DELHI TRANSPORT UNDERTAKING

BALBIR SARAN GOEL February 23, 1970

[J. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.]

7 5 'I

Delhi Road Transport Authority Act, 1950-Conditions of Appoint- 111ent and Service Regulations, 1952, Reg. 9, 15 & 17-En1ployee un~ successfully approacViing Court, without exhausting depar11nental renze~ dies-Simpliciter order terminating seri•ices as no longer required- JVhether by way of Punishn1ent.

Regulation 9 df the Delhi Road Transport Authority Act (Conditions of . ..\ppointment and Service Regulations), 1952 provides for , termination oi services in two modes. The first is by its clause (a) by ¥:hich services may be terminated without any notice or pay in lieu of notice. This can be done among other reasons for misconduct. The second mode is by clause (b) by which the services may be terminated owing to reduction of establishment or in circumstances other than those mentioned in clause

(al which relate to termination without notice.

When termination is made under clause (b) one month's notice or pay in lieu thereof is to be gi, en to the employee.

Regulation 15 says that a breach of the standing order will amount to misconduct, and one of the penalties_ imposed. for nlisconduct is dismissal.

It also prohibits an order of dismissal, reflloval or other punishment except censure unless the procedure laid down in clouse (c) of Regulation 15 is followed.

The standing order 17 enjoins that no employee should have recourse to a court of law without first resorting to the normal official channels of redress.

1-hc respondent. an cn1ployec of the appellant-J]ndertaking established under the Delhi Transport Authority Act, was demoted.

He challenged the demotion by filing a petition under Art. 226 of the Constitution.

Thereafter the appellant-undertaking passed an order terminating the respondent's services, stating only that his services were no longer required ttn<l that one inonth's salary in lieu o'f notice would be paid. The respon <li.:-nt filed a suit claiming that the order \Vas illegal. On the questions,

( i l whether the respondent's services could be terminated under Regulation 9(b) without complying v1ith the procednre pr:escribed l;>y Regulation

15. and (ii) whether although the or<ler was made in perfectly harmless and innocuous terms and purporting to be within Regulation 9(b) it was a mere camouflage for inflicting punishment for breach of standing order J 7. as the respondent had approached the High Court without exhausting the Departmental remedies. this Court.

HELD : (i) Even if it be assun1e<l that the. law is te same as would be applicablf to, a case governed by Art. 311. 1t w3:s d1fficu_It to say that the services of the respondent ere not merely erm1nated . 1n accordance

ith Regulation 9(b) which governed the cond_ltLons _of his employment.

It n1av be that the motive for termination of ht~ service~ was the brech o'f St:inding Order 17 i.e. of filing a writ petition in th~ High Court aga1!1st

the demotion without exhausting departmental reed1e5 but the questI}~ of motive is immaterial. No charge-sheet was prefe, rred under hRegud a ti on 15 nor was any enqUiry held in accordbce t~:tif' 1ie b:!~~ntd; n~ h!~ under Regulation 9(b) was maded. It lmfiaj n the part of the authority successfully pleaded and prove 1na a ' es

terminating his services the impugned order could be legitimately challenged but no foundation was laid in that behalf in the pfaint nor was the question of malafides investigated by the courts below. (763 E-G]

(ii) As regards the punishment having been inflicted for misconduct the order being a mere camouflage no such question could arise in the present case.

Regulation 9(b) clearly empowered the authorities to terminate the services after giving one month's notice or pay in lieu of notice.

The order was unequivocally made in terms of that Regulation. Even if the employers of the respondent thought thaf he was a cantankerous person and it was not desirable to retain him in service it was open to them to terminate his services in terms of Regulation 9(b) and it was not necessary to dismiss him by way of punishment for misconduct. If the emp]oyer chooses to terminate the services in accordance with clause ( b) of Regulation 9 after giving one month's notice or pay in lieu thereof it cannot amouht to termination of. service for misconduct within the ir..eaning of clause (a). It is only when some punishment is inflicted of the nature specified in Regulation 15 for misconduct that the procedure laid down therein for an inquiry etc., becomes applicable. (763 HJ

S. R. Tewari v. District Board Agra & Another, (1964] 3 S.C.R. 55, State of Punjab v. Shri Sukhraj Bahadur, (1968] 3 S.C.R. 244, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2266 of 1968.

Appeal by special leave from the judgment and decree dated August 4, 1967 of the Delhi High Court in Letters Patent Appeal No. 68-D of -1965.

Niren De, Attorney-General, D. D. Chaudhuri and G. K . . Sharma, for the appellant.

H. R. Gokhale and S. K. Gambhir, for the respondent.

The Judgment of the Court was delivered by

Grover, J.

This is an appeal by special leave in which the sole question for determination is whether the services of the respondent who was an employee of the appellant cpuld be terminated under Regulation 9(b) without complying with the "procedure prescribed by Regulation 15 of the D.R.T.A. (Conditions of Appointment and Service Regulations), 1952, as amended which were framed under s. 53 sub-ss. (1) and (2)(c) of the Delhi Road Transport Authority Act 1950.

The respondent was originally appointed as a booking agent under the Gwalior Northern India Transport Company.

He was promoted ro the rank of Travelling Ticket Examiner in 1947. In 1948 the Government of India, Ministry of Transporc, took over the aforesaid company.

On March 7, 1950 the Delhi Road Transport Authority Act was passed.

The services of the respon- ' dent were transferred to the said Authority.

In March 1952 the

respondent was demoted from the rank of Travelling Ticket Examiner to that of a Conductor.

He filed a writ petition in the Circuit Bench of the Punjab High Court at Delhi in April 1953.

The writ petition was dismissed and thereafter his services were terminated on November 11, 1953.

The order of termination which was passed by the Manager of the Delhi Road Transport Authority was in the following terms :

"Your services will not be required by this organisation with effect from November 12, 1953.

You will be paid one month's salary in lieu of notice."

There were certain proceedings before the Conciliation Officer and ii• answe1 to a query made by that officer the General Manager wrote a letter on August 14, 1956 in which it was stated, inrer alia, that the respondent hd approached the High Court when he had been demoted at the previous stage without exhausting the normal official channel of redress and without putting in his representation before the Appellate Authority as provided in the Service Rules.

His services were therefore terminated under RegulatiQn 9 (b) after paying one month's salary in lieu of notice. It mdy be mentioned that the Service Rule of which the breach was alleged to have been committed by the respondent was Standing Order No. 17 which enjoined that no employee should have recourse to a court of law without first resorting to the normal official channels of redress.

The suit out c.f which the present appeal has arisen was filed by the respondent containing all the above facts in which it was alleged that the order dated November 11, 1953 was one of dismissal and had been passed as a measure of punishment, the procedure prescribed by Regulation 15 not having been followed.

In para 29 of the plaint the sole allegation relating to maid fides was made in these terms :

" ...... It was mala fide on the part of General Manager, D.R.T.A. to terminate the services of the plaintiff without assigning any reason."

A declaration was sought that the order of dismissal was illegal, mala fide etc. and that the plaintiff continued to remain in the employment of the appellant without any interruption of rights.

A claim for certain amount was also made on account of salary etc.

