STATE OF MADHYA PRADESH v.

RANOJIRAO SHINDE & ANR.

March 21, 1968

[M. HIDAYATULLAH, C.J., R. S. BACHAWAT, C. A. VAIDIALINGAM,

K. S. HEGDE AND A. N. GROVER, JJ.]

Constitution of India, Arts, 19(1)(/), (5) and 31-Enactment abolishing cc.oh grant-If violative of Art. 19(1)(/) and 31(2)-Choses in action and money, i/ could be acquired under Art. 31(2).

Madhya Pradesh Abolition of Cash Grants Act (M.P. 16 of 1963)- lf violates Art. 19(l)(f) or Art. 31(2) of the Constitution.

'The appellant.State abolished by an executive order cash grants payable by it. This order was quashed by this Court. Thereupon the State passed the Madhya Pradesh Abolition of Cash Grants Act, 1963 to abolish the cb grants, but provided for the payment of certain comjlensation to the grantees-;-respondents. Tho respondents challenged the vires of the Act before the High Court The High Court held the Act to be ultra vires of Art. 19(1) (f) of the Constitution and not saved by sub-Art.

(5) thereof. In appeals by certificate, this Court,

HELD : The Act is either violative of Art. 31 (2) or, in the !lltemative, Art. 19(1)1f) of the Constitution. (490 F]

Choses in action and money could not be acquired under Art. 31(2}.

If it is held that State by the exercise of its pOwer of eminent domain can acquire choses in action and money belonging to its . citizens, by paying a fraction of the money taken as compensation, the fundamental right gnaranteed under Art. 19(1 )(f) would be deprived of all its contents and that Article will cease to have any meaningful purpose.

Article 31(2) must be construed harmoniously with .Art. 19(1)(1). If so constr'Jed, it is obvious that the public purpose contemplated by the Article does not include enrichment of the colfe'rs of the State. Further the compensation• referred to in Art. 3112) is the just equivalent of the value of the property taken. (495 E-H]

A law which authorises the State to deprive a persOn of bis property must be a valid law. It must not violate Art. 19(1)(f) which means that it must satisfy the ruirements of Art. 19(5). The word "law" used in Art. 31(1) 'indicates its limitations and refers back to Art. 19 and any law made under Art. 31( I) can be sustained only if the restrictions it imposes,

are reasonable and in the interest of general public. The Act which empowers the State to approp'riate some one else's property for itself solely with a view to augment the resources of the State cannot be considered as .a reasonable restriction in the interest of the general public. If Art. 19(5) is inteqireted to mean that the State can take by authority of law anyone's property for the purpose of increasing its assets or revenues, the g\Jarantee gjveli by Art. 19(1)(f) would become illusory [496 D-497 _El

Madhorao Phalke v. State of Madhya Bharat [1961) I S.C.R. 957, Kamuhwar Prasad v. State of Bihar, A.I.R. 1962 S.C, 1166, Stale of Bihar v. Kcmeshwar Singh, [1952) S.C.R. 889, Kavalappara Kottarathil Kochunl v. State of Madril$, [1960] 3 S.C.R. 887, followed.

Bombav Dyein11 and Manufacturing Co. Ltd. v.

State of Bombay, [1958] S.C.R. 1122, referred to.

-490

SUPREME COURT REPORTS [1968] 3 s.c.R.

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1730 .and 1731of1966.

Appeals from the judgment and order dated August 18, 1964 .of the Madhya Pradesh High Court in Misc. Petition Nos. 21 .and 22 of 1963 (G.).

I. N. Shroff, for the appellant (in both the appeals).

B. Sen, P. W. Sahasrabuddhe, S. K: Dholakia and A. G.

Ratnaparkhi, for the respondent (in both the appeals).

The Judgment of the Court was delivered by Hegde, J. In these connected appeals by certificates the ques non that arises for decision is whether the Madhya Pradesh Abo

lition of Cash Grants Act of 1963 {Act No. XVI of 1963) is .ultra vires the provisions of tbe Constitution. The respondents in these appeals were entitled to receive cash grants from tbe Government of Madhya Pradesh. The impugned Act abolished such grants but provided for the payment of certain compensation to tbe :grantees. The respondents <; hallenged the vires of the Act before the High Court of Madhya Pradesh in Miscellaneous Petitions Nos. 21 and 22 of 1963, on various grounds. The High Court rejected ;111 the contentions advanced on behalf of the respondents excepting one namely that the Act is ultra v/res of Art. 19(l)(f) of the Constitution and is not saved by sub-Art. (5) thereof. After -Obtaining from the High Court certificates under Art. 133(1)(c), the State of Madhya Pradesh has filed these appeals. The State is challenging the correctness of the decision of the High Court to the extent it went against it.

The respondents on their part, in addition to supporting the findings of the High Court which are in their favour, relied also on the other pleas taken by them before the High Court.

As we are of the opinion that the impugned Act is either violative of Art. 31 (2) or, in the alternative, Art. 19(1) (f) of the Constitution, we have not !bought it necessary to go into the other contentions ta_ken on behalf of the respondents.

Before the impugned Act was enacted, the State of Madhya Bharat which forms part of the new State of Madhya Pradesh, purported to abolish the cash grants payable by it by ineans of an executive order. That order was unsuccessfully challenged by Madhorao Phalke and others before the High Court.

But in appeal this Court in Madhorao Plialke v. State of Madhya Bharat(') quashed the order in question. holding that the grants in question were recognised by the kalambandis of 1912 and 1935 issued by the Rulers of Gwalior and those knlambandis are existing laws within the meaning of Art. 372 of the Constitution and consequently the same could not be abrogated by means of an executive order. Jt may be noted that in that appeal, the appellant challeng-

(1) [1961] I S.C.R. 957.

ed the order in question on two grounds, namel>:-(1) tha~ as his right to receive the cash grant had been statutorily recognised by the State of Gwalior, it was not open to the Government of Madhya Bharat to extinguish that right merely by an executive ordr, and

(2) that that right being property the same could not be dives_ted without payment of compensation under Art. 31 of the Constitution. This Coun allowed the appeal on the first ground ~~ consequently it did not <jeal with the second. After the dec1s1on of this Court in that case, the impugned Act was enacted by the Madhya Pradesh legislature on April 5, 1963. It received the assent of the President on July 25, 1963 and was published in the Madhya Pradesh Gazette Extraordinary on August 2, 1963.

The Act comes into force on such date as the Government may by notification appoint. Even before that notification was issued, the petitions from which these appeals arise were instituted in the High Coun. We are given to understand that in view of those. petitions, the Act has not yet been brought into force.

The long title of the Act says that it is an Act to provide for D the discontinuance of cash grants in Madhya Pradesh and to make provisions for other matters connected therewith. It contains twelve sections. Section 11 sets out the short title, extent and commencement of the Act. Section 2 defines some of the expressions found in the Act.

Section 3 is the most important section. It purports to abolish certain cash grants. Section 4 provides for E statement of claims by the grantees. Section 5 provides the manner of determining the compensation payable. Section 6 prescribes that appeal, revfsion and review under the Actto be in. accordance v.ith Madhya Pradesh Act No. 20 of 1959. Section 7 provides for the determination of disputes as regards the title of any grantee. Section 8 bars the jurisdiction of civil courts to . issue F an ijunction against any person in respect of any proceedings pendmg before the competent authority under s. 5 which shall have the effect of staying the proceedings.

Section 9 prescribes the quantum of compensation payable. Section 10 deals with the mode of payment of compensation.

Section 11 empowers the State Government to make rules for carrying out all or any of the purposes of the Act.

Section 12 says that if any difficulty G arises in giving effect to the provisions of the Act, the State Government may by order make such provisions not inconsistent v.ith the purposes of this Act as appears to be necessary or expedient for removing the difficulty.

H In these appeals we are mainly concerned with the vires of s 3 read ""!tit the defin_ition of "cash grant" in s. 2(1 ).

If sectio~ 3 read with s. 2(1) 1s held to be ultra vi1'11s of the Constitution,. then the who!~ Act falls t? .the groll~ as the rell!aining sections of the Act are merely subsidiary or mc1dental provisions. Section L7Sup.C.J/68-7

492 SUPREMB COURT JUlPOllTS

(1968] 3 S.C.R.

3 ( •) provides that notwithstanding anything contained in any law, custom, usage, sanad or a decree or order of a court or other authority whatsoever, all cash grants shall be discontinued and cease to have effect from the commencement of this Act.

But the proviso thereto makes certain exceptions with which we are not concerned in this case.

The case of the respondents falls within the main part. They do not have the benefit of the proviso. A cash grant as defined in s. 2 (1 )( ••) includes a grant of

(*) '

13. Abolition of certain cash grtin1s-(_t) Notwithstanding anything contained in any law, custcm, usage. sanad or a decree or order of a ccurt or other authority whatscever, all cash grants shall be disc_ontinued and cease-to have effect from th~ commencement of this Act ;

Provided that where the grantee is a person specified in column (1) of the Table belowhecashgrantmay, at the option ofthe grantee exercised in such rnal}ner, within such period and in such fonn as may be prescribed, be continued sub1ect to the contlitions and during the Period mentioned in the corresponding entry in column (2) of the said Table~

TABLE (!)

(i) A widow {ii) A minor

(a) in the case of a male

{b) in the case of a female

(iii) A person above the age of 60

years.

(2)

So long as she remains a widow.

Till the date he attain& 21 years Qf age.

Till the date of her marriage or till she attains 21 years of age, which ever is earlier.

DUl'iDg his life time.

(iv) A person subject to physical During his life time.

"disability or mental . infirmity

owin'g to which he is incapable of earning his Uvelihood.

 (2) Upcn th~ disc.>ntinu1nc~ of a cash grant under suection (1), it shall not bJ obligatory on the grantee to perform the function or discharge the duty, if

an"y attached to such grant".

c••) "2(1)-'Cash grant' means a grant of money which is enforcea,, le by th'e grantee against the State Government on the c:Iate of the coming into force -0f this Act but does not include-

(i) a grant of money for-

(a) services of public temPles, mosque or .church; .or (b) W'?rship r

public temples, mosque or.church; or (c) readingpuran in pubhc temples; or (d) pcrformirig Kirlan in public temples;

(ii) a grant of money to charitable or religious institutions; (111') a grant of. money or pension or annuity or special or perpetual annuity sanctio.ned under-

(i:i) s. S .of the Central Provine<.& and Berar Revocation of Land Revenue Exemptions Act, 1948 (XXXVII of 1948);

(b) s. 77 or s. 81-A of the Madhya Pradesh Abolition of Proprietary Rights (Estate~ Mahals Alienated Lands) Act, 19SO (1 of 1951);

(c) s. 41 of the Vindhya Pradesh Abolition of Jagirs and Land Reforms

 Act, 1952 {XI of 1952);

(d) the orders relating to Jagirs in Bhopal 'lhekam Khosravi, 1949,

para 30' read with s. 45-A of the Bhopal Abolition of Jagirs and Land Reforms Act, 1953 (No. X of 1953); and

(e) sub-s. (2) of s. 160 of the Madhya Pradesh Land Revenue Code,

1959, (20 of 1959);"

A money which is enforceable by the grantee against the State Goverliment on the date of the coming into force of the Act but does not include those granis which are specifically excluded.

