award. The High Court formulated the points which arose out of the arguments addressed before it thus :-

"J. Whether the dispute referred by the State Go vernment to the Labour Court is an industrial dispute ?

2. If it is such a dispute-

(a) Whether the State Government of Mysore was not the appropriate Government to make the reference 7 and

(b) Whether the reference should. have been made by the Central Government to a National Tribunal 7

3.: Whether any dispute relating to the termination of the ser\iice of the fourth respondent is included in the order of reference ?

4. Whether the points. of dispute actually referred fall within the scope of the items enumerated in the second Schedule of the Industrial Disputes Act and are therefore within the competence of the Labour Court 7

5. Whethet on the question of transfer there was any dispute at all for adjudication ?"

On the first point the High Court, agreeing with the Labour Court, held that on the facts what was originally an individual grievance of Mahalingam did assume at the time the reference was made bythe G()vernment the character of anindustrial dispute.

On the first part of the second point, the High Court held that the State Government of Mysore was the appropriate Government to make the reference. On the second part it held that it was for tl).e Central Government to decide to refer or not to refer the dispute but the State Government which is the appropriate Government in relation to the dispute does not Jose its power of making a reference.

On the third point the High Court held that the question of legality or otherwise of the Company's action in removing Maha- Iingam from service was not the subject-matter of reference to the M2 Sup. CI/67-5

SUPREME COURT REPORTS

(1967] 2 S.C.R.

Labour Court and its award to the extent it dealt with that topic was without jurisdiction.

On the fourth point, the High Court held that the first proviso to cl. (d) to s. 10 (I) of the Act did not apply and that the dispute relating to increments and overtime wages was beyond the juris diction of the Labour Court and could not have been validly referred to it. It also held that the dispute regarding transfer was included in the expression "rules of discipline" enumerated as item 8 of the Third Schedule and was therefore not within the competence of the

Labour Court to adjudicate upon.

In view of these findings the Award was quashed. Regarding point No. 5 formulated by it, the High Court observed that it was unnecessary to examine that point, but as the matter had been argued at some length, the High Court stated. its opinion thereon.

In its opinion, there was no scope for making the order of transfer the subject-matter of any dispute.

The same points that were formulated by the High Court were argued before us.

Mr. R.amamurti, appearing on behalf of the appellants, urged regarding point No. 3 that on its true interpretation the order of reference was quite clear and that the question of ter mination of services of Mahatingam was included in the order of reference. We have already reproduced the order of reference and, in our opinion, there is force in what Mr. Ramamurti urges.

It seems to us that the order of referenC:e is quite clear if regard is had to the words "reinstatement in Bangalore branch with benefits of back wages." If the words "with benefits of back wages" are not considered, and with respect, the High Court did not consider them, the High Court's conclusion might possibly be justified. It seems to us that by the time the reference came to be made everybody knew that Mahalingam had been removed from service.

The words "with benefits of back wages" coupled with the word "re-instatement" are appropriate only to a case of removal and not to a case of transfer. On the facts of this case it is quite clear that the contention of Mahalingam was that the transfer was illegal and if the transfer was illegal, his removal from service would fall.automatically with the finding that the transfer was illegal, and one of the appropriate reliefs that would be given would be re-instatement in the Bangalore Branch with benefits of back wages. In our view it is beca~ of the above considerntions that the word "removal'' was not expressly mentioned. In this connection the High Court relied on the pr')- visions of s. 10(4) of the Act which reads as under :-

" 10(4) Where in an order referring an industrial dispute to a Labour Court, Tribunal or National Tribunal under this section or in a subsequent order, the appropriate Government has specified the points of dispute for adjudi

cation, the Labour Court or the Tribunal or the National

A Tribunal, as the case may be, shall confine its adjudication to those points and matters inidental th ereto."

We are unable to appreciate how this sub-section has any relevance to the question of construction of the order of reference made bv the Government. It is true that the points in dispute must be specified, but the point with which we are concerned is, whether as a matter of construction the point in dispute has been specified or not, and according to us the dispute regarding removal has been specified.

Regarding the fourth point, with respect, the High Court misinterpreted the first proviso to cl. (d) to s. 10(1). This proviso reads as follows :-

"Provided that where the dispute relates to any matter specified in the Third Schedule and is not likely to affect more than one hundred workmen, the appropriate Go vernment 111ay, if it so thinks fit, make the reference to a Labour Court under clause (c);"

The High Court negative the plea of Mahalingam on two grounds: First that there is nothing either in the order of reference or in any other material placed before it to indicate that the Goverfllllent have applied their mind to the applicability of the proviso to the facts of this case or have actually acted pursuant to the proviso in making the references to the Labour Court and secondly, that there can be no doubt that more than one hundred persons are interested in and are therefore likely to be affected by the dispute in question. In our view it is not necessary that the order of reference should expressly state that it is because of the proviso that a reference is being made to the Labour Court, and if the reference can be justified on the facts, there is nothing in the Act which makes such a reference invalid. The second reason given by the High Court, with respect is erront:ous because it seems to have equated the words "interested' and "affected". It would be noticed that s. IO(lA) uses both the words "interested" or "affected". Section 10(5} also uses both the words "interested" or "affected". It seems to us that there is a difference in the import of the words "interested" or "affected".

The Union which sponsors the cause of an individual workman is interested in -the dispute but the workmen who are the members of the Union are not necessarily affected by the dispute.

The dispute in this case was regarding the validity of the transfer and consequent removal of the appellant. The other workmen would naturally be interested it; i the dispute but they are not affected by this dispute.

In our opinion, the High Court erred in holding that the first proviso to s. 10(1 )( d) did not apply to the facts of this. case. In view of our decision on this point, it is not necessary to go into the question whether the points in dispute fell within the second or the third

Schedule to the Act.

534 SUPREME COURT llEPOllTS

(1967] 2 S.C.R.

Therefore, the appeal must succeed unless the Company can satisfy us that the points decided against it should have been decided in its favour.

This takes us to the other points. Mr.

0. P. Malhotra strongly urges that the State Government of Mysore was not the appropriate Government to make the reference.

He says that although the dispute started at Bangalore, the resolution sponsoring this dispute was passed in K.rishnagiri, and, that the proper test to be applied in the case of individual disputes is where the dispute has been sponsored. It seems to us that on the facts of this case it is clear that there was a separate establishment at Bangalore and Mahalingam was working there.

There were a number of other workmen working in this place. The order of transfer, it is true, was made in Krishnagiri at the head office, but the order was to operate on a workmar. working in Bangalore. In our view the High Court was right in holding that the proper question to raise is : where did the dispute arise ?

Ordinarily, if there is a separate establishment and the workman is working in that establishment, the dispute would arise at that place. As the High Court observed, there should clearly be some nexus between the dispute and the territory of the State and not necessarily between the territory of the State and the industry concerning which the dispute arose. This Court in Indian Cable Co. Ltd. v. Its Workmen(') held as follows :

"The Act contained no provisions bearing on this question, which must, consequently, be decided on the principles governing the jurisdiction of Courts to entertain actions or proceedings. Dealing with a similar question under the provisions of the Bombay Industrial Relations Act, 1946, Chagla, C. J ., observed in Lalbhai Trimm la I Mills Ltd. v. Vin and Others (1956] I L.L.J. 557, 558 : 'But what we are concerned with to decide is: where did the dispute substantially arise ? Now, the Act does not deal with the cause of action, nor does it indicate what factors will confer jurisdiction upon the labour court. But applying the well-known tests of jurisdiction, a Court or Tribunal would have jurisdiction if the parties reside within jurisdiction or if the subject-matter of the dispute substantially arises within jurisdiction.' In our opinion, those principles are applicable for deciding which of the States has jurisdiction to make a reference under s. JO of the Act".