The only two issues framed on the merits were :

"(1) Whether the order dated 11-11-5 3 termitnating

the services of the plaintiff is illegal and ultra vires as alleged?-

(2) Whether the plaintiff is entitled to the recovery of any amount by way of consequential relief?

If so, at what rate and for what period?"

The trial court held that the order terminating the services of the respondent was not covered by Regulation 9(b) but was an order of dismissal from service under Regulation 15(2) clause (7) and therefore the order of termination was nothing short of dismissal.

It was held that the dismissal of the respondent was illegal and that he was entitled to the pay and allowances in the sum of Rs. 4500.

An appeal was taken to the District Court which confirmed the decree of the trial court. A learnd Single Judge of the High Court who disposed of the second appeal preferred ily the present appellant affirmed the decree of the courts below but on different grounds.

It was held by him that Regulation 9(b) did not confer any power on the Authority to terminate the employment of its employees.

A division bench which heard the appeal under the Letters Patent affirmed the decisions of the courts below but on different grounds.

It was held that the real reason for dispensing with the services of the respondent was one given by the General Manager in his letter to the Conciliation Officer.

It was the alleged breach of the Service Rules.

A breach of the Standing Order amounted to misconduct as provided by Regulation 15(1).

One of the penalties prescribed by Regulation 15(2) was dismissal.

That though the order of termination of services of the respondent did not on its face, contain the reason for the non-requirement of his services the real reason was the misconduct of the respondent in that he had committed a breach of the Standing Order.

The procedure laid down in Regulation 15(2)(cl of enquiry etc. not having been followed the impugned order was void and illegal.

In fact that order had been made by way of punishment.

Regulation 9, to the extent it is material, is as follows :

"9. Termination of Service.-(a) Except as otherwise

specified in the appointment orders. the services of an G employee of the Authority may be terminated without any notice or pay in lieu of notice-

(i) during the period of probation and without assigning any reasons therefor.

(ii) for misconduct,

(iii) on the completion of specific period of appointment,

(Iv) In the case of employees engaged on contract for a specific period, on the expiration of such period in accordance with the terms of appointment.

(b) Where the termination is made due to reduction of establishment or in circumstances other than those mentioned at (a) above, one month notice or pay in lieu thereof will be given to all categories of employees.

(c) .•...•.•..••.• "

Regulation 15 says that a breach of the Standing Order issued from time to time by the Delhi Road Transport Authority will amount to misconduct.

The penalties whicn can be imposed for misconduct are enumerated out of which dismissal is one.

It. is provided that no order of dismissal, removal or other punishment except censure shall be passed unless the procedure laid down in clause ( c) is followed.

That clause outlines the steps which must be taken in the matter of affording an opportunity to the delinquent employee and of an inquiry which is to be conducted in the niatter.

Now Regulation 9 clearly provides for termination of services in two modes; the first is where the services may be terminated without any notice or pay in Jieu of notice.

This can.

E be done among other reasons for misconduct.

The second mode is of terminating the services owing to reduction of establishment or in circumstances other than those mentioned in clause (a) which relate to termination without notice. When termination is made

under clause (b) one month's notice or pay in lieu thereof is to be given to the employee.

Thus it is clear that if the employer F chooses to terminate the services in accordance with clause (b) after giving one month's notice or pay in lieu thereof it . caunot amount to terminatien of service for misconduct within. the meaning of clause (a).

It is only when some puii'ishmeni is inflicted of the nature specified in Regulation 15 for misconduct that the procedure laid down therein for an inquiry etc. becomes applicable.

G The contention which appears to have prevailed with the High Court and which has been pressed before us is that although the order was made in perfectly harmless and innocuous terms and purported to be within Regulation 9(b) it was a mere camouflage for inflicting puinshment for breach of Standing Order 17 inasmuch as the respondent had approached the High Court under Art. 226 of the Constitution without exhausting the departmental remedies.

H The High Court relied on the observations in S. R. Tewari v.

District Board Agra & Another(') that the form of the order under

(I) (1964] 3 S.C.R. 5.5 . . LIOSup.Cl(NP)/70--4

which the employment of a servant was determined was not conclusive of the true nature of the order.

The form might be merely to camouflage an order of dismissal for misconduct and it was always open to the court before which the order was challenged to go behind the form and ascertain the true character of the order.

In that case it was held that the employment was terminated by giving a notice in accordance with the rules and it was not a case of dismissal.

The learned Attorney General for the appellant has sought to distinguish cases which fall under Art. 311 and those which are governed by statutory provisions or rules containing provisions analogous to Art. 311.

According to his submission the concept of punishment is not relevant when the employer chooses to terminate the employment of an employee in accordance with the conditions of service.

All that has to be seen is whether the order made by him is in conformity with the statutory powers. He has further submitted that where the master chooses to follow the mode of terminating the services prescribed by Regulation 9(b) no stigma attaches to such termination and no question of the employee having been punished can arise nor can it be examined in such a case whether the order made was a mere camouflage or cloak for dismissing an employee by way of punishment for misconduct.

It has further been emphasised that what has to be seen is the situation obtaining on the date the order was made and no notice should or ought to be taken of any subsequent facts emreging out of correspondence or pleadings in a court of law in reply to the allegations in the plaint of ma/a fide and the like.

Tt does not appear necessary to refer to numerous decisions which have been given by the Court in cases arising under Art. 311 of the Constitution on the points debated before us by counsel for both s; des.

In State of Punjab v. Shri Subhraj Bahadur(') most of these cases have been discussed.

By a conspectus of those cases, it was stated, the following propositions clearly emerge:

"l. The services of a temporary servant or a probationer can be terminated under the rules of his employment and such termination without anything more would not attract the operation of Art. 311 of the Constitution.

2. The circumstances preceding or attendant on the order of termination of service have to be examined in each case. the motive behind ii being immaterial.

(I) 1968) 3, S.C.R. 234 at p. 24<1.

3. If the order visits the public servant with any evil consequences or casts an aspersion against his character or integrity, it must be considered to be one by way of punishment, no matter whether he was a mere probationer or a temporary servant.

4. An order of termination of service in unexceptionable form preceded by an inquiry launched bi the superior authorities only to ascertain whether the public servant should be retained in service, does not attract the operation of Art. 311 of the Constitution. . .

5. If there be a full-scale departmental enquiry envisaged by Art. 311 i.e. an Enquiry Officer is appointed, a charge sheet submitted, explanation called for and considered, any order of termination of service made thereafter will attract the operation of the said article."

In that case the departmental enquiry did not proceed beyond the stage of submission of charge-sheet followed by the respondent's explanation thereto. 'The enquiry was not proceeded with, there were no sittings of any Inquiry Officer, no evidence was recorded and no conclusions arrived at on the enquiry.

It was, therefore, held that the services had been terminated simpliciter under the rules of employment and Art. 311 was not attracted.

In the present case even if it is assumed that the law is the same as would be applicable to a case governed by Art. 311 it is difficult to say on the principles laid down in the above case that the services of the respondent were not merely terminated in accordance with Regulation 9(b) which governed the conditions of his employment.

It may .be that the motive for termination of his services was the breach of Standing Order 17 i.e., of filing a writ petition in the High Court against the demotion without exhausting departmental remedies but the question of motive is immaterial.