This definition takes in all the cash grants whatever may be the nature or origin of those grants. The definition of a cash grant is wide enough to include cash grants sanctioned by ex-Rulers in lieu of B J agirs or other properties resumed or even payments agreed to be made in lieu of loans given to the Rulers.

Different considerations may arise if the grants abolished are gratuitous payments, grants in lieu of services to be rendered or other resumable grants.

But as mentioned earlier, the definition of cash grants in s. 2(1) does not make any distinction between the various types of cash C grants.

Hence, the said definition will have to stand or fall as a whole, there being no basis for severing some out of the several grants included therein. It is impennissible for this Court to rewrite that clause and confine the definition only to such of the cash grants which the legislature might be competent to abolish.

The doctrine of severability is applicable only if it is possible D to separate the legal from the unconstitutional portion of the provision. If it is not possible to do so, the entire provision has to be struck down as unconstitutional. see Kameshwar Prasad v. State of Bihar(').

The High Court has come to the conclusion that a "cash grant" is property within the meaning of that expression in Arti- 1: cles 19(l)(f) and 31. This conclusion was not challenged before us. It is obvious that a right to a sum of money is property.

There was controversy before the High Court whether the abolition of cash grants under the Act . can be considered as acquisition under Art. 31 (2). It was urged before that Court on behalf of the State that that abolition of cash grant amounted I' to compulsory acquisition of property f<JI'. public purpose and as the Act has prescribed the compensation payable to grantees the acquisition in question is completely protected by Art. 31(2). The High Court replied this contention opining that as the law in question cannot be considered as having transferred the rights of the grantees as proyided in Art. 31 (2A) the State cannot seek D the protection of Art. 31 (2). This conclusion is debatable. It is possible to view the discontinuance of the payment of cash grants under s. 3 as a statutory transfer of rights of the grantees to the State. But there is no need to pursue this line of reasoning for reasons to be stated presently. Though the language of Art. 31 (2) prima facie comprehends movable properties including choses in action and money there are valid grounds to hold that H choses in action and money are outside the reach of Art 31 (2).

In the United States of America, opinion is divided among the

(I) A.!.R.1962 S.C. 1166.

494 SUPREME COUllT REPOllTS [1968] 3 s.c.R.

jurists whether money and choses in action can be acquired in the exercise of the power of eminent domain though the prepondel:'llllce of opinion appears to be that it is impermissible.

But so far as we are concerned; this question is concluded by the decisions of this Court. In State of Bihar v. Kameshwar Singh(1) this Coun held that under Art. 31 (2) of the Constitution, money and choses in action could not be acquired. Mahajan, J. (as he then was), speaking for the majority, after quoting with approval certain passages from Cooley's Constitutional Limitations, observed (at pp. 943-44 of the Report) :

"It was not necessary to decide in this case whether under the comp_ulsory acquisition power the State has the power to acquire choses in action or money, but it cannot be seriously disputed that such an acquisition amounts to a forced loan and that the desired result can be more appositely obtained in exercise of the police power of the State than of the power of eminent domain or compulsory acquisition of property and that compensation in such a case is the same amount of money that is being taken and in the case Of a chose in action the amount of money that it would produce.

In this situation it cannot be. held that fifty per cent of the outstanding arrears was compensation in any sense of that expression for this acquisition. The true position is that the State took over all the arrears and decided to refund fifty per cent of them and forfeit the rest. The validity of this acquisition has to be decided independently of the acquisition of the estates. It has no connection with land reform or with any public purpose. It stands on the same footing as other debts due to zamindars or their other movable properties, which it was not the object of the Act to acquire. As already stated, the only j)urpose to support this acquisition is to raise revenue t6 pay compensation to some of the zamindars whose e5tates are being taken.

This piirp0se does not fall within any definition, however wide, of the phrase 'public purpose' and the law therefore to this extent is unconstitutional."

In the same case, Mukherjea, J. (as he then was) observed:

"Taking money under the right of emineni domain when it must be compensated by money afterwards, could be nothing more. or less than a forced loan and it is difficult to say that it comes under the head of acquisi-

(1) (!952) S.C.R. 889.

A lion or requisitioning of property •.•• and is embraced within its ordinary connotation."

Chandrasekhar Aiyar 1., in that very case held that though money and choses in action are movable property and would prima facie come under the power of compulsory acquisition the power under Art 31 (2) could not be used to support such acquisition "on B the ground that generally speaking there would be no public purpose in their acquisition"'.

The majority view in that case was followed by this Court in Bombay Dyeing and Manufacturing Cb Ltd. v. The State of Bombay(1 ). That case considered the validity of s. 3 (1) of the Bombay Labour Welfare Fund Act which provided that there should be constituted a fund called the Bouie bay Labour Welfare Fund and notwithstanding anything contained in any other law for the time being in force, the same specified in sub-s. (2) ihereof shall be paid into the fund. Section 3

(2) provided inter alia :

"The Fund shall consist of :-

(a) all fines realised from the employees;

(b) all unpaid accumulation." / The Court held following the decision of this Court in State of Bihar v. Kameshwar Singh(') that the provision in question is, c _ invalid and is not protected by Art 31 (2). ;.

From the above decisions it follows that choses in action anif': ' E money could not be acquired under Art. 31 (2). If it is held that

State by the exercise of its power of eminent domain can acquire choses in action and money belonging to its citizens, by paying a fraction of the money taken as compensation, the fundamental right guaranteed under Art. 19(1 )(f) would be deprived of all ilS' _ contents and that Article will cease to have any meaningful p111-f F pose.

The power conferred under Art. 31 (2) is not a taxing-< power.

That power cannot be _utilised for enriching the coffers( of the State. _ It is true that the abolition of tbe cash grants would' augment the resources of the State but that cannot be considered •as a public purpose under Art. 31 (2). If it is otherwise it would be permissible for the legislatures to enact laws acquiring the public debts due from the State, the annuity deposits returnable by G it and provident fund payable by it by providing for the payment of some nominal compensation to the persons whose rights are acquired as the acquisitions in question would augment the resources of the State. But nothing so bad can be said to be within contemplation of Art. 31 (2).

That Article must be construed harmoniously with Art. 19(1)(f).

If so construed, it is obvious

H that the public purpose contemplated by that Article does not include enrichment of the coffers of the State. Further the compensation referred to in Art. 31 ( 2) is, as held by this Court in various

(I) [1958] S.C.R. 1122.

(2) !1952] S.C.R. 889.

..,,_._- ·· ., r ,. I

496 SUPREME COURT llBPOllTS

decisions, is the just equivalent of the value of the property taken.

A If for every rupee acquired fifty paisas or less is made payable as compensation the vi()lation of Art. 31 (2) would be patent and in tliose circumstances the exercise of the powers by the legislature would be considered as a fraud on its powers and consequently the legislation will be struck down as a colourable piece of legisla- B

It is true that in State of Bihar v. K.ameshwar Singh(') and in Bombay Dyeing and Manufacturing Co Limited v. Stat8 of Bom bay('), this Court was considering the question of taking of monoy by the State that was in the hands of others, but in this case we are. concerned with the abrogation of the liability of the Government. But we fail to see any difference in principle in these two sets: of cases. In the former case the Government was compulsorily taking others' property and in the latter it seeks to appropriate to itself the property of others which is in its hands.

It was next urged that the impugned Act, even if it is held not to be protected by Art. 31(2) is still valid under Art. 31(1). The said Article says that no person shall be deprived of his property save by authority of law.

A law which authorises the State to deprive a person of his property must be a valid law.

It must not violate Art. 19(1 )(f) which means that it must satisfy the requirements of Art. 19(5). In Kava/appara Kottarathi Kochuni v.

State of Madras(•) this Court laid down that the word "law" used by Art. 31(1) indicates its limitations and refers back to E Art. 19 and any law made under Art. 31 (1) can be sustained only if the restrictions it imposes are reasonable and in the interest of the general public, . The Act which empowers the State to appropriate some one else's property for itself solely with a view to augment the resources of the State, cannot be considered as a reasonable restriction in the interest of the general public. That conclusion of ours receives support from the ratio of the decisions of this Court in State of Bihar v. Kameshwar Singh(') and in Bombay Dyeing and Manufacturing Co. Limited v. Stale of Bombay(') wherein Venkatarama Aiyar, J. speaking for the Court, observed :

"Assuming that the correct position is what the respondents contend it is that the case falls within Art. 19(l){f), the question that has still to be determined is whether the impugned Act could be supported under Art. l 9(S). There was some discussion before us as to the scope of this provision, the point of the debate being whether the words _'imposing reasonable restriction'

(I) [1952) S.C.R. 889.

(2) (1958) S.C.R. 1122.

would cover a legislation, which not merely regulated the exercise of the rights guaranteed by Art. 19(1 )(f) but totally extinguished them, and whether a law like the present one which deprived the owner of his properties could be held to fall within that provision. It was argued that a law authorising the State to seize and destroy diseased cattle, noxious drugs and the like, could not be brought within Art. 19 ( 5) if the word 'restriction' was to be narrowly construed, and that accordingly . the power to restrict must be held to include, in appropriate

case&, the power to prohibit the exercise of the right.

That view does find support in the observations of Lord Porter in Commonwealth of Australki v. Bank of New South Wales(') : but the present legislation cannot be sustained even on the above interpretation of the word "restriction", as s. 3 ( 1) of the Act. deals with moneys and money cannot be likened to diseased cattle or noxious drugs so as to attract the exercise of police power under Art. 19 ( 5). It appears to us that whether we apply Art. 31(2) or Art, 19(5), the impugned Act cannot be upheld and it must be struck down." If Article 19(5) is interpreted to mean that State can take by authority of law anyone's property for the purpose of increasing its assets or revenues, the guarantee given by Art. 19(1)(f) would become illusory, a proposition to which this Court cannot subscribe.

For the reasons mentioned above we are unable to uphold the validity of Madhya Pradesh Abolition of Cash Grants Act. .

These appeals accordingly fail and are dismissed with costs with one set ol hearing fee.

Y.P.

Appeals disriwed.

(I} (1950] A.C. 235.