Applying the above principles to the facts of this case it is quite clear that the subject-matter of the dispute in this case substantially arose within the jurisdiction of the Mysore Government.

(l) (1962] Supp. 3 S.C.R. 589 : (1962] I L.L.J. 409.

A Mr.

Malhot:a further urges that the High Court erred in holding that it was an industrial dispute. We see no force in this contention. The High Court rightly observed that once the findings of fact recorded by the Labour Court are accepted, there is no doubt in faw that in the circumstances of this case, what was originally an individual grievance of Mahalingam did assume, B at tb.e time the reference was made by the Government, the character of an industrial dispute.

Mr. Malhotra urges that the finding of the Labour Court that the transfer was illegal was perverse. It is not necessary to go into this question because once it is held that there is an agreement between the Company and' Mahalingam that he could not be C transferred from Bangalore, the transfer would be bad. The Labour Court had observed that one of the terms ofagreement was that the Company had agreed not to transfer Mahalingam to any place out of Bangalore for a period of ten years; the Company had t\ansferred Mahalingam from Bangalore to the head office at Krishnagiri and this action of the Company was in contravention of D the terms of the agreement.

Then Mr. Malhotra tried to urge the fifth point formulated by the High Court. This point was not taken before the Labour.

Court and we did not allow him to raise this point.

In the result the appeal is allowed, judgment of the High Court set aside and the Award of the Labour Court restored. The appellant will have his costs here and in the High Court.

V.P.S.

Appeal allowed •

WORKMEN OF SHRI RANGAVILAS MOTORS (P) LTD. & ANR

RANGAVILAS MOTORS (PJ LTD. AND ORS

s. 10(1)

Mysore

Krishnagiri

Rangalore

Krishnagiri Motor Workers' Union

Government of Mvsore

Industrial Disputes Act, 1947

Banga

Bangalore

Mysore Government

Second Schedule

Mvsore Government

CIVIL APPELLATE JURISDICTION

M. K. Ramamurthi

O. P. Malhotra

P. C. Bhathari

O. C. Mathur

Slkri

R. Mahalingam

Rangavilas Motors (P) Ltd.

Mahalingam

April 7, 1960

April 8, 1960

Selvaraj

s. 10

Industrial Disputes Act, 1947

Labour Court, Bangalore

Rangavilas Motor (Private) Ltd.

R. Mahalingam

Second Schedule

State Government of Mysore

Central Government

Schedule of the Industrial Disputes Act

Maha- Iingam

s. 10

Third Schedule

R.amamurti

Mahatingam

Ramamurti

s. 10(4)

s. 10(1)

Third Schedule

P. Malhotra

K.rishnagiri

Krishnagiri

Chagla

Malhot

Malhotra


PRll'AM SINGH CHAHIL A

STATE OF PUNJAB AND ORS.

February I, 1967

[K. SueBA RAO, C.J., J. C. SHAH, J.M. SHELAT, B

V. BHARGAVA AND G. K. MITTER, JJ.)

Pt/ml Tenancy and Agricultural Lands Act, 1955, as amended by Act XV of 1956 and Act Ill of 1959, s. 32FF-CeUlng fixed on land under penoNd Cllltlvallon of lt:ndlwkhr-Transfers to cerlaJn re/aJioru to be ignored for purpose of ceiling-Such relalions enumerated by r. 2JA framed JUUkr the Act by Guvernmen1-Validity of s. 32FF-Whedter C ruUen from excessive de/egatlon--Rlght under Art.. 31A, 2nd proviso, Coutltutl<NI of lntJia, whether affected.

The petitioner owned certain land in the ellltwbilc State of Pepsu. Afur August 21,, 1956 he transferred one half of the •aid land in favour of his wife. Aft.er this transfer the land remaining in the hands of the petitiooer was less than the ceiling of 30 standard acres prescribed by the Pepsu Tenancy and Agrieultural Lands Act, 1955 as ameodod by Act XV of D

1956. However by s. 32FF introduced into the above Act by Act III of 1959 it was laid down that transfers of land after August 21, 1956 to certain relations (to be named by the State Government) were Dot to affect the rislit of the State Oovemmeot under the Act to the surplus area to which it would be eniitled but for such transfer or disposition. By r. 23A framed under the Act the State Guvcmment prescnbed the relations. Relying UpM s, 32FF and r. 23A the Special Colll:ctor, Chandigarh illduded in the total area held by the petitioner the land transferred by him in i: favour of bis wife and served on him ,. draft statement holdin, g that a certain e><teot of hi• land was surplus area. The petitioner filed a petition under Art. 32 of the' Constitution challenging the Special Collector's order and lbe validity of the Act, It wu urged in support of the petition that : (i) By adding the land ttalllferred to certain relations to the land held by a person UDder bis personal cultivation for the purpose of determining the celling and the F aurplus area a. 32FF of the Act and r. 23 of the rules made thereunder contravened Art. 3 IA, 2nd proviso; (ii) The legislature without enumerating the relations or indicating some principles for ascertaining the relations abdicated its legislative function and delegated it to the State Government to presc:n'be the relations and therefore s. 32FF was void; (iii) The rules &=."~ for fixing compensation for the land acquired were ullro vius

they did not lake into account the current valUe of the cronraised thereon; and the Stale therefore was interfering with the petitioner'> G riglit lo the land, unsupp<.'rted by law.

HEID : (i) Section 32FP was enccted in order to prevent transfec of land to relations with a view to evading the provisions of the 1956 Act which imposed a ceiling on the land under the personal cultivalioo of the landholder.

The Legislature certainly is competent to make such a law.

The validity of such a provision may perhaps be questioned under certain H circumstances on the ground that it is an unreasonable restriction within the meaning of Art. 19(2) of the Constitution. But that was not open to the petitioner as the amending Act giving retrospective operation relale' to an 'estate'. Therefore Art. 31A operates dS a bar against raising any such

.H ..

question.

Section 32FF is therefore valid and as the land acquired in the preaent case was admittedly above the ceiling, the second proviso to Art. 31 had no application. [541 A-DJ

(ii) From the mere fact that the enumeration of relations for the purpose of s. 32FF is left to the State Government it cannot be &aid that the Legislature had abdicated its function.

It has clearly laid down the policy and on :be basis of that policy enumeration can easily be worked out. Tho expression 'relation' is comprehensive and has a local significance.

The relatives must be such as those in whose favour benami tn111.-ac1ions are usually entered into or those whose benefit is indirectly the benefit of the lrallsferor himself. It is such relations who are men boned lo r. 23A allhough tho mention of sisters has been omitted by mistake.

[541 B- O]

(iii) The validity of the rules prescribed for fixing compensation could not be decided by the Court for want of relevant materials qn the record. [S4S Hl

OiuOINAL JURISDICTION : Writ t>etition No. 110 of 1966.

Petition under Art. 32 of the Constitution of India for enforcement of fundamental rights.

K. P. Bhandari and R. Gqpa/akrishnan, for the petitioner.

Gopal Singh and R. N. Sachthey, for respondents Nos. I and 3.