No chargesheet was preferred under Regulation 15 nor was any enquiry held in accordance therewith before the order under Regulation 9(b) was made.

It may be that if the respondent had successfully pleaded and proved ma/a fides oo the part of the authority terminating his services the impugned order could be legitimately challanged but no foundation was laid in that g_ehalf in the plaint nor was the question of ma/a fides investigated by the courts below.

As regards the punishment having been inflicted for misconduct the order being a mere camouflage we are unable to endorse the view that any such question could arise in the present case.

Regulation 9(b) clearly empowered the authorities to terminate the services after giving one month's notice or pay in lieu of notice. 'The order was unequivocally made in terms of that Regulation.

Even

if the employers of the respondent thought that he was a cantankerous person and it was not desirable to retain him in service it was operi to them to terminate his services in terms of Regulation 9(b) and it was no! necessary to dismiss him by way of punishment for misconduct.

The appeal is consequently allowed and the decree granted by the courts below is set aside.

In view of this court's order dated Nvvember 1, 1968, the appellant will pay the costs of the respcndent.

Y.P.

Appeal allowed.

DELHI TRANSPORT UNDERTAKING

BALBIR SARAN GOEL

February 23, 1970

C. SHAH

K. S. HEGDE

A. N. GROVER, JJ.

Service Regulations, 1952

Art. 226

Art. 311

(1964] 3 S.C.R. 55

(1968] 3 S.C.R. 244

CIVIL APPELLATE JURISDICTION

August 4, 1967

Delhi High Court

Niren De

D. D. Chaudhuri

G. K . . Sharma

H. R. Gokhale

S. K. Gambhir

Grover

s. 53

Delhi Road Transport Authority Act 1950

Government of India

March 7, 1950

Delhi Road Transport Authority

November 12, 1953

August 14, 1956

November 11, 1953

Art. 226

(1964] 3 S.C.R. 5

Art. 311

Art. 311

Art. 311

Art. 311

Art. 311

Art. 311

Art. 311

Art. 311

Nvvember 1, 1968


DEBABRATA GUPTA

S. K. GHOSH February 23, 1970

[A. N. RAY AND I. D. DUA, JJ.]

Indian Penal Code Section 406--Criminal breach of trus--Jngrt'dients necessary-Proof of entrustment.

Certain disputes arose between the appellant and the respondent '"ho were partners in a firm.

After the respondent had sent to the appellant a notice for dissolution of the partnership, the appellant withdrew cenain funds from the firm account. The respondent thereafter lodged a complaint against the appellant alleging criminal breach of trust \vithin the meaning of Section 406 I.P.C. He also instituted a suit for the dissclution of the partnership and for accounts. The Additional Chief Presidency Magistrate issued summons to the appellant under Section .!06. 'fhe appellant instituted proceedings in the High Court for quashing the criminal proceedings but the High Court rejected his prayer.

On appeal to this Court,

HELD : Dismissing the appeal :

The offence of criminal breach of trust under section 406 of the Indian Penal Code is not in respect of property belonging to the p;?rtnership but is an offence committed by the person in respect of prOJ'.'erty which has heen specially entrusted to such a person and which he P.olds in a fiduciary capacity. [768 Fl

Jn the present case_. the appellant denied that there \Vas any special entrustrnent of any property or that he, wa5 holding any property in 'a fiduciary capacity.

It was neither possible nor desirable to express any opinion on the merits of such a plea.

It \Vas not possible to do so because the facts were not in possession of the court and furthermore the facts could not h.z before the court \vithout proper investigation and enquiry.

It was not desirable to do so because if :iny such opinion be expressed it might prejudice or embarrass either party, [768 G]

R. P. Kapur v. State of Pnnjab, [1960] 3 S.C.R. 388; Ve/ji Rarhavji Patel v. State of Maharashtra, [1965] 2 S.C.R. 429, lli1t1ban Mohan R, mc.

v. Surendra Mohan Das, I.LR. [1952] 2 Cal. 23, referred to.

CRIMINAL

AP PELLA TE JURISDICTION : Criminal Appeal No. 134 of 1967.

Appeal by special leave from the judgment and order dated June 7, 1967 of the Calcutta High Court in Criminal Revision No. 1100 of 1965.

Debabrata Mukherjee and Sukumar Ghose, for the appellant.

Sadhu Singh, for the re1pondent.

The Judgment oi the Court was delivered by

Ray, J.

This is an appeal by special leave against the judgment of the Calcutta High Court dated 7 June, 1967 refusing to quash the process issued and the proceedings pending before the Additional Chief Presidency Magistrate, Calcutta under section 406 of the Indian Penal Code.

The appellant and the respondent entered into a registered deed of partnership on 27 March, 1963. The name of the partnership business was "Allied Engineers".

The nature of the business was that if the tender submitted by the respondent to the Eastern Railways for extension of bridge No. 2 at the west and of Howrah yard, West Bengal was accepted by the Eastern Railways the said work would be deemed to be included within the partnership.

Under the terms of partnership agreement the capital was Rs. 20,000 to be contributed equally by the partners within six months from the date of the agreement.

The main office of the partnership was at 12/1/5 Manohar Pukur Road, Kalighat, Calcutta.

Another term of the partnership was that if the tender was accepted the appellant would advance or lend from time to time a total sum of Rs. 20,000 towards the work represented by the tender as and when necessary.

The amount so advanced would be repayable to the appellant with interest at six per cent per annum and 503 of the profit to be earned. The respondent was, under the terms of partnership agreement, to execute an irrevocable power of attorney in the manner and with powers as provided in the draft approved by the partners. The bankers of the firm would be United Bank of India Limited and all cheques on the said bank would be signed by both the partners.

The agreement further provided that all cheques in respect of the work in the name of the respondent, S. K. Ghosh, in Eastern Railways would be drawn on the banking account operated by the partner Debabrata Gupta, namely, the appellant for which the respondent would execute an irrevocable power of attorney.

The case of the appellant is that he advanced to the partnership from time io time an aggregate sum of Rs. 50,000 for completion of the work. The respondent executed the power of attorney in favour of the appellant on 27 March, 1963 and authorised the appellant to submit all bills, interim as well as final. to receive cheques and to do necessary things on behalf of the respondent in connection with the said work for extension of bridge under the partnership agreement.

On 18 April, 1964 a second deed of partnership was made between the appellant and the respondent in modification of the earlier deed dated 27 March, 1963.

It was recited there that the appellant had invested to the extent of Rs. 50,000 for the

DEBABRATA V. S. K. GHOSH (Ray, J.)

aforesaid work of constructibn of the bridge. It was also recited in the agreement that the respondent was not in a position to contribute to his share of the capital. The second deed further provided that the amount contributed by the appeilant "shall be repaid immediately after the collection of the bills from the Eastern Railway\;".

The banking account was to be operated by the appellant and all bills collected and security refunded by the Eastern Railways in respect of the first agrecmcnc was to be deposited by the p"rnc; """ ,\te bank forthwith.

It appears that disputes arose between the appellant ana: the respondent whereupon the respondent wrote to the bank to stop all payments to the appellant. The respondent sent to the appellant a notice for dissolution of the partnership. The appellant in accordance with the partnership agreement instituted proceedings in the High Court at Calcutta on or about 8 September, 1965 for filing an arbitration agreement under section 20 of the Arbitration Act. The High Court appointed an arbitrator for adjudication of disputes between the parties.