STATE OF MADHYA PRADESH

RANOJIRAO SHINDE & ANR

March 21, 1968

M. HIDAYATULLAH, C.J.

R. S. BACHAWAT

K. S. HEGDE

A. N. GROVER, JJ.

Constitution of India

Art. 19(1)(/) and 31(2)

Art. 31(2)

Art. 19(l)(f)

Art. 31(2)

Art. 19(1)

Art. 31

Art. 19(1)

Article 31(2)

Art. 19(1)(1)

Art. 3112

Art. 19(1)(f)

Art. 19(5)

Art. 31(1)

Art. 19

Art. 31( I)

Art. 19(5)

Art. 19(1)(f)

[1960] 3 S.C.R. 887

I. N. Shroff

B. Sen

P. W. Sahasrabuddhe

S. K: Dholakia

A. G.

Ratnaparkhi

Hegde

High Court of Madhya Pradesh

Art. 19(l)(f)

Art. 133(1)(c)

State of Madhya Pradesh

Art. 31

Art. 19(1)

State of Madhya Bharat

Madhorao Phalke

Gwalior

Art. 372

State of Gwalior

Government of Madhya Bharat

Art. 31

April 5, 1963

July 25, 1963

August 2, 1963

Madhya Pradesh

Section 11

Section 2

Section 3

Section 4

Section 5

Section 6

Madhya Pradesh Act

Section 7

Section 8

s. 5

Section 9

Section 10

Section 11

Section 12

s 3

s. 2(1 )

s. 2(1)

(1968] 3 S.C.R.

3

s. 2

s. 77

s. 81

s. 41

Act, 1952

s. 45

s. 160

Madhya Pradesh Land Revenue Code

s. 2(1)

Art. 31

Art. 31(2)

Art. 31

Art. 31

s. 3

Art. 31

Art 31

United States of America

Art. 31

Mahajan

Cooley

Mukherjea

Chandrasekhar Aiyar

Art 31

s. 3

Section 3

Art 31

Art. 31

Art. 19(1 )(f)

Art. 31

Art. 31

Art. 31

Art. 19(1)(f)

Art. 31

Art. 31

Art. 31(2)

Art. 31(1)

Art. 19(1 )(f)

Art. 19(5)

Art. 31(1)

Art. 19

Art. 31

Venkatarama Aiyar

Art. 19(l)

Art. 19(1 )(f)

Art. 19

Porter

s. 3

Art. 19

Art. 31(2)

Article 19(5)

Art. 19(1)(f)


NAm SINGH AND OTHERS v.

THE BOARD OF REVENUE AND OTHERS March 21, 1968

[J. C. SHAH AND G. K. ~ITTER, JJ.J

U.P. Zamindari and Land Reforms Act, 1952 s. 20(b)(i)-resp0ndents shown in record of rights for l356F c..r sub-tenants-if to be regarded as occupants entitled to 'Adhivasi~ rights-er whether inquiry to be about pr.opriezy of entry.

In 1945 one R who was the thekadat of the proprietary rights of a village, sued the appellants and the respondents, other than tho first res• pondent Board of Revenue, far their ejectment under section 171 Of the U.P. Tenancy Act. alleging that the appellants bad illegally sub-let the lands tp the respondents. The appellants and tbe respondents made a common case denying the alleged sub-letting and stating that the entries in the villa8'e records about the respondents being sub-tenants were erroneous.

The suit was dismissed in March, 1946, I.e., towards the end of 1353 F on the ground that there was no sub-letting and the entries were not correct No attempt was made by anyone to bring the village records in harmony with this decision and the respondents continued to figure as

suf>..tenants in these records.

On his attention being drawn to this, the Lekbpal, on his own authority. removed the entries in favour of the respondents from the records for the year ending 1358 F, but the entries for the year 1356 F were left undisturbed as it was not within the Lekhpal's jurisdiction to alter these.

After the .U.P. Zamindari Abolition and Land Reforms Act came into force in 1952 i.e .. at the beginning of 1360 F, on the strength of the Khasra and Khatauni of 1356 F, the respondents claimed•.Afiiivasl rights under section. 20(b) (i) of the Act and filed six suits praying for the recovery of possession of. the lands under s. 232 of the Act. They lost the. suits before the sub Divisional Officer and Additional Commissioner . of Varanasi but succeeded in appeals to the Board of Revenue.

The appellants thereafter filed writ petitions for quashing the Of\(ers of the Boatd; 1111d the High Court although of the view that the impugned

orders of the Board of Revenue were wrong, held that the Board had jurisdiction to interpret section 20(b) as it thought proper; and as the orders passed by it were final without being subject to any appeal. they could not be quashed by certiorari as being mere errors of law.

In appeal to this Court, it was contended, inter alia, on behalf of the appellants that (i) the correctness of the entry in the record of rights of 1356 F could be one into and was capable of challenge in a court of law exercising jurisdiction under Art. 226; (ii) in the present case there

was an adjudication in March 1946 that the respondents were not subtenants; consequently, unless they showed that they bad thereafter become sub-tenants, the benefit of the entry in their favou'r in 1356 F could not be availed of by them; (iii) in the Khasra of 1356 F the respondents were only recorded as sub-tenants but not as occupants and could not therefore get the benefit of s. 20(b)(i) of the Act.

HELD : Dismissing the appeals.

The record of rights for the year 1356 F had not been corrected afte'rwards. The court had to go by the entry in the record of rights and

no enquiry need be made as to when the respondents became sub-tenants after the decision in the suit filed by R. As between the tenant and the slJ!>.tenant, the entry in the record of rights in favour of the sub-tenant made him the occupant entitled to the adhivcsi rights under s. 20 of the Act. !504 G-Hl

The Upper Ganges Sugar Mills Ltd. v. Khalil-ul-Rahman and others, [1961] 1 S.C.R. 564; Amba Prasad v. Abdul Noor Khan & Ors. [1964] 7 S.C.R. 800; Ram Dular Singh & Anr. v. Babu Sukh Ram & Ors., (1963] A.L.J. 667; and Nanakchand v. Board of Revenue U,.P. [1955] A.L.J. 408;

applied.

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 621 to 626 of 1965.

Appeals by special leave from the judgment and order dated March 6, 1964 of the Allahabad High Court in Civil Misc. Writs Nos. 1428 to 1433 of 1961.

1. P. Goyal and Sobhag Mal Jain, for the appellants (in all the appeals).

S. P. Sinha and M. I. Khuwaja, for respondents Nos. 2 to 4 (In all the appeals).

The Judgment of the Court was delivered by Mitter, J. These six appeals by special !.:ave arise from a common judgment of the Allahabad High Court rejecting six writ petitions fifed by the appellants in that court for quashing the orders of the Board of Revenue arising out of cases filed under section 232 of the U.P. Zamindari Abolition and Land Reform> Act.

The relevant facts are as follows.

In 1945 one Ram Dhari Singh who was the thekadar of the proprietary rights of a village sued the appellants and the respondents other than the Board of Revenue for their ejectment under section 171 of the U.P. Tenancy Act alleging that the appellants had illegally sublet the lands to the said respondents. Tire appellants and the respondents made a common cause denying the alleged subletting and stating that the entries in the village records about the respondents being subc tenants were erroneous.

On 3rd March 1946 i.e., towards the end of 1353 F. the suit was dismissed on the ground that there had been no subletting and that the entries regarding the subletting in. the village records were not correct. No attempt was,. however made by anyone tobring the village records in harmony with the said decision with the result that the said respondents continued to figure therein as sub-tenants as before. On his attention being drawn to this fact, the Lekhpal on his own authority removed the entries in favour of the said respondents showing them as sub-tenants from the records of the year ending 1358 F.

500 SUPREME COURT REPOllTS

(1968) 3 S.CR.

The entries in the year 1356 F. were left undisturbed and it was A not within the jurisdiction of the Lekhpal to make any alterations therein.

The U.P. Zamindari Abolition and Land Reforms Act (hereinafter referred to as the 'Act') came into force with the commencement of 1360 F. i.e. 1st July, 1952. Under s. 20(b)(i) B every person who . was recorded as occupant in the Khasra or Khatauni of 1356 F. prepared under sections 28 and 33 respectively of the U.P. Land Revenue Act was to be called an "adhivasi" and was subject to the provisions of the Act, to be entitled to take or retain possession of the land (unless he would become a bhumidar or an asami). The second Explanation to the section provided that where any entry in the records referred C to in clause (b) of section 20 had been corrected before the date of vesting under or in accordance with the provisions of the U.P.

Land Revenue Act, 1901, the entry so corrected was to prevail for the purposes of the said clause. The third Explanation provided that for the purposes of the second Explanation an entry shall be deemed to have been corrected before the date of vestfitg D if an order or decree of a competent court requiring any correction in the records had been made before the said date and had become final even though the correction may not have been incorporated in the records.

On the strength of the Khasra and Khatauni of 1356 F. the respondents claimed adhivasi rights under s. 20(b)(i) of the Act E They filed six suits praying for recovery of possession under s. 232 of the Act.

According to their case, the appellants were never in possession of the lands in dispute at any time. They lost the suits before the Sub Divisional Officer and the Additional Commissioner of Varanasi but they ultimately succeeded in appeals to the Board of Revenue.

The appellants filed the writ petitions for quashing the orders of the Board of Revenue.

The High Court went elaborately into the procedure for making entries in the records of rights and examined the question as to whether an entry recording a person as a sub-tenant was equivalent to an entry recording him as occil- G pant for the purpose of the Act. The High Court concluded that the impugned orders of the Board of J!.evenue were wrong but held that the Board had jurisdiction to interpret s. 20 (b) as it thought proper . and as the orders passed by it were final without being subject to any appeal, they could not be quashed by certiorari as being mere errors of law.

It is from this judgment that the present appeals have been launched.

H Learned counsel for the appellants. raised the following points in his address :

( 1) The correctness of the entry in the record of rights of 1356 F. can be gone into and is capable of challenge in a court of law exercising jurisdiction under Art. 226.

(2) In the present case there was an adjudication in March 1946 and the respondents were not sub-tenants : consequently, unless they showed that they had hereafter become sub-tenants the benefit of the entry in their favour in 1356 F. could not be -availed of by them.

(3) Under rule 183 of the rules framed under the Act it was incumbent on the respondents to state in their applications the dates of their dispossession and the failure to do so rendered their petitions defective.

( 4) In the Khasra of 1356 F. the respondents were only recorded as sub-tenants but not as occupants and hence they cannot get the benefit of s. 20(b )(i) of the Act.