R. N. Sachthey, for respondent No. 2.

The Judgment of the Court was delivered by SubbaRao, C.J, This is a petition under Art. 32 oftheConstitutioir of India for a declaration that the provisions of Sections 32A, 320, 32E, 32FF and 32G of the Pepsu Tenancy and Agricultural Lahds Act, 1955, as amended by Act XV of 1956, hereinafter called the Act, are illegal, ultra vires and unconstitutional and for a declaration that the provisions of Rule 28 of the Pepsu Tenancy and Agricultural Lands Rules, 1958, hereinafter called tbe Rules, are illegal and void, and for restraining the respondents from dispossessing the petitioner from his land under the provision& thereof.

The facts may b"e briefly stated : The petitioner owned land measuring abo11t 284 bighas situated in village Narinderpura. In the year 1956 he transferred one half of the said land in favour of his wife Shrimati Charanjeei Kaur. Excluding the land so transferred, the land remaining. in the hands of the petitioner is admittedly below the ceiling prescribed under the Act. On October 30, 1956; Act XV of 1956 was passed by the Legislature of the Patiala and East Punjab Union. It amended the Pepsu Tenancy and Agricultural Lands Act, 1955. By the amendment Chapter 4-A wa& added to the earlier Act and also a ceiling was imposed on land under personal cultivation. The petitioner is admittedly in personal cultivation of his land, which, excluding that sold to his wife, is below the ceiling prescribed under the Act.

On January 14, 1959 the Punjab Legilature passed Pepsu Tenancy and Agricultural Land (Amendment) Act, 1959, (Act III of 1959).

Under the said amending Act, no transfer or other disposition of land effected after August 21, 1956, except in favour of persons mentioned thereunder, shall affect the right of the State Government under the Act to the surplus area to which it would be entitled but for such transfer or disposition. Relying upon that section and including in the total area held by the petitioner the land transferred by him in favour of his wife, the Special Collector, Chandigarh, on May 31, 1962, served a draft statement on the petitioner holding that certain extent of land was surplus area. The petitioner, questioning the order of the Collector on various grounds, filed this petition for the enforcement of his fundamental rights.

The learned counsel for the petitioner raised before us the following three points : (I) The provisions of ss. 32A, 320, 32E, 32FF, 32G and 32P of the Act are inconsistent with the second proviso to Art. 31A of the Constitution; (2) the provisions ofs. 32FF, read with r. 23A of the Rules, amount to delegation of legislative. power; and (3) the provisions of r. 28 of the Rules are inconsistent with the provisions of s. 32G of the Act and therefore Art. 31A is not a bar against the enforcement of the petitioner's fundamental right under Aru.. 19, 13(2) and 14 of the Constitution.

To appreciate the scope of the first question it is necessary to read the relevant provisions of the Acts and the Constitution. The second proviso to Art. 31-A of the Constitution reads:

"Provided that where any law makes any provision for the acquisition by the State of any estate and" where any land comprised therein is held by a person under his personal cultivation, it shall not be lawful for the State to acquire any portion of such land as is within the ceiling limit applicable to him under any law for the time being in force . . . unless the law relating to the acquisition of such land . . . . . . provides for payment of compensation at a rate which shall not be less than the market value thereof."

Section 3 of Pepsu Tenancy and Agricultural Lands Act, 1955 as amended by Act XV of 1956 provides :.

"Permissible limit for the purpose of this Act is thirty standard acres of land and where such thirty standard acres on being converted into ordinary acres exceed eighty acres, such eighty acres :

Section 32-A provides : "Notwithstanding anything to the contrary in any law, custom, usage or agreement, no person shall be

entitled to own or hold as landowner or tenant land under his persona\ cultivation within he State which exceeds in the aggregate the permissible limits."

Section 32-E provides : "Notwithstanding anything to the contrary contained in any law, custom or usage for the time being in force, and subject to the provisions of Chapter IV, after the date on which the final statement in respect of a landowner. or tenant is published in the Official Gazette, then-

(a) in the case of the surplus area of the landowner . . . . . . . . which is not included within the permissible limits of the landowner, such area shall on the date on which possession thereof is taken by or on behalf of the State Government be deemed to have been acquired by the State Government for a public purpose and all rights; title and interest, of all persons in such land shall be e11tinguished, and such rights, title and interest shall vest in the State Government free from encumbrances created by any person".

Section 32FF inserted by the Punjab Act III of 1955 reads as under :

"Save in the i; ase of land acquired by the State Government under any law for the time being in force or by an heir by inheritance held by a small landowner not being a relation as prescribed of the person making the transfer or disposition of land, for consideration up to an area which with or without the area owned or held by him does not in aggregate exceed the. permissible limit, no transfer or other disposition of land effected after 21st August, 1956, shall affect the right of the State Government under this Act to the surplus area to which it would be entitled but for such transfer or disposition".

Rule 23A of Jhe Rules of Pepsu Tenancy and Agricultural Lands Rules, 1958 reads as under :

"For the purposes of s. 32FF of the Act, the prescribed relations shall be the wife or husband, male or female descendants and the descendants of such female, father, mother, father's or mother's sister, brother and his descendants, mother's brother and his descendants, wife's brother and sister's husband." The gist of the said provisions may be stated thus: No person shall be entitled to own or hold as landowner or tenant land under his .personal cultivation exceeding the permissible limit, that is, thirty standard acres. Any land in excess of the permissible limit

vests in the State.

Under Act 111 of 1959, the Act was amended and for the purposes of ascertaining the surplus land, the land transferred after August 21, 1956, in favour of the persons mentioned in r. 23A was added to his land and if the total thereof was above the permissible area, the surplus would vest in the State Government. To put it differently, the said transfer is ignored and the surplus area is ascertained. In the instant case if the transfer by the petitioner in favour of his wife is not ignored, the petitioner's land would be within the permissible area. But if ignored it would be above that area. Admittedly also under the provisions of the Act, compensation payable in respect of the surplus area is not its market value but that ascertained in the manner prescribed by the Act and the Rules made thereunder. Under the second proviso to Art. 3 IA of the Constitution, if the State acquires any portion of land which is within the ceiling limits, it shall pay compensation at a rate which shall not be less than the market value thereof.

Learned counsel for the petitioner contends that s. 3:2FF, inserted by Punjab Act Ill of 1959, whereunder land validly transferred after August 21, 1956, is added to the transferor's land for the purposes of ascertaining the ceiling offends the second proviso to Art. 31A. It is argued that while under the said second proviso a person is entitled to market value in respect of the land below the ceiling acquired from him, s. 32FF by a fiction statutorily raises the ceiling. The answer to the question raised depends upon the constitutional validity of s. 32FF of the Act. It is not disputed that the Parliament can make an Act in respect of the matters within its purview either prospectively or retrospectively. It is a well known legislative device to put an earlier date in order to prevent the evasion of an impending statute. It appears that on August 13, 1956, the Pepsu Tenancy and Agricultural Second Amendment Bill, 1956 was published in Pepsu Gaz.ette Extraordinary fixing the permissible limits of a landholder an.d introducing some provisions against the eviction of tenant in possession of lands above the said limits. The statement of objects and reasons reads thus :

"The necessity for introducing certain agrarian reforms particularly with a view to protecting the tenants against eviction and fixing for allottees a higher limit for reservation of land for personal cultivation was being felt for some time past. This bill seeks to achieve the object by amending the Pepsu Tenancy and Agricultural Lands Act,

1955."

The proposal to introduce the said bill must have caused appre hension in the minds of the landowners that they would lose the lands above the permissible area and naturally they must have transferred their lands in favour of their relatives. Section 32FF

D - .;,, t,.

G '

was added to frustrate such devices and to make the enforcement of the Act really effective. Under the said section such a transfer made after August 21, 1956, shall not affect the rights of the State Government under the Act to the surplus area to which it would be entitled but for such transfer.