Meanwhile, summons was issued by the Chief Presidency Magistrate, Calcutta under sections 406 and 424/34 of the Indian Penal Code against the appellant. The respondent on 19 June, 1965 had lodged a complaint against the appellant for process under sections 406 and 424/34 of the Indian Penal Code against the appellant and against two other persons alleging that the appellant had dishonestly withdrawn sums totalling about Rs. 92, 000 from the account of the partnership firm and further that in collusion with other persons had removed the books of accounts.

The respondent also filed a suit being Title Suit No. 15 of 1966 in the Third Court of the Subordinate Judge, Alipore, West Bengal against the appellant for dissolution of partnership and for accounts.

In that suit the respondent obtained a temporary injunction against the appellant restraining him from receiving payment from the Eastern Railways and from operating the bank account of the partnership.

The appellant and the accused No. 2 instituted proceedings

n the High C.ourt at Calcutta for quashing the criminal proceedings.

Th~ Htgh Court at Calcutta quashed the process issued under sections 424/34 of the Indian Penal Code against accused No. 2 on the ground of want of territorial jurisdiction but refused to quash the process under section 406 of .the Indian 'Penal Code against the api ·Hant. '

Counsel on behalf of the appellant contended first that there could be no issue of process in dispuies between the partners and.

secondly the Additional Chief Presidency Magistrate had no jurisdiction to issue process because the alleged offence had ta.ken place outside the jurisdiction of that court.

Counsel for the appellant relying on the decision of this Court in R. P. Kapur v.

The State of Punjab(') contended that the High Court could exercise inherent jurisdiction to quash proceedings where the allegations in the complaint did not make oui a case. It is true .that the Court can in some cases do so. The question is whether the present case is one of that type.

Counsel for theappellant relied on the decision of this Court in Velji Raghavji Patel v. State of Maharashtra(') where one of the partners was convicted of an offeurce of criminal breach of trust under section 409 of the Indian Penal Code and this Court held that where a partner realised the sum in his capacity as partner and utilised them for the business of the partnership, he was only liable to render accounts to his partners and his failure to do so would not amount to criminal breach of trust. Counsel for the appellant invoked the application of the same doctrine to the present case.

In order to accede to the contention it has to be established first that the dispute is only between the partners and secondly it does not relate to any special entrusiment of property which constitutes one of the basic ingredients of an offence under section 406 of the Indian Penal Code. 1his Court in Patel's case(2 ) approved the decision of the Calcutta High Court in Bhuban Mohan Rana v. Surendra Mohan Das(') and said that before criminal breach of trust is established it must be shown that the person charged has been entrusted with property or with dominion over the property. In other words, the offence of criminal breach of trust under section 406 of the Indian Penal Code is not in respect of property belonging to the partnership but is an offence committed by the person in re.spect of . property _which has been specially entrusted to such a person and which_blds in a fiduciary capacity.

In the present case, the appellani denies that there was any special entru.stment of any property or that he was holding any property in a fiduciary capacity. It is neither possible nor desirable to expr.ss any opinion on the merits of such a plea. Ii is not possible to do so because the.facts are not in possession of the court and furthermore the faCts cannot be before the court without proper investigation and. enquiry. It is not desirable to do so because if any such opinion be expressed it may prejudice or embarrass either party.

(3) I.LR. [1952] 2 Cal. 23.

DEBABllATA V. S, K, GHOSH (Ray, J.) 76~

The plea as to lack of territorial jurisdiction cannot also be decided on the materials nor can an opinion be expressed on that question.

It is made clear that all pleas and defences are left open to the appellant including the question whether there was any special entrustment of any proprty to the appellant and the territorial jurisdiction of the Court.

For these reasQllS, the appeal fails and is dismissed.

R.K.P.S.

Appeal dismissed.

DEBABRATA GUPTA

S. K. GHOSH

February 23, 1970

A. N. RAY

I. D. DUA, JJ.

Indian Penal Code

Section 406

Section 406

I.P.C

section 406

Indian Penal Code

[1960] 3 S.C.R. 388

[1965] 2 S.C.R. 429

Debabrata Mukherjee

Sukumar Ghose

Sadhu Singh

Ray

section 406

Indian Penal Code

27 March, 1963

West Bengal

Kalighat

Calcutta

United Bank of India Limited

S. K. Ghosh

Eastern Railways

Debabrata Gupta

18 April, 1964

High Court at Calcutta

8 September, 1965

section 20

Chief Presidency Magistrate, Calcutta

sections 406 and 424

Indian Penal Code

19 June, 1965

sections 406 and 424

Indian Penal Code

High C.ourt at Calcutta

sections 424

Indian Penal Code

section 406

Penal Code

Additional Chief Presidency Magistrate

section 409

Indian Penal Code

section 406

Indian Penal Code

Patel

Calcutta High Court

Bhuban Mohan

section 406

Indian Penal Code

DEBABllATA V. S, K, GHOSH


SUSHIL KUMAR GUPTA

JOY SHANKAR BHATIACHARYYA

February 23, 1970

[A. N. RAY AND I. D. DUA, JJ.] B

Criminal Trial-Secretary of co.operative society charged under ss. 408 and 411 AJ.P.C.-Joint trial with abettors-Acquittal of abettors-Effect on coriviction of the principal accused.

Criminal breach of trust-User by accused of money entrusW!d, contrary to rules-Ratification by Directors-No power to ratify-Effect of

Misjoinder of chargts-No prejudice to accused.

Constitution of India, 1950, Art 134(1) (c)-Certificate by High Court-Judicial discretion to be exercised by High Cour,,

The appellant, who was the Secretary of a Cooperative Society and was responsible for the cash and maintenance of the accounts of the D Society, was charged with the offences of criminal breach of trust and falsificatiol\ of accounts under ss. 408 and 477-A, I.P.C. He was tried along with 5 others who were charged with the offence of abetment of the offences.

The, trial court acquitted all of !hem, but the appellate court (the Court of Judicial Commissioner) convicted the appellant and acquitted the others. The appellate Court held that the appellant had advanced money against the rules of the Society and also 10 various persoflb not entitled to it, that the .appellant had thereby committed criminal breach E of trust and either mi>.appropriated or misapplied the funds of the Society dishonestly to benefit himself or his relations and friends. The appellate Court certified that the case was a fit one for appeal to this Court under Art. 134(t)(c), but, the order granting the certific&te did not "disclose on its face what exactly was the difficulty of the appellate Court and what question of outstanding difficulty this Court was to settle.

in appeal to this Court, F

HELD: (I) The acquittal of the co-accused was not based on the finding that there was no falsification of accounts or embezzlement.

Therefore, the appellant could n.ot contend that no offence was committed because of the acquittal of the co-accused. [773 G-DJ

(2) On the finding of the appellate court, it was not a mere civil liability of the appellant. The appellant's manner of dealing with the money entrusted to his custody constituted criminal breach of trust.

The Directors had no authority under the bye-laws to give any directions contrary to the bye-la\VS and so, could not ratify the violation of the bye-laws.