Before entering into a discussion as to the merits of the points raised, it is worthy of note that before the Board of Revenue i, e. the ultimate fact-finding authority the contention on behalf of the respondents who were the appellants before the Board, was that they had been recorded as occupants in the revenue papers of 1356 F. and hence they were entitled to be reinstated to pos session, it being unneeessary for them to prove that they were in actual possession in 1356 F.

The arguments before the Board of Revenue on behalf of thepresent appeliants were : ( 1) as the appellants were not in possession, they were not sub-tenants either in 1356 F. or before and hence they _could not be regarded as occupants in 1356 F : in support of this proposition reliance was placed on a decision of this Court in The Upper Ganges Suirar Mills Ltd. v. Khalil-ul- Rahman and others(') which will be discussed later : (2) as both the courts below and the Board of Revenue had concurrently found that there was no contract of sub-tenancy, the respondents could not be regarded as sub-tenants and could not rely on an entry in the year 1356 F. in their favour, and (3) a sub-tenant was not an occupant and as such not entitled to maintain an application under s. 232 of the Act.

All these contentions were turned down by the Board of Revenue.

As regards the first point the Board took the view that the Upper Ganges Sugar Mills'(') case did not lay down that a person had to be in actual possession before be could get the benefit of the entry in the record of rights of 1356 F. With regard to the second point, the Board held that even if the respondents had failed to prove that they were sub-tenants they could

(!) [1961] I S.C.R. 504.

.502

SUPREME COURT REPORTS [1968] 3 S.C.ll.

still be treated as trespassers.

The third point was disposed of by ae Board placing reliance on an earlier deci.sion of its own to the effect that the entry of sub-tenancy should be held to be an entry of a recorded occupant.

There are two decisions of this Court which negative the points <:anvassed before us. In the Upper Ganges Sugar Mills'(') case, the appellant company, a thekadar up to 1355 F. (June 1948) had retained possession of the lands in dispute by virtue of stay orders granted although the landlord had succeecled in the ejectment suit under the U.P. Tenancy Act in all the courts up to the Board of Revenue.

During the pendency of the company's appeal to this Court, the Act came into force.

The company started proceedings to recover actual possession under s. 232 of the Act read with sections 12 and 20. The trial court decided in favour of the company and ordered delivery of possession under both the sections. The landlords lost in appeal. Thereupon there was a Se<:ond Appeal to the Board of Revenue which was dismissed in January 1956. The landlords came to this Court on special leave, The appeals were remanded by this Court for a finding whether the company had acquired any rights under s. 20 of the Act. The Board held that the company was entitled to such benefit and had acquired Adhivasi rights thereunder.

Before this Court. at the final hearing, there was a good deal of discussion as to the meaning of the expression "a person in occupation". It was held that in order that the company could take the benefit of s. 20 it should have been recorded as in occupation of the land in dispute in the year 1356 F. and the only limitation placed by judicial decisions on the meaning of the word "occupant" was that a person should be in occupation \n his own right and not on behalf of some one else. On behalf of the landlords it was argued that the company was not in possession in its own right firstly because there was an order for ejectment in November 1948 and thereafter it remained in possession only on account of the stay orders; and secondly, as L thekadar the possession of the company was on behalf of the landlords.

This Court held that on the landlords' own showing the company was not in possession as a thekadar as the theka had expired before 1356 F. and consequently the nature of occupation of the company was on its own behalf and not on behalf of the court or of the landlords. In the result, the company was held entitled to Adhivasi rights. - This case establishes that a person recorded as an occupant on the relevant date although found by courts of Jaw to have no -ri!lht to possession even prior thereto, is not to be denied <Odhivasi rights.

The case of Amba Prasad v. Abdul Noor Khan and others(1) is more in point.

Amba Prasad was a zamindar of a village before the coming into operation of the Act. The opposite parties were persons whose names had been recorded in column 23 (miscellaneous) in the Khasra for the year 1356 F. as persons in possession . and they claimed to be recorded as occupants of the B fields in dispute and to have obtained Adhivasi rights under s. 20.

The case of the respondents was that they were in occupation of the land and had been dispossessed after June 30, 1948 by the appellant and as they were recorded occupants i11 1356 F. they were not required to prove actual possession.

The appellant's stand was that the entry was fraudulently made after July 1, 1949.

The suits were dismissed by the Sub-Divisional Officer but in appeal the Additional Commissioner held that the respondents had acquired Adhivasi rights.

This was upheld by the Board of Revenue. The appellant then filed appeals to this Court.

The real dispute as noted by this Court was, whether a person who was recorded as 'Qabiz' but not as a tenant or subtenant would get the advantage of s. 20 of the Act and claim D Adhivasi rights. Examining the scheme of s. 20 along with its Explanations, it was observed :

"The section, speaking generally, says that certain persons "recorded" as "occupants" of lands (other than grove lands or lands to which section 16 applies) shall be known as adhivasis and shall be entitled to retain or to regain possession of them after the date of vesting which was July 1, 1952. . . . . . . Su.ch persons must be recorded as occupants in the Khasra or Khatauni for 1356 F. (1-7-48 to 30-6-49).

If such a: person is in possession he continues in possession.

U he is evicted after June 30, 1948 he is to be put back in possession notwithstanding anything in any order or decree. By fiction such persons are deemed to be entitled to regain possession (Explanation I). The emphasis has been laid on the record of khasra or khatauni of 1356 F. and June 30 1948 is the datum line. The importance of an entry' in these two documents is further apparent from Expl!!nations Il and III. Under the former if the entry is corrected before the date of vesting (1-7-52) the corrected entry is to prevail and under the latter the entry is deemed to be corrected (even though not actually corrected) if an order or decree of a competent court ordering the correction had been made before the date of vesting and the order or decree had become final.

There are thus two date lines. They are June 30,.

(I) [1964] 7S.C.R. 800.

SUPREME COURT REPORTS

1948 and July 1, 1952, and the title to possession as A adhivasi depends on the entries in the khasra or khatauni for the year 1356 F."

The Court went on to add that the word 'occupant' had not been defined in the Act and said ;

"Since khasra records possession and enjoyment the word 'occupant' must mean a person holding the land in possession or actual enjoyment The khasra, however, may mention the proprietor, the tenant, the subtenant and other person in actual possession, as the case may be. If by occupant is meant the person in actual possession it is clear that between a propri_etor and a tenant, the tenant, and between a tenant and the subtenant the latter and between him and a person recorded in the remarks column as "Dawedar qabiz" the dawedar qabiz are the occupants. . . . . . . . . The section eliminates inquiries into disputed possession by accepting the records in the khasra or khatauni of 1356 F. or its correction before July 1, 1952. It was perhaps thought that all such disputes would have solved them- selves in the four years between June 30, 1948 and June 30, 1952." With regard to the question as to whether a mere entry in 1356 F. without possession in that year was sufficient, reference was made by this Court to the Full Bench decision of the Allahabad High Court in Ram Dular Singh and another v. Babu Sukh Ram & others( 1) which had endorsed the earlier view in N anakchand v.

Board of Revenue, U.P.( 2 )~ In the last mentioned case the Allahabad High Court had observed that the words in the section were not "every person who was an occupant in 1356 F." nor were the words "every person who was recorded as an occupant in the year 1356F. and who was in possession in that year." According to the Allahabad High Court there was no warrant for introducing words in the section which were not there. This Court felt that in view of the Jong established line of cases, there was no justification for reopening this question and the decision of the Board of Revenue was right.

These decisions negative the first, second and the fourth points sought to be raised on behalf of the appellants. The record of rights for the year 1356 F. had not been corrected afterwards. We have to go by the entry in the record of rights and no enquiry need be made as to when the respondents became sub-tenants after the decision in favour of the landlord, Ram Dhani Singh. The last decision of this Court also shows that as between the tenant and the sub-tenant the entry in the record of rights in favour of the

.(!) i1963J A.L.J. 667.

(2) [195S] A.L.J. 408.

sub-tenant makes him the occupant entitled to the adhivasi rights under s. 20 of the Act.

With regard to the point as to the violation of rule 183 it is enough to say that the point was not canvassed before the Board of Revenue and as such we need not look into it.

B In the result, the appeals fail and are dismissed with costs.

One hearing fee.

R.K.P.S.

Appeals dismissed.

NAm SINGH AND OTHERS

THE BOARD OF REVENUE AND OTHERS

C. SHAH

Zamindari and Land Reforms Act, 1952

s. 20(b)(i)

section 171

Lekbpal

s. 232

section 20(b)

Art. 226

s. 20(b)(i)

s. 20

[1961] 1 S.C.R. 564

[1964] 7 S.C.R. 800

CIVIL APPELLATE JURISDICTION

Allahabad High Court

P. Goyal

Sobhag Mal Jain

S. P. Sinha

M. I. Khuwaja

Mitter

section 232

Ram Dhari Singh

section 171

3rd March 1946

s. 20(b)(i)

sections 28 and 33

Land Revenue Act

section 20

Land Revenue Act, 1901

s. 20(b)(i)

s. 232

Varanasi

s. 20

Art. 226

s. 20(b )(i)

s. 232

Upper Ganges Sugar Mills

s. 232

sections 12 and 20

s. 20

s. 20

s. 20

June 30, 1948

July 1, 1949

s. 20

s. 20

section 16

July 1, 1952

June 30 1948

June 30, 1952

Ram Dhani Singh

s. 20


LAJWANTI v.

LAL CHAND AND ORS.

March 22, 1968

[J. C. SHAH, V. RAMASWAMI AND G. K. MITTER, JJ.J

East Punjab Factories (Control of DisnwntUng) Act 19411, s. 3- Whether bars execution of delivecy of possession.

Execution of Decree-No appeal from earlier execution application- Fresh application, if barred by res judicata-S. 3 of East Punjab Factories (Control of Dismantling) Act, if bars.

The eviction of the respondent from the appellant's premises, which \\'38 used as a factory, was decreed and application for execution of an order for pssession was made.

The respondents resisted the execution on the plea that the machinery installed in the factory could not be removed without the prior permission of Chief Inspector Of Factories as provided by the East Punjab Factories (Control of Dismantling) Act. The execution of the decree in so far as it involved the dismantling or removal of the machinery was stayed, but the p0ssession of the other part of the premises was allowed. Both parties appealed. The appellate Court took the view that the machinery and spare parts were lying practically in all the rooms, and the locking and sealing of the factclry would result in its closure which would be against the provisions of the Act, and therefore directed the appellant to pursue the matter with the State Government.

Thfa order dated April 22, 1953 was not challenged by any appeal. But the appellant restarted th" execution proceedings in which it was held that the State Government had refused permission for demolition of the factory, so the file was ordered to be consigned to the record room. The appOUant filed n appeal, which was dismissed, but in further revision the High Court by its order dated July 13, 1955 observed that on the record it wa:s not possible to decide whether the execution of the decree would defeat the provisions of s. 3 of the Act, so it set aside the order and directed the executing court to give decision on points that arose under s. 3 of the Act, The executing court found that the provisions of the Act did not prohibit the execution and as such the respondents were liable to ejectment but since the application had become over a year Old it would be struck off the file with liberty to make a fresh application. The respondents appealed.