Between the transferor and the transferee the transfer would be good, but it would not be effective against the State Government. That_is to say for ascertaining the surplus area the land transferred would be included in the transferor's land. Out of the total extent, the land above the ceiling, that is the permissible limit, would be the surplus land. The Legislature certainly is competent to make such a law. The validity of such a provision may perhaps be questioned under certain circumstances on the ground that it is an unreasonable restriction within the meaning of Art. 19(2) of the Constitution. But that is not open to the petitioner as the amending Act giving retrospective operation relates to an "estate". Therefore, Art. 31A operates as a bar against raising any such question. We, therefore, hold that s. 32FF is valid and as the land aquired is admittedly above the ceiling, the second proviso to Art. 31A has no application.

The second point also has no merits. Under s. 32FF of the Act, transfers in favour of relations prescribed have to be ignored.

The contention is that the Legislature without enumerating the relations or indicating some principles for ascertaining the relations abdicated its legislative function and delegated it to the State Government to prescribe the relations and, therefore, the said section is void. From the mere fact that the enumeration of the relations is left to the State Government, we cannot say that the Legislature has abdicated its function. It has clearly laid down the policy and on the basis of that policy enumeration of the relations can easily be worked out. The expression 'relation' is comprehensive and has a local significance. The relatives must be such as those in whose favour benami transactions are usually entered into, or those whose benefit is indirectly the benefit of the transferor himself. The fact that under r. 23A comparatively distant relations are mentioned but the sister is omitted, is relied upon to prove the indefiniteness of the policy laid down in the Act.

But a perusal of r. 23A shows that all relations are mentioned, but, by some mistake, sister is omitted. We, therefore, reject this contention.

The next argument covers a wider field. It may be put thus.

The Act provided for acquisition after paying compensation in the manner prescribed. But the Rules prscribing the fixation of compensation are ultra vires the Act and, therefore, they are not valid rules in that regard. Fixation of' compensation is an integral part of acquisition. There cannot be an acquisition under the Act without payment of compensation. With the result there

is no \'alid law enabling the State to acquire the hnds of the petitioner. The petitioner is not questioning the law of acquisition on the ground that it infringes the fundamental right under Art. 19, 14 or 31, but complains that the State is infringing his fundamental right under Art. 19 without any valid law to support its action.

So stated there is considerable force in the argument.

But the whole edifice would be brought down if the Rules prescribing the compensation are valid, for, in that event, the petitioner's fundamental rights are infringed under the law of acquisition and by reason of Art. 31-A he cannot question the validity of the law on the ground that it infringes the three fundamental rights mentioned therein.

At this stage the argument advanced by learned counsel for the respondents that the decision of this Court in The State of Bihar

v. Maharajadhiroja Sir Kameshwar Singh of Darbhanga(') concludes the matter against the petitioner on the question raised by him may be noticed. In that case one of the contentions raised was that the Bihar Land Reforms Act, 1950 (XXX of 1950) and other Acts were ultra vires the Constitution for want of legisfative competency, as law made under Entry 36 of List II of the Seventh Schedule to the Constitution should provide for compensation and as the Acts did not provide for compensation, they were void.

This argument was built upon the contention that under Entry 36 of List II of the Seventh Schedule only a law of acquisition could be made that the existence of a public purpose and an obligation to pay compensation are the necessary concomittants of compulsory acquisition of private property, and that, therefore, the term "acqui: sition" must be construed as importing, by necessary implication, the two conditions aforesaid. This Court held that the expression "acquisition" in Entry 36 of List II did not take in the concept of compensation and, therefore, the Acts could not be said to be bad for want of legislative competence.

Be that as it may, this judgment has no real bearing on the question raised before us. The point taken is quite a different one. namely, the Legislature made a law of acquisition providin!! fo, nxation of compensation in the manner prescribed and that the rules prescribing the said manner are ultra vires the statute, and therefore, the .State is interfering with the petitioner's right unsupported by law.

To appreciate the argument it will be necessary to consider the relevant provisions of the Act and the Rules made thereunder.

Under s. 32-G of the Act, "where any land is acquired under s. 32E, there shall be paid compensation which shall be determined by the Collector or any other officer in the manner and in accordance with the principles hereinafter set out." One of the principles is that in respect of land other than banjar land for the first 25 standard acres of land the compensation payable is 12 times the

(I} (1952] S.C.R. 889.

~ -'

fair rent. Under the proviso the compensation in no case can be less than 90 times the land revenue (including the rates and cesses) payable for the land or two hundred rupees per acre, whichever is less.

Under subs. (2) of s. 320, the Collector or the officer authorised by the State Government shall prepare a compensation statement in the form and manner prescribed. Under r. 28 of the Rules the mode of determination of fair rent and classification of soils are given. The relevant provisions of the said rule on which such reliance is placed in support of the argument reads :

Rule 28. Determination of fair rent and classification of soils:-

(I) Fair rents shall be determined by the Commission for each assessment circle as recognised at the last Settlement.

(2) In determining fair rents, the Commission shall,-

(!) follow the principles laid down in rules 1 to 12 of the Land Revenue Rules, 1929, which shall be applicable mutatis mutandis and subject to the amendment that the average yield per acre of any crop given in the last Settlement Report shall be adopted; and

(2) take into account such

Qeing inconsistent with Act and these rules, necessary.

other factors, not the provisions of the as it may consider

(3) The Commission shall, as far as possible, adhere to the classification of soils as adopted at the last Settlement, and where it feels that owing to any circumstance which may have developed since the last Settlement, reclassification of soils in any area has become necessary, it shall; while reclassifying soils, keep in view the princi pie that classification should be as simple as possible and be based on broad differences of a fairly permanent character which affects in a marked degree the' economic rental of the land."

nder rr. I to 12 of the Land Revenue Assessment Rules, 1929, the following procedure is prescribed: An estimate of net assets shall be framed on the basis of rents in kind paid by tenants at will prevailing in the estate or group of estates under consideration. That estimate is made by taking into consideration the re levant factors mentioned in sub-r. (2) of r. l, namely, (a) the average, acreage of each crop on each class of land for which it is proposed to frame separate rates;

(b) the average yield per acre

of each crop so grown for which rent is taken by division of produce; (c) the average price obtainable by agriculturists for each of the crops referred to under clause {b); and (d) the actual share of the gross produce received by landowners in the case of crops which arc divided and the rent payable on zabti crops. The land is classified under different categories depending upon whether they are cultivated or uncultivated lands. The prices to be adopted in the estimate shall be the average of the prices which are likely to be obtained for their crops by the agriculturists during the coming settlement and other relevant considerations.

In estimating the average yield of different crops on different classes of land in an estate or a group of estates, the Revenue Officer shall be guided by the results of certain relevant factors mentioned in r. 5 of the Land Revenue Assessment Rules. After an estimate is made of the annual gross product of an estate or group of estates, an estimate shall be made of the annual value of the produce of the land-owner or of his net assets. This method by which the estimate of the money value of the net assets of an estate or a group of estates shall be made is adopted for ascertaining the fair rent under the Act, subject to the modification that the average yield per acre of any .crop given in the last settlement report shall be adopted. It is said that the last Settlement in Pepsu area took place 50 years ago; that is to say, the average yield per acre fixed by the said last Settlement Report shall be substituted for r. 5 of the Land Revenue Assessment Rules,

1929. It is argued that if the average yield of each crop is taken not as it is now but as it was 50 years ago it is not possible to arrive at the fair rent under the Act, as there may be phenomenal raise in the yield of each crop durin.g this long period a11d, therefore, the rules providing for the estimate of fair rent on such artificial basis are ultra vires the statute. In estimating the net assets of an estate the aforesaid four factors will have to be taken into consideration, i.e., the class of land, the average acreage of each crop, the average )'ield per acre of each crop, the average price and the actual share of the land-owner. During these 50 years there may be changes in the fertility of the land, in the character of the land, in the average yield per acre and also in the price an<l in the actual share of the land-owner.