Any resolution ratifying the use of trust money contrary_ to the directions contained in the bye-Jaws would not validate, the breach of the bye-laws.

[7750; 776 A-CJ

- (3) There was no misjoinder of charges and no prejudice was caus-ed to the appellant. [776 F]

( 4) . The appellate Court should not have granted the certiJicate, under Art. 134(\)(c) in the present case. The word 'certify' in "the Article

postulates the exercise of judicial discretion by the appellate Court and the certificate shcuid ordinarily show on the face of it that the discretion was invokcM ano properly exercisCd.

This Court should be in a position to koow that the appellate Court has not acted mechanically but bas appli"

its n1ind. n certificate under this clause is impermissible on questions of fact. \Vhen the case does not disclose a substantial question of law or principle the certificate granted by the appellate Court is liable to be revoked by this Court, though such. pl'in1a facie non-disclosure would not by itse\t :mtomatically invalidate the ccr'ificate. [777 A-Cl

CRIMINAL

APPELLATE JURISDICTION : Criminal Appeal No. 131 of 1967.

Appeal from the judgment and order dated January 9, 1967 of the Judicial Commissioner's Court Tripura, Agartala in Criminal Appeal Case No. 8 of 1963.

M. K. Ramamurthi, J. Ramamurthi and Vineet Kumar, for the appellant.

H. R. Khanna and R. N. Sachthey, for the respondent.

The Judgment of the Court was delivered by

Dua, J.

Pursuant to a complaint by Shri Joy Shanker Bhattacharyya, the appellant Sushi! Kumar Gupta was tried in the court of Assistant Sessions Judge, Tripura on the following charges :

" ( 1) That you in between the month of September, 1958 and July, 1959 at Agartala P. S. Kotwali being a servant viz. Secretary in the employment of the Tripura Central Marketing Co-operative Society Ltd., and in such capacity entrusted with certain property to wit a total sum of Rs. 18,200 being the fund of the Society committed criminal breach of trust in respect of the said property and thereby committed an offence punishable under s. 408 of the Indian Penal Code and within the cognizance of this Court.

Secondly : that you in between the period of September, 1958 and July, 1959 at the same place being a Secretary in the employment of the Tripura Central Marketing Co-operative Society Lid., wilfully and with intent to defaud, falsified certain books and other relevant apers. to wit cash book etc., which belonged to the said society, your employer and thereby commiited an offence punis)lable under s. 477-A of the Indian Penal Code and within the cognizance of this Court."

As the appellant was tried jointly along with five others who have been. acquitted and as it. was arged on behalf of the appellant that m view of the acqutttal of his co-accused'the appellant

also should have been acquitted, the charges against them may also be reproduced :

"That Sushi! Kumar Gupta, Secretary of the Tripura Central Marketing Co-operative Society Ltd., in between the period of September, 1958 and Jufy, 1959 at Agartala p.s. Kotwali committed the offence of criminal breach of trust in respect of Rs. 18,200 and that you the aforesaid persons at the same place and time abetted the said Shri Sushi! Kumar Gupta in the commission of the same offence of criminal breach of trust in respect of the said amount which was committed in consequence of your abetment and that you hii_ve thereby committed an offence punishable under s. 109, I.P.C. read with s. 408, I.P.C. and within my cognizance.

Secondly : that Shri Sushi! Kumar Gupta, Secretary of the Tripura Central Marketing Co-operative Society Ltd. in between the period of -September, 1958 and July, 1959 at Agartala p.s. Kotwali committed the offence of falsificaiion of accounts and that you the aforesaid persons at the same place and time abetted the said Shri Sushi! Kumar Gupta in the commission of the same offence of falsification of account which was committed in consequence of your abetment and that you have thereby committed an offence punishable u/s 109, I.P.C. read with s. 477-A of the I.P.C. and within my cognizance."

"The trial court acquitted all the six accused persons. An appeal against the acquittal of all of them was preferred under s. 417 (3), Cr. P.C. in the court of the Judicial Commissioner, Tripura.

That court allowed the appeal against S. K. Gupta only and dismissed it as against the others.

S. K. Gupta was held guilty of the offence of criminal breach of trust under s. 408, I.P.C. and also of the offence of falsification of accounts under s. 477-A, l.P.C. regarding the sum of Rs. 18,200. He was sentenced under each count to undergo rigorous imprisonment for one year, the sentences to be concurrent.

The convict S. K. Gupta has appealed to ibis Court on certificate granted under Art. 134 ( 1 )( c) of the Constitution. The order granting the certificate does not disclose on its face what exactly the difficulty of the court of the Judicial Commissioner is and precisely what question of outstanding difficuliy this Court is desired to settle. On behalf of the appellant his learned advocate Shri Ramamurthy, however, addressed elaborate arguments questioning the order of the learned Judicial Commissioner allowing

the appeal against the appellant S. K. Gupta's acquittal. His challenge was based on three main contentions.

The fourth point that the learned Judicial Commissioner erred in law in considering Ex. P-59 to be admissible ii} evidence, in disagreement with the trial court, according to which it was hit by s. 24, Indian Evidence Act, was not allowed to l;>e argued in this Court because this ground was not taken in the grounds of appeal.

The first contention seriously pressed on behalf of the appellant is that in view o( the acquittal of his co-accused who were tried along with him the court of the Judicial Commissioner was wrong in law in holding that there was falsification of accounts and embezzlement of the funds of the Tripura Central Marketing Co-operative Society.

This submission is unacceptable.

The acquittal of the other co-accused as affirmed by the learned Judicial Commissioner is not based on the finding that there was no falsification of accounts and no embezzlement of the funds of the Society.

S. K. Gupta, appellant, it may be pointed out was the Secretary of the Society since April 13, 1957 when the first general meeting of the Society was held and was in that capacity entrusted with its funds. He worked as such till August 10, 1960.

He was accordingly responsible for the cash and maintenance of current accounts of the Society during the period in question.

Turning to the Bye-laws of the Society, bye-law no. 41 prescribes the duties of the Secretary. According to this bye-law ihe Secretary has inter alia :

"(3) To make disbursement and to obtain vouchers and to receive payments and pass receipts, under the general or sp.cial orders of the Board of Direciors on this behalf from time to time.

( 4) To keep all accounts and registers required by the rules.

(13) To countersign cash book in token of the balance being correct and to produce the cash balance whenever called upon to do so by the Chairman or any person authorised to do so ..

In the absence of the Secretary the Board of Directors may authorise the Manager to perform the duties of the Secretary.

The Board of Directors may also authorise the Manager to perform any of ihe duties of the Secretary to facilitate H the working of the Society.

Receipts passed on behalf of the Society shall be sigJned by the Secretary.

Share certificates and otherdocuments shall be signed by the Secretary and one member of Board of Directors jointly."

Byelaw 42 contains directions regarding advances against pro- .duce of goods and clause ( 1) of this byelaw provides :

"(1) The Board of Directors shall, at the beginning of the session, fix the amount of advance, indicating the percentage of the market price of produce or goods pledged with the society, that may be granted to a member. Such limits may be fixed for difierent commodities and varied from time to time according to fluctuation in markets or otherwise.