The District Judge held that the Act did not apply to involuntary dismant1ing of factories and that the issue raised by the ex-ecuting court did not arise but in fact it had been decided against the appOUant by the High Court in revision. The appellant's appeal to High Court was dismissed by a Single Judge, and in the Letters Patent Appeal, it \Vas held that the delivery of possession was not barred in execution of decree by the Act, but the matter had become res judicala in conse~ quenee of the decisions in the first execution application and the decision of the High Court dated July 13, 1955 in the second execution application. Allowing the appeal, HELD : The Act does not bar the deJivery of possession in execution of a decree. It makes no re1ference to any decree for possession against the owner of a factory.

By ordering delivery of possession of the premises. the executing court does not make an order for dismantling a factdry and a bailiff charged with execution of a warrant for possession does not infringe the provision of law by rendering possession of the proper!• to the decreeholder. [510 C-DJ

There was no final order about the inexecutability of the decree on the first application for execution. Further the High Court by its order dated July 13, 1955, did not .decide the question as to whether the decree for J>OSSCSSion would be inexecutable in. \iew of the Act. It stated expressly

that it \\oas not possible for it t~ dcdde whether the execution of the decree 1,1, ould defeat the provisions of the Act, and being unable to come to a decision on the record it rmanded the matter to the court of execu tion.

It found itself unable to interpret the section on the evidence hefore it.

The proceedings subsequent to the remand order culminated in the order of the Division Bench from which the present appeal a'rose.

The order dated July 13, 1955 was not a final order which put a eat on the proceedinp, [510 F-H]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 687 of 1965.

Appeal by special leave from the judgment and decree dated October 3, 1961 of the Punjab High Court in Letters Patent Appeal No. 405 of 1958.

C. B. Agarwa/a and K. P. Gupta, for the appellant.

S. N. Anand, for respondent No. 1.

The Judgment of the Court was delivered by Mitter, J. This is an appeal by special leave from a judgment and order of the Punjab High Court in Letters Patent Appeal No. 405 of 1956.

The matter arises out of an application for execution of an order for possession passed on a compromise between the parties.

The Division Bench of the Punjab High Court felt itself unable. to help the decree-holder because of an earlier decision in the execu tion proceedings which was held to constitute res judicata against her. The main question for consideration is, whether it was right in doing so.

The relevant facts are as follows. As far back as April 1950.

Harbans Lal, the late husband of the appeJlant before us, obtained an order for eviction from the Rent Controller against Lal Chand and Ram Rattan Dass Jain in respec't of certain premises which were being used as a factory.

This decree was upheld in appeal and in July 1951 the decree-holder applied for execution. The court bailiff made a report dated the 14th July 1951 that on his going to give delivery of possession resistance was offered by a number of persons and being apprehensive of breach of peace he could not effect delivery of possession.

The judgment debto1.s appear to have approached the Department of Industries and informed them of the attempt at their eviction by the decree-holder.

The copy of a letter from the Extra Assistant Director of Industries to the Chief Inspector of Factories dated July 18, 1951 exhibited at the instance of the judgment-debtors goes to show that the machinery installed in the factory could not be removed without 7 Sup. C.J./68-8

k:=--

SUPREME COURT REPORTS

[1968] 3 S.C.R.

the prior permission of the Chief Inspector of Factories.

Obviously the judgment-debtors wanted to thwart the decree-holder from getting possession through court by invoking the aid of the East Punjab Factories (Control of Dismantling) Act XX of 1948. hereinafter referred to as the Act.

The judgment-debtors applied for stay of execution of the decree on August 23, 1951. The Subordinate Judge issued notices but did not grant stay. On appeal the District Judge accepted the appeal noting th.at the Subordinate Judge had not given any finding about the applicability of the Act.

He had before him the report of the bailiff that possession of the premises could not be given over as there were machinery stored therein .. By order dated October 11, 1951 he directed the Subordinate Judge to decide the objections under the Act.

The , Subordinat~ Judge framed a number of issues including one which read : 'whether the judgment-debtors could not be dispossessed of the factory and machinery could not be dismantled without permission of the Government ?" Taking evidence of the parties and noting the contents of the letter of the Industries Department, he observed that the judgment-debtors had not secured permission but the decree-holder might follow up the matter through court. He stayed execution of 'the decree in so far as it involved the dismantling or removal of the machinery but allowed the same for securing possession of the part of the premises where no machinery was stored. This was on 7th February, 1953.

Both parties filed appeals from this order which were dismissed. The appellate court was of the view that machinery and spare parts were lying practically in all the rooms of the building and the locking and sealing of the factory would res11lt in its closure which would go against the provisions of the above-mentioned Act.

The decree-holder was therefore directed to pursue the matter with the State Government.

Incidentally, the court noted that the decree-holder bad not challenged the proposition that the court could not order delivery of possession without the requisite sanction for the dimantling of the factory.

This order dated 22nd April 1953 was not challenged by any appeal to the Higb Court.

It appears that the court consigned the execution proceedings to the record room on July 25, 1953.

On Augut 18, 1953 the decree-holder applied for execution proceedings being re-started. On November 7, 1953 the executing court observed that a reply from the State Government had been received to the effect that permissi<m for demolition of the factory could not be given. The execution fi!ewas therefore ordered to be consigned to the record room once more. From this order. an appeal was preferred by the decree, holder.

The Additional District Judge held that in view of the imperative provisions of section 3 of the Act the decree-holder could not be granted posses-

A sion in execution of the decree and dismissed the appeal by order dated January 8, 1954. On further appeal, a learned Judge of the High Court by order dated July 13, 1955 observed that in the &ecution proceedings BO evidence had been adduced on e points arising under Punjab Act XX of 1948. He therefore said as follows : B

"On the present record it is not possible for me to decide whether the execution of the decree would defeat the provisions of section 3 of the Punjab Act XX of

1948. That being the position of matters, I set aside the order passed by the Subordinate courts and direct the. court of execution to give fresh decision on the points that arise under section 3 of Punjab Act XX of 1948. ln proceedings pursuant to this order parties will be given opportunity to examine bearing on the points that arise under section 3 of Punjab Act XX of 1948." On remand the Subordinate Judge by order dated 30th December, 1955 held that the Act was not intended to cover involuntary dismantling in execution of orders of competent courts : further the Rent Restriction Act, 1949 passed after Act XX of 1948 did not take any notice of the prohibition contained in the said Act.

In the result he found that the respondent was liable to be ejected in e"x.ecution of the decree for eviction but as the application had become over a year old it would be struck off the file and the decree-holder be at liberty to take out execution of the decree by a fresh application. ·

The judgment-debtors went up in appeal to the court of the District Judge.

The District Judge by order dated December 31, 1956 held that the Act did not apply to involuntary dismantling F of factories and that the issue raised by the Subordinate Judge in this connection did not arise but in fact it had been decided against the landlord by the High Court in Revision. According to him, the order of the High Court went to show that s. 3 of Act XX of 1948 covered delivery of possession even in execution of the order of the Rent Controller for otherwise the revision G application would have been accepted by him straightaway. In the result he dismissed the execution petition.

The appellant went up in Second Appeal to the High Court at Chandigarh. A single Judge of that Court dismissed the appeal.

The decree-holder filed a Letters Patent Appeal.

Although of the view that delivery of possession was not barred in ff execution of the decree by Act XX of 1948, the Division Bench concluded that so far as the parties before it were concerned, the matter had become res judicata in consequence of the decisions of the executing court and the first appellate court on the

510 SUPREME COURT RiPOllTS

(1968] 3 S.C.R.

firs! .execution appli.cation th~ decision of a sinJ!!e Judge in A on on the preV1ous occas10n m 'the second execution application.

Section 3 sul>-s. (1) of East Punjab Act XX of 1948 pro vides as follows :

"No person shall, without the written permission of the State Government or of an officer. authorised in this behalf by the State Government, dismantle any factory or remove from a factory any spare parts kept for maintaining the machinery of the factory in order." The Act which oontains only eight sections makes no ref~ to any decree for possession against the owner of a factory. By ordering delivery of possession of the premises the executing court does not make an order for dismantling a factory and a baililf charged with execution of a wammt for possesswn docs not infringe the above provision of law by rendering possession of the property to the decree-holder. So far as the judgment-del>- tor, the owner of the tactory, concerned, it wQuld be his look out to take the matter up with the State Government, if necessary and we have no doubt at in a case like this where there is no oo, llusion between the decree-holder and the judgment-debtors the State Government would not prosecute the judgmellt-debtors or refuse to accord sanction to the judgment-debtors for removal of the machinery from the premises of which they could not lawfully c<intinue in possession.

It appears that the Subordinate Judge; the District Judge and. the Judges of the Punjab High Court were all of the view that the. Act did not bar the delivery of possession in execution of a decree.

Iii our opinion there was no final order about the inexeclltability of the decree on the first application for execution which was consigned to the record room by order dated July 25, 1953. Further, the judgment of the learned single Judge of the Punjab High Court dated July 13, 1955 did not decide the question as to whether the decree for possession would be inexecutable in view of Act XX of 1948. He stated expressly that it was ndt possible for him to decide whether the execution of the decree would defeat .the provisions of s. 3 of Punjab Act XX of 1948 and being unable to come to a decision on the record he remanded the matter to the court of execution. He found himself unable to interpret the section on the evidence before him. The proceedings subsequent to the remand order culminated in the order of the Division Bench from which the present appeal arises. The order dated July 13, 1955 was not a final order which put a seal on the proceedings.

The course of litigation subsequent to the order for eviction in 1950 is truly amazing.

For 17 years the decree-holder has

been unable to reap the fruits of the decree although practically all the courts felt that the Act of 1948 could not be called in aid by the judgment-debtors to resist execution by delivery of possession.

We cannot but condemn in very strong terms the attitude of the judgment-debtors who, to say the least, are persons who have little regard for sanctity of their own solemn promise made before a court of law. On June 29, 1950 in Miscellaneous Civil Appeal No. 39 of 1950 they stated on oath that they had reached an agreement with the landlord that they would "remain on the premises only up till 31st March 1951 when they would of their own accord vacate the premises" and on their failure to do so the landlord would be entitled to take out execution against them.

Even before the time to vacate the premises came, one of the judgment-debtors filed a suit for a perpetual injunction to restmin the decree-holder from obtaining possession in terms of the consent order of 29th June 1950. The suit was dismissed on July 11, 1951. The judgment-debtors also lost the appeal filed against that dismissal.