So far as the price and the average acreage of each crop are concerned, the date of acquisition is the determining factor under the rules.

In regard to the fertility of the soil, the Commission is authorized under the rules redassify the lands on the basis of broad differenc~ of fairly permanent chracter which affect in a marked degree the economic rental of the lands that is to say, if in the lasL Settlement it was a baroni land, the Commission may say, having regard to the changed circumstances, that it is a .mi/ah land or abi land. If a land is differently classified. the yield taken for determining the fair rent will be that of the higher classified land.

But as regards the yield from different categories of land, there is nothing on the record to

H -r

show why the rules accepted the average yield per acre or any crop given in the last Settlement Report. Though it is theoretically possible that, improvement in seeds and the use of chemical fertilisers may have increased the yield of a particular crop per acre, there is nothing on record to show that in Pepsu there is any such abnormal increase in the yield per acre in respect of any particular crop, The fact that the average yield of the last Settlement Report is adopted prima facie indicates there has been no such increase in yield in respect of any particular crop. The petitioner does not say in his affidavit that there is any such increase.

In sub-para (a) of para 18 of the petition he says ;

"In order to determine the fair rent, the average yield of the land in question should be adopted as the basis.

It is submitted that the yield of the land is recorded at the conclusion of every crop in the Khasra Girdawari by the Village Patwari and the same is checked by the Assistant Collector."

In sub-para (b) thereof he adds :

"That the provisions of rule 28 of the rules are inconsisteAt with the provisions of Section 31G of the Act. The provisioll's of rule 28 provide that the Commission shall adhere to the classification of the soil as adopted at the last Settlement.

It is submitted that the last Settlement took pince in erstwhile Patiala State about 50 years back. The village Narinderpura was part of Patiala State at that time. The provisions of rule 28 accordingly run contrary to the letter and spirit of the provisions of section 320 of the Act.

The classification of the land should be taken on the date the land is acquired under the Act."

It will be seen from the said two sub-paragraphs of para 18 of the affidavit of the petitioner that his complaint is that the classification of the soil is that which obtained 50 years ago and that the yield can be ascertained from Khasra Girdawari. But there is no allegation that the yield of the land in respect of any crop per acre has so increased that it will be unreasonable to take the yield recorded in the last Settlement as the criterion for arriving at the fairrent.

So far as the classification is concerned, as we have pointed out earlier, r. 3 of the Rules enjoins the Commission to reclassify the lands, if owing to supervening circumstances there is change in the category of the land, On the record, as placed before us, without an allegation that there is an increase in the yield per acre in regard to a particular crop, it is not possible for us to hold that the relevant rules are ultra vires the Act. It may be that in some other case where specific allegations are made in that regard and

established, the validity of the Rules may have to be con.; idrd.

A We, therefore, hold that on the facts placed before us 11e cnnot hold that the Rules arc 11/tra 1ires the Act. Jf so, it follows that the petitioner's land is being acquired under a law of acquisition and that the petitioner is precluded, by reason of Art. 3IA of the Cons titution. from questioning the validity of the Act or the Rules made thereunder on tlte ground that his fundamental right under B Art. 19, 14 or 31 of the Constitution is infringed.

In this view, no other question arises for consideration.

In the result, the petition is dismissed but, in the circumstances, without costs.

G.C.

Petition dismi<sed.

A

STATE OF PUNJAB AND ORS

K. SueBA RAO, C.J.

C. SHAH, J

M. SHELAT

V. BHARGAVA

G. K. MITTER, JJ.

s. 32F

JA framed JUUkr the Act

s. 32F

August 21,, 1956

s. 32F

August 21, 1956

Art. 32

Art. 3

s. 32F

Section 32F

Art. 19(2)

Art. 31A

Section 32F

Art. 31

s. 32F

Art. 32

Constitution of India

K. P. Bhandari

R. Gqpa

Gopal Singh

R. N. Sachthey

SubbaRao

Art. 32

Sections 32A, 320, 32E, 32F

Narinderpura

Shrimati Charanjeei Kaur

October 30, 1956

January 14, 1959

Punjab Legilature

21, 1956

Chandigarh

May 31, 1962

ss. 32A, 320, 32E, 32F

Art. 31A

s. 32G

Art. 31A

Art. 31

Section 3

Section 32

Section 32

Section 32F

21st August, 1956

s. 32F

Art. 3

s. 3

Art. 31A

s. 32F

s. 32F

Parliament

August 13, 1956

Section 32F

Art. 19(2)

Art. 31A

s. 32F

Art. 31A

s. 32F

Art. 19, 14

Art. 19

Art. 31

Darbhanga

Seventh Schedule

s. 32

s. 32E

s. 320

Land Revenue Rules, 1929

Land Revenue Assessment Rules, 1929

Pepsu

Land Revenue Assessment Rules

Patwari

Section 31G

Patiala

section 320

Khasra Girdawari

Art. 3I

Art. 19, 14


BENGAL TIMBER TRADING CO. LTD.

COMMISSIONER OF SALES TAX, MADHYA

PRADESH

February I, 1967

[K. SUBBA RAo, C.J., J. C., SHAH, J. M. SHELAT.,

V. BHARGAVA AND G. K. MITTER, JJ.j

Constitution of India, !950, Ar(. 286(l)(a) Explanation, prior to amendment by the Constitution (Sixth Armndment Act) 1956--Sale of rail- Wll)I sleepers-"Actually delivered" meaning of-Question to be considered for decision whether delivery wltliin the State--''F, O.R." used in connection with price and not place--EfJect of-Liabi1ity to sales-tax under C.P. and Berar Sales Tax Act (21 of 1947).

The appellant entered into a contract with the President of India for the supply of railway sleepers. The consignees, to whom the sleepers were to be despatched according to the instructions given to the appellant under

cl. II (a) of the conditions of contract, were outside the State of Madhya Pradesh. The sleepers were booked by rail to the consignees from Dhamtari railway station in Madhya Pradesh. In the third column in the Sche dule to the contract, Dhamtari was shown as the place of delivery. On the question whether the sales came under the Explanation to Art. 286{1)

(u) of the Constitution prior to its amendment by the Constitution (Sixth Amendment) Act, 1956 and were therefore exe!llpt from sales-tax under the C.P. and Berar Sales Tax Act, 1947, the High Court held: (I) that the property in the goods passed to the purchaser at Dhamtari, (2) that the sleepers were actually delivered to the purchasers at that place, and

(3) that the sales were completed at Dhamtari and were therefore liable to tax.

Io appeal to this Court,

HELD : The sales were covered by the E•planation and as such were not ta<able by the State of Madhya Pradesh. [557 A-Bl

(1) The que•tioo is not when and where, under the general law, the title to the goods passed under the contract; but whether actual delivery of the 1oods took place, for consumption outside the State of Madhya Pradesh so as to be within the deeming provision of the Explanation.