It shall also be competent for the Board of Directors to call on a borrower at any time before the due date to repay a portion of the loan or advance issued or to produce additional security for the outstanding Joan or advance withln a time fixed by them, if in their opinion, there is fall or likely to be a fall in the market value of the produce or goods pledged."

Under byelaw 44 loans may be granted to members in suitable "Cases on such terms and conditions as regards individual and maximum limits, repayment of loan, rate of interest thereon etc., as may be fixed by the Board of Directors from time to time. According tci the learned judical Commissioner "the overall picture" emerging from the evidence on the record, to quote his own words, it :

"(1) A sum of Rs. 18,200/- was said to have been disbursed in 1958 and 1959.

(2) It was said to have been repaid in the last week of June, 1959 towards the end of the co-operative year of 1959 and Jong after the maximum period of 6 months allowed by rule 42 ( 4) of the byelaws.

(3) The same amount was again said to have been disbursed in a few days in the first week of July commencing with the next cooperative year (1959-60),

( 4) Except the 2nd and 4th respondents, the others were not members of the Co-operative Society and in this regard the !st respondent disregarded sub-rule ( 1) of r. 42 of the byelaws.

( 5) The I st respondent did not obtain any general or special orders of the Board of Directors to make the disbursements and violated sub-rule ( 1) of r. 42 of Ext.

P-41.

(6) Ext. P-56 and P-59 show that the alleged collections of the monies in June 1959 was false and that the accounts were got up.

(7) The fact that a discount Qf Rs. 10/- was paid to cash a cheque on 29-6-1959 shows that the society had B no funds on that day.

(8) None of the alleged loanees was a Jute grower and no jute was deposited in th" godowns of the society before the advances were made and in this regard the mandatory provisions of sub-r. (2) of r. 42 were also disregarded by the 1st respondent.

( 9) A number of adjustments were made in the Accounts to show that the sum of Rs. 18,200/- was disbursed.

(10) The three persons to whom ultimately the amounts were said to have been disbursed are interested in the 1st respondent. The 4th respondent C. C. Das Gupta is a relation of the 1st respondent and proved by P. Ws 1, 6 and 8 and as admitted by the 4th respondent himself in Ext. P-56. The 3rd respondent Sudhir Ranjan Roy is a servant of D.W. 1 who is a co-Director of the Match Factory and friend of the 1st respondent. The 3rd respondent Haradhan Deb was appointed by the 1st respondent in the C.M.S. The 3rd respondent was also an employee of the C.T.S. of which the 1st respondent was a Director."

On the basis of these observations the appellant was held to have committed criminal breach of trust and to have either misappropriated or misapplied the funds of the Society dishonestly to benefit himself of his relations and friends.

Counsel failed to point out any legal infirmity in the final conclusion drawn in the impugned order from the overall picture. Indeed, counsel, after a faint attempt to find fault with this conclusion felt constrained to admit that the money had been advanced against the rules of the Society and also to the persons not entitled to it, his only contention in support of the appeal being that it did not constitute a criminal offence and that in any event the Board of Directors of the Society having ratified the advances, the foundation for the criminal charge must be deemed to have disappeared.

We are unable to agree.

H The offence of criminal breach of trust is committed when a person who is entrusted in any manner with property or with dominion over it. dishonestly misappropriates it, or converts it to his own use, or dishonestly uses it or disposes it Qf, in violation

of any direction of law prescribing the .mode in which the trust is to be discharged, or of any lawful contract, express or implied, made by him touching such discharge, or wilfully suffers any other person so to do.

The appellant's manner of dealing with the money entrusted to his custody clearly constitutes criminal breach of trust.

Counsel was not able to point out any provision which empowers the Directors to prescribe the mode of making advances, which violates or is in breach of, or contrary to the Byelaws. If the Directors possess no authority to give any directions contrary to the byelaws they can scarcely claim or assume power to ratify violation of the Byelaws in the matter of dealing with the trust money.

Our attention was not drawn to any over-riding provision conferring power on the Board of Directors to ratify use of the trust money contrary to the directions contained in the Byelaws. Exhibit P-27, the resolution of . the Board of Directors dated January 10, 1960, on which reliance in support of the argument was placed, merely states "investments made by the Secretary uptodafo are hereby approved" without pointing out the provisions under which such approval could validate breaches of the Byelaws.

Incidentally it may be mentioned that the learned Judicial Commissioner also entertained some suspicion about the manner in which the meeting, in which this resofotion was passed, was held.

This contention of the counsel must, therefore, be repelled.

In the last submission the counsel made a grievance against the joint trial of several accused persons on several items of embezzlement According to him there was a misjoinder of charges which vitiated the trial.

In our opinion, charges under s. 408 and s. 4 77-A, Indian Penal Code, could, in the circumstances of this case, be tried together and the joint trial of all the accused was proper and lawful. Our attention was not drawn to any provision of law against the legality of the joint trial. In any event no failure of justice in consequence of the joinder of charges was pointed out, with the result that the question of misjoinder of charges must be held to be of little conseq11ence at the stage of appeal. ·

Before closing we may point out, as has repeatedly been said by this Court, that there is normally no right of appeal to this Court in criminal matters except in cases provided by Art. 134 (l)(a) and (b) of the Constitution. Clause (c) of this Article empowers the High Court to certify cases to be fit for appeal to this Court. The word "certify" is a strong word; it posiulates exercise of judicial discretion by the High Court and the certificate should ordinarily show on the fce of it th.at the discretion was invoked and properly exercised. This Court should be in a position to know that the High Court has not acted mechanically

but has applied iis mind. A certificate under this clause is impermissible on questions of fact and when a case does not disCiose a substantial question of law or principle then the certificate granted by the High Court is liable to be revoked by this Court, though such prima facie non-disclosure would not by itself automatically invalidate the certificate. In the case in hand no substantial question of law or principle was made out'at the bar and the certificate wa5 clearly misconceived though it vaguely states that sevei:al questions of law are involved. The appeal fails and is dismissed.

V.P.S.

Appeal dismissed.

uosupCIQ'!PJ70I-s

SUSHIL KUMAR GUPTA

JOY SHANKAR BHATIACHARYYA

February 23, 1970

A. N. RAY

I. D. DUA, JJ.

ss. 408 and 411

Constitution of India

Art 134(1)

ss. 408 and 477

I.P.C

Art. 134(t)(c)

Art. 134(\)(c)

M. K. Ramamurthi

Vineet Kumar

H. R. Khanna

R. N. Sachthey

Dua

Joy Shanker Bhattacharyya

Sushi! Kumar Gupta

Assistant Sessions Judge, Tripura

s. 408

Indian Penal Code

s. 477

Indian Penal Code

Sushi! Kumar Gupta

s. 109

I.P.C

s. 408

I.P.C

s 109

I.P.C

s. 477

I.P.C

s. 417

Judicial Commissioner, Tripura

S. K. Gupta

s. 408

I.P.C

s. 477

Art. 134

Ramamurthy

S. K. Gupta

s. 24

Indian Evidence Act

April 13, 1957

August 10, 1960

C. C. Das Gupta

Sudhir Ranjan Roy

Haradhan Deb

C.M.S.

C.T.S.

January 10, 1960

s. 408

s. 4

Indian Penal Code

Art. 134


R. D. AGARWALA & ANR. ETC.

UNION OF INDIA & ANR.