At every step and turn for nearly twe decades they have successfully resisted delivery of possession by raising an illusory plea.

Learned counsel for the respondents argued that even now his clients can urge the plea that the decree was not executable because of the provisions of Act XX of 1948. According to him, the agreement was in contravention of a statute and the respondents could not be estopped from pleading or proving facts which would render the agreement void.

His case was that Act XX of 1948 being in force on June 29, 1950 any agreement arrived at between the parties in contravention of its provisions would not be binding on the parties. No exception can be taken to the broad proposition of Jaw but no question of estoppel ever arose in this case because Act XX of 1948 did not operate as a bar to the delivery of possession of premises in execution of a decree.

In the result, the appeal is a!lowed with costs throughout from the 18th August 1953 irrespective of any order in that behalf made at any time thereafter.

It is. unfortunate that the decreeholder has been kept out of possession so long; but she is partly responsible for it herself. If she had preferred an appeal from order of the District Judge passed on 22nd April, 1953 to the High Court, probably her troubles would have ended Jong ago.

Y.P.

Appeal allowed.

LAJWANTI

LAL CHAND AND ORS

March 22, 1968

C. SHAH

V. RAMASWAMI

G. K. MITTER, JJ

s. 3

S. 3

April 22, 1953

July 13, 1955

s. 3

s. 3

Punjab High Court

C. B. Agarwa

K. P. Gupta

S. N. Anand

Mitter

Harbans Lal

Lal Chand

Ram Rattan Dass Jain

14th July 1951

August 23, 1951

October 11, 1951

7th February, 1953

22nd April 1953

July 25, 1953

Augut 18, 1953

November 7, 1953

section 3

January 8, 1954

section 3

Punjab Act XX of

section 3

Punjab Act XX of 1948

section 3

Punjab Act XX of 1948

30th December, 1955

Rent Restriction Act, 1949

December 31, 1956

s. 3

High Court at Chandigarh

Section 3

East Punjab Act

s. 3

Punjab Act XX of 1948

June 29, 1950

29th June 1950

July 11, 1951

18th August 1953

22nd April, 1953


TIKA RAM & SONS LTD •. ETC.

11IE COMMISSIONER OF SALES TAX U.P., LUCKNOW

March 22, 1968

[I. C. SHAH, V. RAMASWAMI AND G. K. MITTER, JI.)

U.P. Stiles Tax Act (15 of 1948) ar amended by Act 8 of 1954, ss 2(h), Explanction II (ii) and II-Scope of Explanation-If ultra."'-

When Commiss/Qner has right to ask for reference to High Co11rt-Jwildiction of Revisin11 Authorit, v to refer and of High Court to ec/de conltitutional validity of provisions of Act.

For the period !st April 1948 to 25th January 1950, goods (oil) were manufactured o'r produced in the Stat<> of Uttar Pradesh by the appelllllla who were carrying on business in the . State in those goods.

Part of the good< were sent to their depols outside the State before any contract of. sale in respect of them was made, and thereafter, sold to various parti ...

'Those outside sales were also assessed to sales tax under the U.P. s.leo 'tax Act, 1948. The matter was taken to the Appellate Authority ud thereafter to the Revising Authority constituted UDder the Act. Though the revision was filed before !st April 1954 when the Amending Act of 1954 came into force, it was disposed of in 1957, in favour of the appellants. On the application of the Commissioner of Sales Tax two questiODS of law were referred to the High Court one of which related to the oonstitutional validity of Explanation II (ii) to s, 2(h) of the Act, according to which, the sale of any goods 'which are produced or manufactured in U.P. by the producer or manufacture thereof, shall, wherever the c!eli...Y or contract of sale is made, be deemed for the pul'poses of this Act to

liave taken place in U.P.' The High Court decided both questions in favour of the Commissioner.

In appeal to this Court it was contended that : (I) For attractin& tu liability the Explanation requires that the goods should have been mannfactured or produced in U.P. after the contract of sale was entered inlD;

(2) the Explanation was ultra vires as being outside legislative competence, because, sales tax legislation was concerned with tax on the transaction of a completed sale, and a Stare could not impoae sales tax on tbe baois that one of the component parts of sale constitutes sufficient nexJU between the taxing stale and the sale; (3) the Revising Authority could

not rdfer to the High Court and the High Court could not decide on such ref"ence, any question regarding the constitutional validity of the Explanation; and ( 4) the Revising Authority could not make a reference to tho High Court under s. 11, at the instance of the Commissioner, as the Commissioner had no power to apply when the revision was filed before the Revising Authority but was empowered to do so only by the amending ACt of 1954 which had no retrospective operation.

HELD : (I) For the application of the Explanation and attracting tax liability, it is only necessary that the goods must have been sold by the person who produced or manufactured them, but there is no requirement that he must have manufactured or produced them after the contract of sale and not before. (518 CJ ·

(2) To ccinfer jurisdiction upon the State Legislature to impose sales tax, it is sufficient if there is a proper territorial nexus or connection

Sl2

between the taxing authority and the transaction sought to be taxed. and,

the fact that goods were manufactured in the State constitutes a real and pertinent nexus. [519 CJ

The Tata Iron and Steel Co. Ltd. v. State of Bi/Jar, [1958] S.C.R. 1355 and Bharat Sugar Mill.< v. The Staie of Bi/Jar, 11 S.T.C, 793, followed.

(3) The appellants did not challenge the jurisdiction of the High Court to examine the constitutional validity of the Explanation; nor was any such challenge made in the special leave petition to this Coun OI' in the statement of case. On the contrary, the appellants contended in the revision before the Revising Authority that the Explanation was ultra vires. Therefore. having voluntarily submitted to the jurisdiction of the Revising Authority it is not open to the appellants to challenge the jurisdiction of the Revising Authority to refer the question of the constitutional validity of the Explanation to the High Coun, or of the High Court to decide it [522 E-0]

( 4) The Commissioner had the power to apply for a referenoe on the date he applied for a reference, as the amending Act had by )hen come into force.. There is nothing in the language o'r in thecontext of s. 11 to suggest that he could exercise the right only if it existed on the date on which the revision ws filed before the Revising Authority. The rule that a statute should he interpreted, as far as possible, so as to respeCt vested rights has no appliction because, the amendment does not affect any vested right of the appellants. but only deals with a procedural matter. [523 E-Hl

Gardner v; Lucar, (1878] 3 A.C. 582, 603, applied.

CML APPELLATE JURISDICTION : Civil Appeals Nos. 1682 to 1691 of 1967.

Appeals by special leave from the judgment and order dated November 30, 1962 of the Allahabad High Court in Misc. Sales Tax Reference Nos. 144, 134, 143, 148, 124, 104, 105, 112 and 113 of 1958 respectively.

M. C. Chagla and S. S. Shukla, for the appellants (in all the appeals).

C. B .. Agarwala and 0. P. Rana, for the respondents (in all appeals).

The Judgment of the Court was delivered by Ramaswami, J, These appeals are brought, by special leave from the judgment of the Ailahabad High Court dated November 30, 1962 in.Miscellaneous Sales Tax Reference No. 144 of 1958 and other connected references.

e appellants are manufacturers and dealers of oil in the Provmce. of Uttar Pradesh and they have their own depots outside the Province. For the financial year 1948-49 and the subse<jueot period from April 1, 1949 to January 25, 1950 the appellants had sent their goods to their depots outside the Province of Uttar Pradesh, for example, to Calcutta in the State of West Bengal before any contract of sale in respect of the goods was made.

514 SUPREME COURT REPO!lTS

(1968] 3 S.C.R.

After the goods had reached the depots outside the Province of Uttar Pradesh, they were sold to various parties. The Sales Tax Officers of Uttar Pradesh assessed the outside sales of all the appellants to sales tax under the Uttar Pradesh Sales Tax Act 15 of 1948, hereinafter called the 'Act'. It appears that this category of sales roughly amounted to more than one crore of rupees in the case of the appellants and the sales tax was levied at the rate of 3 pies per rupee subject to a rebate under s. 5 .of the Act and certain other adjustments.

Aggrieved by the assessments, the appellants took the matter in appeal under s. 9 of the Act.

The appeals were heard by various Appellate Officers called Judge, Appeals.

Some of the Appellate Officers held that the assessment was properly made, while some others took the view that the assessments made for outside sales were improper and the assessment order should be quashed.

The parties aggrieved by the appellate orders filed revisions before the revising authority called Judge, Revisions under s. 10 of the Act. By his judgment dated July 10, 1957 the Judge, Revisions held that the out of State sales would be taxable ( I ) if the goods were in existence in the Province of Uttar Pradesh at the time when the contracts for sale were made; and (2) if the goods were manufactured after the contracts for sale were made in respect of them and were subsequently appropriated towards those contracts. He further held that sales of goods which were not only manufactured but also exported before any contracts for sale were made would not be taxable. Under s. 11 of the Act, the Commissioner of Sales Tax applied to the Revising Authority for making a reference of the case to the High Court. By its order dated .January 23, 1958 the Revising Authority drew up a statement of the case and referred to the Allahabad High Court tbe following two questions of Jaw for determination :

"(1) Whether clause (ii) of the Explanation II to Section 2 ( h) U.P. Sales Tax Act provides for taxing sales in which goods were manufactured or produced in U.P. but for which the contract for sale was made after the goods had left the State ? ( 2) If the reply to the above is in affirmative, whether this provision is ultra vires ?"

By its judgment dated November 30, 1962, the High Court answered the first question in the affirmative and the second question in the negative.

It is necessary at this stage to refer to the relevant statutory provisions which were in force during the material period.

Section 99 of the Government of India Act, 1935 authorised a Provincial Legislature, subject to the provisions of that Act, to make laws for the Province or for any part thereof.

Section

100 ( 3) of that Act provided that, subject to tbe two preceding sub-sections, the Provincial Legislature had, and tbe Federal Legislature had not, power to make laws for any Province or any part thereof with respect to any of the matters enumerated in List II of the Seventh Schedule to that Act. The matter enumerated in Entry 48 in List II was ''Taxes on the sale of goods and on advertisements." It was in exercise of this legislative power that the Uttar Pradesh State Legislature enacted Act 15 of i948 which came into force on Anril 1, 1948. Section 3 of the Act provides as follows :

"3. Liability to tax under the Act-Subject to the provisions of this Act, every dealer shall pay on turnover in each assessment -year a tax at the rate of 3 pies a rupee:

Provided that-

(i) the Provincial Government may, by notification in the official Gazette, reduce the rate of tax on the turnover of any dealer or class of dealers or on the turnover in respect of any goods or class of goods;

(ii) a dealer whose turnover in the previous year is less than Rs. 12,000/- or such larger amount as may be prescribed shall not be liable to pay the tax under this Act for the assessment year; " Section 2 ( c) defines a "dealer" to mean "any person or association of persons carrying on the business of buying or selling and supplying goods in the United Provinces, whether for commission, remuneration or otherwise and includes any firm or Hindu joint family and any society, club or association which sells or supplies goods to its members but does not include any department of the Provincial Government or of the Indian Union (hereinafter called the 'Dominion Government')''. Section 2 (h) is to the following effect :

" 'sale' means, with its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable consideration and includes forward contracts but does not include a mortgage, hypothecation, charge or pledge :

" ....................................