(556 B-C]

(2) In the fifth column in the Schedule to the contract, relating 1o rate, the expression "F.O.R." was used only in connection with tbe price of the eoods. Therefore, it only meant that the rate was to be inclusive of all charges of puttiD& the goods on rail and had nothing to do with the r, tace of delivery. Further, the expression "actually delivered" in the Exp anatioo means physical delivery of the goods or such other aetion a.

puts the goods in the po"sscssion of the purchaser but does not include symbolical or notional delivery auch as entrustment to the railway .. a common carrier (550 C; 553 F-G; 555 D]

SinRareni Collierie" Co. Ltd. v. State of Andhra Prades/1 & Ors. [1966] 2 S.C.R. 190 followed.

L2Sup. CI/67-6

(3) All the claus"' of the contract have to be read a,, a whole to find out the intention of the partic< as to where the actual delivery wns to tal<o place. So read, els. 3, 11. 12 and 14 of the contract aro n01 merely conditions •uper-imposed after the actunl delivery of the &ood•. They show

that, while the major pan of the operations of the appellant with regard to delivery were to be performed at Dhnmtari, he WOJ not relieved of all liability '" to delivery until the good• were finally accepted at the dcstil>atiooi by the coMignce, and that actual physicnl delivery was not to be taken as complete before the goods were aeceptcd by the consignee at the destination.

Clause J(n) links delivery with final acceptance, which, according to cl. 11 (g), could only be after tbe gooda had reached the destination and were acknowledged 85 accepted by tho consignee.

Clau.<e 11 (g) also shows that notwithstanding the fact that the goods had been pUScd by the Sleeper Pas.sing Officer at Dhnmtari, they bad been put on

rail within the period or contract at the said station, the Sleeper Pa5'ing Olllcer had 11iven the appellnnt a pa.sing certificate in terms of cl. 10 and the Stnlton Moster nt Dhnmtari had is.•ued a tally receipt for the number of sleepers loaded the consignee stlll had the right to inspect the flOOW at the destination and reject any which were not in terms of the

contr.Jct; ond such rejected goods were to be treated us non-delivered. The place of aclllnl delivery, in the light of oil the circumstane<:>. could only be the destination nnd the goods could only be said to be fully delivered and finnlly ncceptcd ofter they were acknowlcdaed at the dcstinntion, and since consumption took place only in the Slate to which the goods were d<'!patchod, the snlcs came within the purview or the cxplnnntion [5S4 H:

555 A-D; 556 B-DJ

B/rtndronat/1 Gul1a & Co. v. State of Blluzr, 5 S.T.C. 273 and D. N.

Dutta v. Commis.rloncr of Sale.< Tax, Ori."a, 1.L.R. [1961) Cuttack 622 overruled.

C1v1r. ArPELLATf. JURISDICTION : Civil Appeals Nos. 398 to 400 of 1966.

Appeals by spccinl leave from the judgments nnd orders dated March 6, 1964 of the Madhya Pradesh High Court in M.C.C. Nos. 90, 91 and I JO of 1963 respectively.

M. C. Seta/vad, Slrankar Ghoslr and D. N. Gupta, for the r appellant (in all the nppeals).

B. Sr11 and/. N. Shroff, for the respondent (in 1111 the appeals).

The Judgment of tho Court was delivered by Mitter, J. These arc three appeals by lcnve granted by this Court from orders of reference under section 44(1) of the Madhya

Prndesh General Sales Tnx Act, 1958 at the instance of the Commissioner of Sales Tax, Madhya Pradesh to the High Court ln tbnt StR!Q. The question in each of tho references was, whether, lo the facts and circumstances of the case, the sales of sleepers (for railways) made by the non-applicant (Benaal Timber Trading Co.

Ltd,) under tho agreement with tho President of India came under Art. 286 (1) (a) of the Constitution read with the Explanation thereto and therefore were exempt from the imposition of tax under the C.P. and Bcrar Sulcs Tax Act, 1947 ?

Except for the amounts which varied from year to year involved in the sales, the facts and circumstances were common in all the three cases. The periods for which tax was sought to be imposed were; from 1st July 1950 to 30th June 1951, from !st July 1951 to 30th June 1952 and from 1st July 1952 to 30th June 1953. It will be noted that all the three periods are prior to the amendment of Art. 286 of the Constitution by the Constitution (Sixth Amendment) Act, 1956. The relevant portion of Art. 286 as it stood during the years in question read as follows :-

"286. (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place-

(a) outside the State: 'Or

(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

Explanation.-For the purposes of sub-clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State. ..

The true meaning of the said Article and Explanation came

up for consideration in a number of decisions of this Court. Its real purpose was to prevent "imposition of an unduly heavy burden upon the consumers by multiple taxation upon a single transaction of sale" Bajarang Jute Ml/ls Ltd. v. State of Andhra Pradesh('). In effect the Explanation to the Article created a

llction and fixed the State "in which the actual delivery of the goods took place for the purpose of consumption there" as the only place where sales tax could be levied as was pointed out in &11gal lmmu11lty Company Ltd. v. TM State of Bl/Jar and Or$,(2).

There it was said thnt "the shifting of the situs of a side or purchalc from its actual situs under the general l11w to a fictional situs under the Explanation takes the s11le or purchase out of the taxing power of all States other than the State where the situs is fictionally fixed".

The earlier decisions of this Court were noted in Bajarang Jute Ml/ls' case(1) and it was there observed :

"Jt is now well-se(tled that by Art. 286(1) [as it stood before it was amended by the Constitution (Sixth Amend~ ment) Act, 1956] sales as a direct result of which goods

(1} l' S.T.C. 430 ~\ 433.

(1) [1955] 2 S.C.R, 603, 651,

were delivered in a State for consumption in such State A i.e., the sales falling within the Explanation to Art. 286(1) were fictionally to be regarded as inside that State for the purpose of cl. (I) (a) and so within the taxing power of the State in which such delivery took place and being outside all other States exempt from sales tax by those other States." B

The last mentioned case was considered by this Court in Singare11i Collieries Co. Ltd. v. State of And!tra Pradesh and others(') and it was held ;

" .......... the expression 'actually delivered' in the context in which it occurs can only mean physical delivery of the goods, or such other action as puts the goods in the possession of the purchaser. The expression 'actually delivered' does not include mere symbolical or notional delivery e.g. by entrusting the goods to a common carrier, or even by delivery of documents of title like railway receipts. It was said that the rule contained in s. 39 (I) of the Indian Sale of Goods Act, 1930 has no application in dealing with a constitutional provision which while imposing a restriction upon the legislative powe. of the States entrusts exclusive power to levy sales tax to the State in which the goods have been actually delivered for the purpose of consumption".

The fiction of the sale or purchase being deemed to have taken place in the State in which the goods had been actually delivered as a direct result of sale or purchase for the purpose of conswnption in that State, was resorted to in order to put the matter beyond all controversy on the question as to where the property in the goods passed or as to any inquiry about the place where the goods may be said to have been delivered.

The contract in this case was entered into between the Presi dent of India and the appellant before us and contained terms and conditions to be noted immediately. The r.ecital to the agreement shows that "the contractor has agreed to supply and deliver to the State wooden sleepers to the number and of the description and quality at the price or prices and at. the times and places and in the manner detailed in the Schedule, specification and conditions of contract hereinafter appearing all of which form part and parcel of this agreement". The relevant conditions of contract are as follows :

Cl. (1 ). Time of delivery of the sleepers shall be of the essence of the contract and the contractor shall deliver the sleepers on or before the date or dates mentioned in the

(I) Jt966t 2 s.c.R. 190, 200.

Schedule or within such extended time or times as may be allowed under cl. (2) ........... .