February 23, 1970

[M. HIDAYATULLAH, C.J., J. C. SHAH, K. S. HEGDE,

A. N. GROVER AND A. N. RAY, JJ.]

Practice and Pi-ocedure-Single Judge deciding iniportant questions and suo motu granting certificate 'under Art. 132(1) of the Constitution-

Pro_.,, riety.

Writ petitions involving. important questions of law came up before C a single Judge of the High Court.

He was requested by the parties to refer the cases to a Divisional Bench.

Instead of doing so he disposed them of himself, and suo n1otu granted a certificate under Art. 132(1) of 1he constitution for appeal to this court.

HELD : The action of the Judge though technically permissible wa-; improper, because, either the Judge should have referred the case<; to a Bench, or alloY.ied the P.arties to pursue their right of appeal to a D Bench against the decision of the single Judge, without short circuiting tht right by passing on the cases to this Court. [779 E-G)

CIVIL APP ELLA TE JURISDICTION : Civil Appeals Nos. 2634 of 1969 and 63 of 1970.

Appeals from the judgment and order dated December 5, E 1969 of the Delhi High Court in Civil Writ Nos. 220 and 725 of 1968.

C.A. No. 2634 of 1969.

Sarjoo Prasad, Prem Nath Chadda, K. L. Mehta, S. K. Mehta, K. R. Nagaraja, M. G. Gupta and Sona Bhatiani, for the appel- F !ants.

R. N. Sachthey, for respondent No. 1.

M. C. Setalvad, Govind Das and B. P. Singh, for intervener No. 1.

M. C. Chagla, K. K. Jain, Bishamber Lal and H. K. Puri, for intervener no. 2.

C.A. No. 63 of 1970.

R. V. S. Mani .. for the appellants.

S. P. Nayar, for respQndent No. 1.

S. K. Mehta, K. L. Mehta, K. R. Nagaraja and Sona Bhatiani for respondents Nos. 3 and 4. . '

,..

R. D. AGARWALA v. UNION (Hidayatul/ah, C.J.) 779

The Order of the Court was delivered by

Hidayalullah, C.J.

This order will govern the disposal of Civil Appeals Nos. 2634 of 1969 and 63 of 1970. These two appeals arise out of two writ petitions filed in the High Coun of Delhi which were disposed of by a common judgment delivered by a le3rned single Judge on December 5, 1969. The appeals have been brought on certificate granted suo motu by the learned single Judge under Art. 132(1) of the Constitution of India.

While granting the certificate, the learned single Judge observed that at an earlier stage in the case, request was made to him to refer these two petitions for decision to a Bench, because important questions were involved in them. At that time, the learned Judge felt that since there was a Division Bench decision of the Rajasthan High Court in Jaipur Udyog Ltd. v. Union of India and another(') there was no need to refer the matter to a larger Bench. The learned Judge goes on to say in the order granting certificate that at the time of the hearing, he found that several questions arose before him which were not covered by the Rajasthan decision. He probably felt that as the points which he had to decide were not considered by this Court in any earlier decision and a• he had decided the case sitting singly, he should grant certificate .mo motu for appeal to this Court.

In our opinion, and we say it respectfully, the learned Judte was error in not making a reference to a Bench when he found that important questions of law were arising before him: Even if he did not make any reference, he should have allowed the parties to take an appeal in the High Court itself under the provisions pertaining to appeals against decisions of a single Judge. Tke practice of deciding the case sitting singly and giving a certificate under Art. 132(1) for appeal to this Court although technically correct, is 111 improp.r practice. Ii is the right of the party to file an appeal in the High Court itself against the decision of the single Judge and that right should not be shOrt-circuited by passing Ol\ the case io the Supreme Court for decision. We think we should not endorse this practice which would create a bad precedent in India. We accordingly cancel the certificate and leave the parties free to file an appeal in the High Court, it they so desire. There will be no order as to costs.

V.P.S.

Certificate Cancelled .

(I) A.1.R. 1969. Raj. 281.

T. N. RAGHUNATHA REDDY

MYSORE STATE TRANSPORT AUTHORITY

February 24, 1970

[S. M. SIKRI, V. BKARGAVA AND C. A. VAIDIALINGAM, JJ.]

Motor Vehicles Act 4 of 1939-'Kolar Scheme' approved and published by Mysore State Government under s. 68-D of Act-'Existing perniit holder' lVithin meaning of cl. (d) of scheme-Who is Agreement between Mysore and Andhra Governments for counter-signing each other perniits

for inter-State routes-Such agree1nent whether overrides Chapl:?r IV-A of Acr.

In 1959 the States of Mysore and Andhra Pradesh entered into a reciprocal arranaement agreeing thereby that certain permits issued by the Transport Authorities of one State should be counter-signed by those of

the other. Under s. 43(1) of the Motor Vehicles Act, 1939 the Government of Mysore issued directions to the State Transport Authority to give effect to the above arrangement. On April 25, 1968 the Regional Transport Authority Cuddapah, Andhra Pradesh issued a permit to the appellant for the Cilddapah-Bangalore inter-State route under s. 63 of the Act, which was to be valid up to May 13, 1971. The appellant then applied to the State Transport Authority in Mysore for counter-signature of his permit.

By then the Government of Mysore had by its order dated 25-1-1968 approved under s. 68-D of the Motor Vehicles Act, a scheme called the 'Kolar scheme'. That scheme provided for exclusive operation by the Mysore State Transport Undertaking of stage-carriages on the notified routes.

Under the scheme existing permit holders' could continue to operate inter-State routes except that their permits would be ineffective' for the overlapping portions of the notified routes. On March I, 1968 the Mysore State Transport Undertaking applied under s. 68F(l) to operate buses on the notified routes.

In December 1968 the Regional Transport Authoritv resolved to give effect to the scheme from 1-1-1969. Meanwhile the appellant's application for counter-signature came up before the Mysore State Transport Authority on July 6, 1968. By that time, however, writ petitions had been filed in the High Court, challenging the 'Kolar scheme' and the Court had made interim orders staying the operation of the. scheme.

In that situation the State Transport Authority, Mysore granted to the appellant counter-signature on his permit, expressly subject to the decision of the High Court as to the validity of the scheme.

On. October 7, 1968 the High Court dismissed the said writ petitions and upheld the validity of the scheme.

Thereupon the State Tran.sport Authority issued a notice to the appellant to surrender the counter-signature slip and stop running the buses.

The appeJlan.t chaHenged this order in a \vrit petition under Art. 226 of 'the Constitution. The petition being dismissed he appealed by special leave to this Court. rhe appellant contended inter alia that : (i) the counter-signature on the appeUant's pcrn1it could not be canoelled as he was an •existing permit holder' under cl. (d) of the scheme and for this purpose the crucial date \Vas 1-1-1969 when the order under s. 68F(2) came into effect; (ii) Inter-State agreement overrides the provisions of Chapter JV-A of the Act

HELD : (i) Assuming, without deciding, that the date of publication is not tbi" appropriate date, the date on which the transp0rt undertaking

applies under s. 68F(l) for a permit must be the date \Vilh rcfernce to which the. expression "existing permit holder" must be interpreted. The application by the State. Transport Undertaking in. the present cases \Vas made on March l, 1968. If this was the crucial date, the appellant was

not an "existing permit holder" because he did not obtain his counter signature till July 1968. [785 C-D]

Abdul Gafoor v. State Mysore, [1962] I S.C.R. 909, applied.