Explanation 11-'-Notwithstanding anything in the Indian Sale of Goods Act, 1930, or any other Jaw for the time being in force, the sale of any goods-

(i) which are actually in the United Provinces at A the time when in respect thereof, the contract of sale as defined in section 4 of that Act is made,

(ii) or which are produced or manufactured in the United Provinces by the producer or manufacturer thereof, shall, wherever the delivery or contract of sale is made, be deemed for the purposes of this Act to have B taken place in the United Provinces.

" ......................................

Section 10 states :

"Power of revision-(1) The Provincial Government shall appoint as Revising Authority a person quali1ied under sub-section (3) of section 220 of the Government of India Act, 1935, for appointment as Judge of a High Court.

(2) The appellate authority appointed under section 9 shall be under the superintendence and control of the Revising Authority.

(3) The Revising Authority may in its discretion at any time mo motu or on being moved by the Commissioner of Sales Tax or on the application of any person aggrieved, call for and examine the record of any order made or proceedings recorded by any appellate or assessing authority under this Act for the purpose of satisfying itself as to the legality or propriety of such order or as to the regularity of such proceedings and may pass such order as he thinks fit. ( 4) The Revising Authority shall not pass any order under sub-section (3) adversely affecting any person unless an opportunity has been given to such person to be hear~.

( 5) If the amount of assessment is reduced by the Revising Authority under sub-section ( 3) it shall order the excess amount of tax if already realized to be refunded."

Section 11 is to the following effect :

"Statement of case to High Court-( 1) Within sixty days !rem tha passing by the Revising Authority of any order under sub-section (3) of section 9 or subsection (I) of section 10 affecting any liability of any dealer. to pay tax under this Act, such dealer may, by application in writing accompanied by a fee of one hundred rupees, require the Revising Authority

TIKA ilAM & SONS v. C.S.T. (Ramaswami, J.) 517

to refer to the High Court any question of law arising out of such order. ( 2) If, for reasons to be recorded in writing, the Revising Authority refuses to make such reference, the applicant may, within thirty days of such refusal, either- ( a) withdraw his application (and if he does so, the fee shall be refunded), or

(b) apply to the High Court against such refusal. ( 3) If upon the receipt of an application under claUSe (b) of sub-section (2), the High Court is not satisfied that such refusal was justified, it may require the Revising Authority to state a case and refer it to the High Court and on receipt of such requisition the Revising Authority shall state and refer the case accordingly.

( 4) If the High Court is not satisfied that the statement in a case referred under this section is sufficient to enable it to determine the question raised thereby, it may refer the case back to the Revising Authority to make such additions thereto or alterations therein as the High Court may direct in that behalf.

" ........................................

By the Amending Act of 1954 (U.P. Act VIII of 1954) which came into force on April 1, i 954 the following provisions were substituted in place of sub-sections ( 1), ( 3) and ( 4) :-

" (1 ) Within one hundred and twenty days from the date of service of the order under sub-secti.on ( 3) of section 10, the person aggrieved, may, by application in writing .......... require the Revising Authority to refer to the High Court any question of Jaw arising out of such order ...........•

(3) The provisions of sub-section (1) shall also be applicable to the Commissioner of Sales Tax with the modification that it shall not be necessary for hint to deposit any fee .

• < 4) If on any application being made under subsection ( 1 ) or ( 3) the Revising Authority refuses to state the case. , .......• the person aggrieved or the Commissioner of. Sales Tax as the case m11y be, may

• • . . ..... apply to the High Coart .......... " It wa; i argued by Mr. Chagla in the first place that cl. (ii) of Explanation II to s. 2(h) of the Act means that the goods should have been manufactured and produced in Uttar Pradesh for sale

1"··

to the person who had contracted to buy them. In other words, there must be a contract for the sale before manufacture or produce. It was pointed out that in the present case the contract was entered into after the goods were manufactured and exported out of Uttar Pradesh. It was contended that as a matter of construction Explanation II does not cover these sales and the deeming provision will not make the appellants liable to pay sales-tax in regard to such sales.

We are unable to accept this argument as correct.

There is nothing in the language or context of Explanation II to suggest that the goods should be produced or manufactured in Uttar Pradesh after the contracts for sale had been entered into. There is hence no warrant for the argument that for attracting the tax liability the goods must have been manufactured or produced after and not before the agreement for sale.

In other words, it is only necessary for the application of Explanation II that the goods must have been sold by the person who produced or manufactured them but there is no requirement that he must have manufactured or produced them after the agreement for sale. . It is the admitted position in these appeals that the goods were manufactured or produced in Urtar Pradesh by the appellants carrying on business in Uttar Pradesh in those good~ and therefore the appellants are liable to pay the tax on their sales irrespective of where and when the contracts for sale were entered into and also irrespective of the fact that the contracts were entered. into after the goods had lieen exported out of Uttar Pradesh.

We accordingly hold that the first question was rightly answered by the High Court.

We proceed to consider the next, and more important, question arising in these appeals, namely, whether the deeming provision contained in s. 2(h) Explanation II(ii') of the Act was ultra vires the Government of India Act, 1935. It was argued by Mr. Chagla that the doctrine of nexus was not applicable to sales-tax legislation, because such legislation was concerned with the tax on the transaction of sale, that is to say, a completed sale and to break up a sale into its component parts and to take one or more such parts and to apply the theory to it would mean that the State would be entitled to impose tax on one or more of the ingredients or constituent elements of the transaction of sale which by itself will not amount to a sale. An identical question has been the subject-matter of consideration by this Court in The Tata Iron & Steel Co., Ltd. v. The State of Bihar(1). It was held in that case that the provisions of s. 4 ( 1 ) read with s. 2 ( g) second provi8o, of the Bihar Sales Tax Act, 1947 as amended by the Bihar Sales Tax Amendment Act, 1949 were within the legislame competency of the Provincial Legislature of Bihar. The second proviso added by the amending Act did not extend the meaning

(I) [19511 S.C.R. ll55.

of the expression "sale" so as to include a contract of sale ; what it actually did was to lay down certain circumstances in which a sale, although completed elsewhere, was to be deemed to have taken place in Bihar. The circumstances mentioned in th!l Pro viso to s. 2 ( g) of the Bihar Sales Tax Act, namely, the presence of the goods in Bihar at the date of the agreement of sale or their production or manufacture there must be held to constitute a sufficient nexus between the taxing Province and the sale wherever that might lake place. It is manifest that a transaction of sale is a composite transaction and consists of legal ingredients like agreement of sale, passing of title and delivery of goods bµt it is not necessary for the purpose of legislative jurisdiction that all legal ingredients of sale or even the transfer of title should have taken place inside the Province. It is sufficient if there is a proper territorial nexus or connection between the taxing authority and the transaction sought to be taxed. . The fact that the goods are manufactured in the Province constitutes a real and pertinent nexus or connection which confers jurisdiction upon the Provincial Legislature to impose the tax.

In dealing with the question whether the production or manufacture of goods constituted a sufficient nexus to the subject-matter of taxation, S. R.

Das, C.J., observed as follows :

"For the purpose of the present case it is sufficient to state that in a sale of goods the goods must of necessity play an important part, for it is the goods in which, as a result of the sale, the property will pass.

In our view the presence of the goods at the date of the agreement for sale in the taxing State or the production or manufacture in that State of goods the property wherein eventually passed as a result of the sale wherever that might have taken place, constituted a sufficient nexus betweep. the taxing State and the sale. In the first case the goods are actually within the State at the date of the agreement for sale .and the property in those goods will generally pass within the State when they are ascertained by appropriation by the seller with the assent of the purchaser and delivered to the purchaser or his agent. Even if the property in those goods passes outside the State the ultimate sale relates to those very goods. In the second case the goods, wherein the title passes eventually 011tside the State, are produced or manufactured in Bihar and the sale wherever that takes place is by the same person who produced or manufactured the same in Bihar. The producer or manufacturer gets his sale price in respect of goods which were in Bihar at the date when the imporc . tant event of agreement for sale was made or which were

produced or manufactured in Bihar. These are relevant facts on which the State could well fasten its tax."

The principle of this decision was reiterated by this Court in a subsequent case-Bharat Sugar Mills Ltd. v.

The State of Bihar('). Jn The Tata Iron & Steel Co. Ltd. v. The State of Blhar('), the course of dealing between the manufacturers and the purchasers was described as follows :

"The intending purchaser has to apply for a permit to the Iron and Steel Controller at Calcutta, who forwards the requisition to the Chief Sales Officer of the assessec working in Calcutta. The Chief Sales Officer thereafter makes a 'works order and forwards it to Jamshedpur.

The 'works order' mentions the complete spec.llication of the goods required. After the receipt of the 'works order' the J amshedpur factory initiates a 'rolling' or 'manufacturing' programme. After the goods are manufactured, the J amshedpur factory sends the invoice to the Controller of Accounts who prepares the forwarding notes, and on the basis of these forwarding notes, railway receipts are prepared. The goods are loaded in the wagons at Jamshedpur and despatched to various stations, but the consignee in the railway receipt is the assessee itself and the freight also is paid by the assessee.

The railway receipts are sent either to the branch offices of the assessee or to its bankers, and after the purchaser pays the amount of consideration, the railway receipt is delivered to him. These facts are admitted and the correctness of these facts are not disputed by the State of Bihar." In our opinion, the ratio of this decision applies to the present case and it must be accordingly held that Explanation II to s. 2(h) of the Act is not ultra vires as being outside the legislative competence of the State of Uttar Pradesh.

Reference was made in he course of argument to the recent decision of this Court in K. S. Venkataraman & Co. v. State of Madras(") in which it was held by' the majority judgment that an authority created by a statute cannot question the vlres of. the statute or any of the provisions thereof under which it functions.

The authority must act under the Act and not outside it and if it acts on the basis of a provision of that statute which is ultra vires, to that extent it would be acting outside the Act. In that event, a suit to question the validity of such an order made outside the Act would lie in a civil court. In this context it was pointed out by the majority judgment that the reasoning of the Judicial Committee in Raleigh l11vestment Co.(') case was based upon the 1!5sumption that the question of ultra vires can be canvassed and finally decided through the machinery provided under the Income-

(!)