Clause 2 provides that if the contractor shall be delayed in the supply of the materials so as to necessitate an extension of the time provided in the Schedule, he shall apply in writing to the Sleeper

Control Officer, Eastern Group, who, if reasonable grounds are shown to his satisfaction, shall grant such extension in writing as ln his absolute discretion he may think fit.

Cl. 3 (a). "The prices named in the Schedule shall cover everything required to be done by the cor>tractor in terms of the specification and conditions of contract including all loading and handling charges connected with the inspection and delivering of the sleepers on rail and taxes and impositions in respect of the sleepers till they are delivered and finally accepted under the terms of this contract."

Cl. 3(b) provides that in the event of wagons not being available within a month after passing, the contractor shall stack and earth the passed sleepers. Pending despatch, the sleepers were to remain in the contractor's custody.

Cl. 4. "The person or persons authorised to inspect, pass and brand sleepers for the State under these conditions of contract . . wfil be appointed or nominated by the President, Eastern Group Sleeper Control and/or the Sleeper Control Officer, Eastern Group • . . ."

Cl. 5(a). "The sleepers shall be offered for examination and passing within the boundaries of the railway stations mentioned in the Schedule unless permission is given in writing by the Sleeper Control Officer, Eastern Group, to the contractor to offer them for inspection at other stations or sites."

Cl. 5 (g). "The contractor shall make all arrangements with the railway concerned for the lease of an adequate plot or plots of Jami at stations where he desires to offer >Jeepers for inspection and bear the charges thereof."

Cl. 9 provides for testing of the sleepers by the Sleeper Passing Officer and any sleepers which were rejected by him were to be removed from the railway premises at the charge and cost of the contractor. Under cl. 10 the Sleeper Control Officer was to give \ht \,\l\ltril.IJtGr a \)assing certificate of the number P8:ssed and re-

"ooted at such station. Under cl ll(a) "After passing, the con- {ractor shall apply to and obtain from the Sleeper Control Officer,

Eastern Group, his orders as to the despatch of the passed sleepers which would then be disposed of by the contractor either by handing them over to the consignee or by loading into railway wagons and booking them under the risk note 'B' by rail to the consignee to whom the sleepers were allotted". Cl. 11 (f) provides that on arrival at destination, the consignee shall check the number of sleepers and report on any shortage or the receipt of defective slee pers. In all cases, the Sleeper Control Officer was to be the final authority as to whether such sleepers were in good order and con formed to the specification or not.

Cls. I l(g), I l(i) and 12 ran as follows:

Cl. I l(g). "In the case of passed sleepers booked by rail the contractor shall immediately after loading apply for and obtain from the despatching station master a tally receipt for the number loaded. Such sleepers as arc acknowledged by the consignee as possessing the passing mark of the Sleeper Passing Officer and the private mark of the contractor will be deemed fully delivered, subject, however, to the right of the consignee to have such sleepers re-inspected by the Sleeper Control Officer, or his representative, and all sleepers rejected by the Sleeper Control Officer shall be deemed to be nondelivered and all sleepers are to be at the risk of the con tractor until fully delivered and finally accepted at the destination." Cl. I l(i). "If there is any shortage in the number of sleepers received by the consignee in any particular consignment i.e. covered by a single railway receipt, the contractor shall be paid for all sleepers shown on the tally receipt provided all sleepers received by the consignee are passed sleepers and have not been rejected by the Sleeper Control Officer but if any part of such consignment consists of unpassed sleepers they shall be rejected and included in the shortage and the contractor shall be held responsible for the total shortage in that consignment and shall not receive any payment for such shortage."

Cl. 12. "The sleepers shall be of the best description and in strict accordance with the specification and the contractor shall receive payment for such sleepers only as are approved, branded and passed by the Sleeper Passing Officer and duly delivered to the consignee in terms of the contract."

Cl. 13 provides for payment of 90% on bills submitted in triplicate supported by the passing certificate, tally receipt and by an acknowledgment from the consignee to the Sleeper Control

A Officer certifying that the sleepers have been received by him and have been checked and found in order. The payment of the remaining 10 % shall be made on bills submitted in triplicate as soon as the sleepers have been delivered as provided in cl. I l(g).

Clause 14 reads :

"It must be expressly understood that all on account or advance payments are in no way to be considered as relieving the contractor in any way from the liabilities he may incur under the terms of the contract. This has express reference to cl. ll(g) above."

The schedule to the contract was in tabular fonn containing six columns. The 3rd column was headed "places at which to be delivered" and below it was mentioned "Dhamtari, Eastern Railway." The 5th column was headed "rate at which the sleepers to be supplied at each place inclusive of all demands, F.O.R." In this column were given the rates for different kinds of sleepers i.e. of different dimensions. The 6th column was headed "month of completion" and in this column (to quote from the document at page 112 of the paper book) was given the date 15-10-1952. The third note at the foot of the schedule provided that "the date of completion of the contract shall be the last date of inspection at the supplier's stations during the month in which the contract is due to be completed." The High Court of Madhya Pradesh took the view that the sales were completed in Dhamtari, that the property in the goods passed to the purchaser at that place and the sleepers were actually delivered to the purchaser at that place. It was further stated in the judgment of the High Court that the place of delivery was spedfically stated to be F.O.R. Dhamtari. The last observation does not seem to be correct because, as noted already, the place of delivery as given in the Schedule was Dhamtari, Eastern Railway and it was only in connection with the price of the goods that the expression 'F.O.R.' occurred. It is well known that the expression 'F.O.R.' when used in connection with the place of delivery means that the delivery prima facie takes place when the goods are put on rail and when the expression is used in connection with the price, it means that the rate is to be inclusive of all charges of putting the goods c>n rail.

In order to find out whether the Explanation to Art. 286(1)

(a) was applicable, we need not consider where the property in the goods passed nor are we to guide ourselves bys. 39(1) of the Indian Sale of Goods Act which only raises a prima facie inference as to delivery. In this case the consignee of the goods was always to be outside Madhya Pradesh according to the instructions given to the contractor with regard to the despatch of the goods. Counsel

on behalf of the Stale of Madhya Pradesh contended that actual delivery of the goods took place at Dhamtari in that State. In aid of his contention, he relied on the following factors : (a) The Schedule which was a part of the contract showed that the place of delivery was Dhamtari, Eastern Railway; and (b) Cls. 1 and 2 of the conditions of contract referred both to the time and place of delivery as mentioned in the schedule. The net result of these two clauses, according to counsel, was that the time and place of delivery both pointed to Dhamtari. According to counsel, cl. 3(b) went to show that after the goods were brought to the railway yard at Dhamtari and were passed by the Sleeper Passing Officer, the contractor became the bailee in custody of the goods and the charges which he incurred in earthing up the goods during the months of April to June were to be borne by the buyer. This was sought to be reinforced by cl. 3(a) which provided that all loading and handling charges and expenses in connection with the putting of sleepers on rail and taxes and impositions were to be on the sellers's account at Dhamtari.

Counsel argued that cl. 5(g\ went to show that it was to suit the con, cniencc of the purchaser that the contractor had to take on lease a plot of land belonging to the railway for storing the sleepers.

Ck 9 and 10. according to him, went to show that the rejected sleepers had to be taken out of the railway yard leading to the inference th;1t only such goods as had been passed by the Sleeper Passing Otticer were to be considered as the property of the railway.

Great reliance was placed on cl.I l(a) which according to counsel, clinched the matter.

It was urged that if the goods were actually handed over to the consignee at Dhamtari railway station, there could be no manner of doubt that actual delivery took place there.