11 S.T.C. 793.

0) [195'] S.C.R. 1355,

(3) [!'l66] 2 S.C.R. 229.

(4) 74 I.A. SO.

tax Act.

The Judicial Committee 'held' that s. 67 of. the Incometax Act, 1922' was'a bar to the maintainability of tlie suit.·, T)ie argument on behalf of 'the assessee in that ce 'was that an asse5sment was not an assessment "made under the Act" if the assessment gave effect to a provision which was ultra vi res the Indian Legislature; that in law such a proyision, being a nullity, was nonexistent; and that an assessm!)nt justifiable in who)e or in part by reference to, or by suc)l a provision was more ap.tly described as an assessment not made under the Act than as an llSSessment made under the Act.

The argument was negatived by the Judicial Committee for the reason that the circumstance that the assessing officer had taken into account an ultra vires provision of the Act was immaterial in detennining whether the assess111ent'was "made under the Act". The main reason that persuaded the Judicial Committee to accept the construction.they placed on s. 67 of the 1ncome-tax Act may be stated in theii' own words as follows:

"'The absence of such machinery would greatly assist, the appellant on the question •of construction and, indeed, it may be added that; if-there were no such machinery and if the ection affected fo preclude the High Court in its ordinary civil jurisdiction from considering a point of 11/tra vires, there would be a serious question whether the opening part of the section, s0 far , as jt debarred the question of ultra vires , being debated fell \vithin the competence of the legislature." -....

It was held by this Court in K. S. Venkataraman & Co. v. State of Madras(') that the assumption underlying the reasoning of the Judicial Committee was not correct and it was µot open to the Income-tax; Oflicer the Appellate Assistant Commissioner and the Appellate Tribunal to decide any question Jls io the ulfra vires character of any provision of the Income-tax Act. In otherwords, the question' of 11/tra vil'es could not be deemed to arise' out of the Tribunal's order and if an assessee raises such. a question, the Tribunal.can ouly reject it on the grounc; l that lt •has no jurisdiction to entertain the objection _or to decide upon it.

The High Court also cannot possibly' give any decision on the question of ultra vires, because it~ jurisdiction , under s. 66 is a special advisory jurisdiction and its scope -is strictly limited. 0.n behalf of the appellants it was suggested that in the present ca8e- 'the Revising Authority under the Act cannot. on a simjlat line of reasoning; refer to the HiglrCoutt any question regarding tlie eonstitutional validity of Explanation Yr of s. 2(h) of the Act. It was, h, owever. pointed out on behalf of the respondents that in a number of c'ases in which proceedings relating to taxation have reached the High Courts by way of a reference. appeal or revision, the question of constitu- ~~~~~~~~~~·- ' (ll [l'J6~] 2 S.C.R. 2~'>. q

tionaI validity of the statute under which the authority functioned was raised, entertained and decided.

For instance, in Tata Iron & Steel Co. Ltd. v. State of Bihar(') a reference was made by the Board of Revenue raising questions as to the. validity of certain provisions of the Bihar Sales-tax Att and decided by the High Court, and ultimately by this Court. Similarly, in Sardar Baldev Singh v. C.I.T., Delhi & Ajmer(2 ) in an appeal from ilie order of the Income-tax Appellate Tribunal with special leave, the constitutional validity of s. 23A of the Indian Income-tax Act, 1922 was permitted to be challenged. Again, in Navinchandra Ma/at/a/ v.

The C.I.T., Bombay City(') in l!- referenee under s. 66(1) of the Indian Income-tax Act, 1922 a question as to the vires of s. 12-B of the Indian Income-tax Act was raised before the Income-tax Appellate Tribunal and was referred to the Bombay High Court.

This Court in appeal from the opinion expressed by the Higli Court on the reference also considered that question. Also, in Gannon Dunkerley & Co. v. State of Madras('), the proceeding reached the High Court of Madras in a revision petition under s. 12-B of the Madras General Sales Tax Act, 1939 and the High Court entertained the plea of ultra vires and decided it in favour of the tax-payer.

It is, however, not necessary in the present case for us to decide the question as to whether the principle laid down in K. S. Venkataraman's case(') is applicable. The reason is that the appellants did not challenge the jurisdiction of the High Court to examine the question of law regarding the constitutional validity of Explanation II to s. 2(h) of the Act. Nor was any such challenge made in the Special Leave Petition to this Court _or in the statement of the case.

On the contrary, the appellant has itself applied to the Judge, Revisions under s. 10 of the Act contending the Explanation II to s. 2(h) was ultra vires. It is not therefore open to the appellants to deny the jurisdiction of the Revisional Authority to decide the question or to challenge the jurisdiction of the High Court to examine the question of law referred to it under s. 11 of the Act and to pronounce upon the constitutional validity of the impugned section. In. other words. it must be taken that the appellants had voluntarily submitted to the jurisdiction of the Revisional Authority and of the High Court on the matter in issue and having submitted to the jurisdiction and having taken the chance of judgment in its favour, it is not right that the appellants should take exception to the jurisdiction of the High Court when the judgment has gone against it. We cannot therefore permit the appellants to canvass in this Court for the first time the question whether it was comiJetent for the

(J) (1958] S.C.R.1355.

(2) (1961] t S.C.R. 482.

(3) [1955] I S.C.R. 829.

(4) T.L.R. (1955] Mad. 832.

(5) (1966] 2 S.C.R. 229.

i ..

High Court to decide the question of law referred to it under s. 11 of the Act. We accordingly reject the argument of the appellants on this aspect of the cillie.

It was lastly submitted by Mr. Chagla that a reference to the High Court under s. 11 of the Act at the instance of the Commissioner of Sales-tax was incompetent as the Commissioner was neither a 'dealer' n~'a person aggrieved' within the meaning of the section as it originally stood, and the. amendment effected in sub-s. (3) of s. 11 by U.P. Sales-tax Act 8 of 1954 .which came into force on April 1, 1954 was not retrospective in character and could not apply to proceedings which had been initiated earlier before Sales-tax authorities as well as before the Revising Authority.

It was pointed out that the appellate order was made on January 4, 1952 and the revision application was filed before the amending Act of 1954 came into force. It further appears that the revision application was disposed of on July 8, 1957 by the Revising Authority.

The contention put forward on behalf of the appellants was that the Commissioner had no power to apply for a reference at the time the appellants had made the application for revision. It was conceded by Mr. Chagla that at the time the Commissioner applied for a reference under s. 11 of the Act the amending Act 1954 had already come into force and under the amended section the Commissioner was empowered to ask for a reference.

The point taken was that the material date was the date on which the appellants made the application for revision and not the date on which the application was actually decided by the Revising Authority.

We are unable to accept this argument as correct.

The right to apply for a referenee is conferred upon a person aggrieved by an order passed under s. 10 and this right exists regardless of when the application for revision was made. Only the existence of ail order undet s. 10 is required for the accrual of the right to make an application for a reference. It was suggested by Mr. Chagla that the Commissioner did not have the right to apply for a refe•ence because the right did not exist when the appellants had made the application for revision.

But the right did exist on the date O? which the Commissioner applied for a reference and there 1s no thin~ in the language o~ context. of s. 11 . to. sugest that the Commissioner could exercise the right only 1f 1t existed on the date on which the application for revision had been made. On behalf of the appellants Mr. Chagla referred to the well-reog nised rule that a statute should be interpreted, as far as possible, so as to respect vested rights. But this rule has no application to the present case for we do not think that amendment of s. 11 of the Act by enabling the Commissioner also to ask for a reference of a question to the High Court alters any vest~ or substantive right of the assessee.

On the contrary, we consider that the L7Sup.C.l/68-9

"Ii

amendment is merely a procedural matter and the present case falls within the general principle that the presumption against a retrospective construction has no application to enactments which affect only the procedure and practice of courts. For "it is perfectly settled that if the legislature forms a new procedure, that, instead of proceeding in this form or that, you should proceed in another and a different way, clearly there bygone transactions are to be sued for and enforced according to tl)e new form of procedure.

Alterations .in the form of procedure are always retrospective, unless there is some good reason or other why they should not be." (Gardner v. Lucas)('). We are accordingly of the opinion that Mr. Chagla is unable to make good his argument on this aspect of the case.

For these reasons we hold that there is no merit in these appeals which are . accordingly dismissed with costs--there will be one hearin~ fee.

V.P.S Appeals dismissed.

(I)

[1878) 3 A.C, 582, 603.

TIKA RAM & SONS LTD •. ETC

THE COMMISSIONER OF SALES TAX U.P., LUCKNOW

March 22, 1968

I. C. SHAH

V. RAMASWAMI

G. K. MITTER

Stiles Tax Act

ss 2(h)

Uttar Pradesh

U.P.

s. 11

s. 11

Allahabad High Court

M. C. Chagla

S. S. Shukla

C. B .. Agarwala

0. P. Rana

Ramaswami

Ailahabad High Court

April 1, 1949

January 25, 1950

Calcutta

West Bengal

SUPREME COURT REPO!lTS

(1968] 3 S.C.R.

s. 5

s. 9

s. 10

July 10, 1957

s. 11

.January 23, 1958

Section 2

Sales Tax Act

November 30, 1962

Section 99

Government of India Act, 1935

Section

100

Uttar Pradesh State Legislature

Anril 1, 1948

Section 3

Section 2

United Provinces

Section 2

section 4

Section 10

section 220

Government of India Act, 1935

section 9

Section 11

section 9

section 10

April 1, i 954

section 10

Chagla

s. 2(h)

Urtar Pradesh

s. 2(h)

s. 4

s. 2

Bihar Sales Tax Act, 1947

Bihar Sales Tax Amendment Act, 1949

Bihar

s. 2

S. R.

Das

Jamshedpur

J amshedpur factory

State of Bihar

s. 2(h)

State of Uttar Pradesh

Raleigh

s. 67

Incometax Act, 1922

s. 67

Income-tax Act

s. 66

s. 2(h)

Income-tax Appellate Tribunal

s. 23A

Indian Income-tax Act, 1922

Navinchandra Ma

C.I.T., Bombay City

s. 66(1)

Indian Income-tax Act, 1922

s. 12

Income-tax Act

Bombay High Court

Higli Court

High Court of Madras

s. 12

Madras General Sales Tax Act, 1939

S. Venkataraman

s. 2(h)

s. 10

s. 2(h)

s. 11

(1966] 2 S.C.R. 229

s. 11

s. 11

s. 11

April 1, 1954

January 4, 1952

July 8, 1957

s. 11

Act the amending Act 1954

s. 10

s. 10

s. 11

s. 11