According to counsel the position was the same if the goods were loaded 1nt11 railway wagons and booked to the consignee under risk note 'B' in terms of the contract. This was sought to be fortified by reference to cl. I l(i) according to which the contractor was to be paid for all sleepers shown on the tally receipt.

Counsel urged that all the abo'e provisions in the contract went to show that as soon as the goods were put on rail al Dhamtari after they had been brought into the railway yard and passed by the Sleeper Passing Officer, and marks had been put on them, delivery of the goods was complete and nothing remained to be done by the contractor.

In our opinion, we have got to take the whole of the contract into account and then find out the intention of the parties as to where actual delivery was to take place thereunder.

While there can be no doubt that the major part of the operations of the contractor with regard to delivery were to be performed at Dhamtari he was not relieved of all liability as to delivery until the goods

H (

were finally accepted at the destination by the consignee. In this respect, we cannot overlook els. 3(a), 11 (g), 12 and 14 of the conditions of contract when the consignee was outside Madhya Pradesh.

Cl. 3 (a) speaks of delivery and final acceptance under the terms of the contract. Delivery here is linked with final acceptance which according to cl. 11 (g) can only be after the goods had reached the destination and were acknowledged as accepted by the consignee.

Cl. 11 (g) makes it clear that notwithstanding the fact that the goods had been passed by the Sleeper Passing Officer at Dhamtari and that they had been put on rail within the period of the contract at the said station and the Sleeper Passing Officer had given the coniractor a passing certificate in terms of cl. 10 and the station master at Dhamtari had issued a tally receipt for the number of sleepers loaded, the consignee still had the right to inspect the goods at the destination and reject any which were not in terms of the c0ntract and such rejected goods were to be treated as non-delivered.

All this, in our opinion, puts the matter beyond doubt that the actual physical delivery was not taken as complete before the goods were aecepted by the consignee at the destination. In all such cases, the consumption took place in the State to which the goods were despatched with the result that the sales came within the purview of the Explanation to Art. 286 (I) (a) as it stood before the Sixth Amendment of the Constitution.

Our attention was drawn to a judgment of the Patna High Court in Birendranath Guha and Co. v. Sttlte of Bihar(') where the assessee had taken lease of a timber forest in Nepal and had built godowns and offices in Nepal territory close to Jogbani railway station in the State of Bihar. The assessee supplied to the railways and despatched to different destinations various quantities of sleepers from Jogbani railway station after obtaining instructions from the Sleeper Control Office. The assessee contended that no sale took place in Bioor since the sleepers had been manufactured in Nepal and despatched from Jogbani railway station to places outside Bihar. The full terms of the contract in that case are not to be found in the report but it appears that it was worded very similarly to the contract before us. The Patna High Court held that on a consideration of all the provisions of the contract, it was manifest that the goods in question had been unconditionally appropriated to be contract at Jogbani railway station. Alternatively, the High Court held that there was appropriation of the goods within the meaning of s. 23(2) of the Sale of Goods Act at Jogbani railway station and accordingly it was held that there was delivery to the carrier at Jogbani railway station coupled with an unconditional appropriation of the goods within the meaning of s. 23 (2) of the Sale of Goods Act. With regard to els. l l(g), 11 (j) and J3(a) the High Court said that these were merely additional stipulations

(I) 5 S. T. C. 273.

superimposed on the contractor who agreed to act as insurer of the goods till the stage of final destination and also agreed to the other conditions, but these additional conditions had no bearing on the question as to where and when the title to the sleepers passed to the buyer.

We find ourselves unable to agree with the above expression of opinion as we have already pointed out that the question is not when the title to the goods passed under the contract, but to ascertain whether actual delivery of the goods took place outside the State of Madhya Pradesh for the purpose of consumption there so as to be within the deeming provision of the Explanation to Art. 286 (1).

The contract has to be considered in the setting of the facts and circumstances of the case as a whole and els. ll(g), ll(i), 12, 13 and 14 cannot be read as conditions superimposed after the actual delivery of the goods. The place of actual delivery in the light of all the circumstances of the case can only be the destination of the goods and the goods can only be said to be fully delivered and finally accepted after they are acknowledged at the destination by the Sleeper Control Officer.

A similar contract came up for consideration before the Assam High Court in Bire11dra11ath Gulza v. Commissioner of Taxes(•) and the High Court took a view different from that of the Patna High Court mentioned above.

In D. N. Dul/a v. Commissioner of Sales Tax, Orissa(2) two questions were referred to the High Court, one of them being, whether there was a completed sale in Orissa so as to confer jurisdiction on the State of Orissa to tax the impugned transactions and secondly, whether even if there was a completed sale in Orissa, the State Government was prohibited from taxing those transactions in view of the ban imposed by cl. (I) and cl. (2) of Art. 286 of the Constitution. The contract, according to the judgment of the High Court, was identical with the one which came for consideration in the Patna case in Birendra11ath Guha and Co. v. State of Bihar(') The Orissa High Court held that in respect of the impugned transaction, none of the sleepers had been subject to reinspection by the Sleeper Control Officer or rejected by him at the destination; all the sleepers were fully delivered when the passing mark was given by the Sleeper Passing Officer at the place of despatch and the seller had loaded them in the wagon at the despatching station and obtained the tally receipt from the station master concerned. It is not necessary to examine the case in detail but it is sufficient to say that even if there was no rejection at the place of destination, actua, l delivery would not be completed until they were finally accepted

(t) 10 S. T. C. 327.

(2) I. L. R. [1961] Cuttack 622.

(l) S S.T.C. 273.

I I

at destination and to that extent we find ourselves unable to agree with the decision of the Orissa High Court.

In the result, it must be held that the sales in these cases were covered by the Explanation to Art. 286 (!) and as such not taxable by the State of Madhya Pradesh. The appeals are therefore allowed with costs. One set of hearing fee.

V.P.S.

Appeal allowed .

BENGAL TIMBER TRADING CO. LTD

K. SUBBA RAo, C.J.

SHAH, J.

M. SHELAT

V. BHARGAVA

G. K. MITTER, JJ

Constitution of India

Sixth Armndment Act

Berar Sales Tax Act

India

State of Madhya Pradesh

Madhya Pradesh

Dhamtari

Art. 286

Berar Sales Tax Act, 1947

State of Madhya Pradesh

[1966] 2 S.C.R. 190

Dhnmtari

cl. 11

cl. 10

M. C. Seta

Slrankar Ghoslr

D. N. Gupta

N. Shroff

Mitter

section 44(1)

Prndesh General Sales Tnx Act, 1958

Benaal Timber Trading Co.

Ltd

Art. 286

Bcrar Sulcs Tax Act, 1947

1st July 1950 to

30th June 1951

!st July 1951 to

1st July 1952 to

30th June 1953

Art. 286

Art. 286

Bajarang Jute

Art. 286(1)

Art. 286(1)

s. 39

Indian Sale of Goods Act, 1930

Clause 2

Cl. 3

Cl. 3(b)

Cl. 4

Cl. 5(a)

Cl. 5

Cl. 9

cl. 10

Cl. 11

Cl. 12

Cl. 13

Clause 14

High Court of Madhya Pradesh

Art. 286(1)

Sale of Goods Act

cl. 3(b)

cl. 3(a)

Dhamtari railway station

Cl. 3

cl. 11

Cl. 11

cl. 10

Art. 286

Patna High Court

Nepal

Bihar

s. 23(2)

Sale of Goods Act

Jogbani railway station

s. 23

Sale of Goods Act

Art. 286

Assam High Court

Orissa

Art. 286

Patna

Orissa High Court

Art. 286