Sri SatJanarayana Transports (P) Lui. Guntur v. Andhra Prades/i

State Road Transport Corporation, C.A. No. 347 of 1961 dt. 30·10-1961, distinguished.

(ii) Even if the crucial date be taken as January 1, 1969 as cont<nded by the appellant, he must still fail on the ground that he was not a p<rmit hO!der at all.

His counter-signature must be deemed to have lapsed when the High Court on Octnber 7, 1968 dismissed the \vrit petitions in which the 'Kolar scheme' had been stayed. The order of the Regional Transport Authority gr.tnting the countersignature "subject to the decision of the High Court of Mysore about the validity of the Nationalisation Scheme of the Kilar Pocket" in the context of the case meant that if the writs failed the counter-signature would automatically lapse. [786 A-BJ

The Smarth Transport Co. v. The Regional Transporl Authority, [1961]

1. S.C.R. 631 at 639, referred to.

(iii) An inter-State agreement cannot over-ride the provisions of Chapter IV-A. .The inter-State agreement is not law and to hold that an inter-State agreement over-rides Chapter IV-A v.ould he to complete'1y

disregard the provisions of s. 68-B of the Act. Articles 162 and 298 of the Constitution had no relevance in this connection.

Assuming that a State has pcv.cr to enter into agreement with another State in exercise of its executive pO\l.'Crs under A.rt. 162 and under Art, 298 it can carry on

trade or business, the fa.::ts did not throw any hight on the question for decision. [786 H-787 Al

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1564 of 1969.

Appeal by special leave from the judgment and order dated April 15, 1969 of the Mysore High Court in Writ Petition No. 1112 of 1969.

P. Ram Reddy, P. Parameslt'ara Rao and A. V. V. Nair, for the appellant.

G Niren De, Attorney-Genera/, R. Gopalakrishnan and S. P.

Nayar, for respondent No. 1.

Shyamala Pappu and Vineet Kumar, for respondent No. 2.

The Judgment of the Court was delivered by Sikri, J.

This appeal by special leave is directed against the judgment of the High Court of Mysore dismissing Writ Petition No. 1112 of 1969 filed by T. N. R•aghunatha Reddy, appellant before us, against .the Mysore State Transport Authority. The

appellant had prayed , to the Court to quash the order/endorsement of the respondent, dated March 5/10, 1969.

In order to appreciate the points raised before the High Court and before us if is necessary to give a few facts.

In 1959 the States of Andhra Pradesh and Mysore appear to have entered into a reciprocal arrangement regarding inter-State road transport.

In exercise of the powers conferred by sub-s. ( 1) of s. 43 of the Motor Vehicles Act, 1939 (Central Act IV Of 1939) the Government of Mysore issued a direction to the State Transport Authority to take necessary action to give effect to the above arrangement. On October 8, 1964, the State of Mysore published under cl. (d) s. 68-C of the Motor Vehicles Act, 1939hereinafter referred to as the Act-what is called the "Kolar

Scheme". Clause ( d) of the scheme reads as follows :

~(d) Whether the services are to be operated by the State Transport

Undertaking to the exclusion, complete or partial of other persons or otberNise

The State TranSport Undertaking will operate services on all the routes to the complete exclusion of other persons except that :-

{a) that existing permit holders on the inter-State routes may .continue to operate such inter-State routes, subject to the condition that their permit shall be rendered ineffective for the over-lapping portions of the notified routes".

It is the case of the appellant that in March 1967 on a proposal made by the State of Mysore, the States of Andhra Pradesh and Mysore eniered into an agreement for counter-signing a second inter-State permit on the route Cuddapa to Bangalore, and on April 4, 1967, the Transport Commissioner of Andhra Pradesh showed willingness to countersign a second permit. On April 13, 1967 the Transport Commissioner of Mysore State expressed willingness to countersign the second permit.

It is further the case of the appellant that although the State of Andhra Pradesh carried out the agreement and countersigned the second permit on the Bangalore-Cuddapa route in favour of a Mysore operator the Mysore State refused to carry out this agreement.

On January 25, 1968, the Kolar Scheme, as approved, was published in the Gazette under s.68-D ( 3) of the Act. On March I. 1968. the Mysore undertakill!! applied under s.68F(l) to operate buses from January 1, 1968, or a later date.

On April 25, 1968, the Regional Transport Authority, Cuddapah issued a permit to the -appellant for Cuddapah-Bangalore route, an inter State route, under s. 63 of the Act. This permit is valid uptil May 13, 1971. On May 16, 1968. the appellant applied to the State Transport Authority, Mysore, for counter-sign; iture under s.63 of

the Act, and on May 20, 1968, the Transport Commissioner, Andhra Pradesh, requested the Transport Commissioner, Myso, re, to countersign the appellant's permit under the agreement.

In the meantime the Kolar Scheme had been challenged in the High Court and the High Court stayed the Kolar Scheme B pending the decision of the writs.

The application of the appel!ant, dated May 16, 1968, ior the grant of counter-signature of the permit came up for consideration before the Mysore State Tr3i11Sport Authority on July 6, 1968. The learned counsel for the appellant urged bef~ it that "counter-signature may be given with any timin~ found suitable by the Authority for their service which is an express service and does not stop in all stations as the shuttle services of the (in the case of) objectors." He also urged that "counter-signature may be cQllSidered and granted as there is a stay order ol. the High Court of Mysore in W.P. No. 1390 of 1968 against the operation of the Kolar Nationalisation Scheme and that his permit was granted before the Scheme was approved and that the permit is issued under reciprocal agreement." The grant of counter-signature was opposed by a number of objectors. The Law Officer of the Mysore State Undertaking argued that though there was a stay order against the Kolar Scheme and its implememtation it did not authorise any Transport Authority to grant any fresh permits for counter-signature. The Transport Authority observed:

"After considering the elaborate arguments oL the counsels for the petitioner and objectors and taking all aspects of the matter and facis as disclosed from the records and the large number of existing services on the route or sectors of the route, the S.T.A. resolved to grant the counter-signature subject to the decision .. of the High Court of Mysore about the validity of the Nationalisation Scheme of Kolar Pocket and with the fol!owing modification to the timings already granted by the R.T.A. Cuddapah."

In pursuance of this resolution actual counter-signature was granted on July 6, 1968. On October 7, 1968, the High Court dismissed the writs relating io the Kolar Scheme and the Regional Transport Authority its meeting on December 30, 1968, passed a series of orders which it deemed fit consequent on the implementation of the Kolar Scheme. On March 10, 1969, the State Transport AuthoritY, Mysore, issued a notice to the appel!ant to s•rrender the counter-signature slip and stop running the buses.

On March 15, 1969, the appellant filed writ petition No. 1112 of 1969 challenging this order.

Before the High Court two points were raised on behalf of the appellant; ( 1) That the State Transport Authority should have heard the appellant before calling upon him to surrender the counter-signature and the Secretary of the State Transport Authority had no power to issue the impugned endorsement; (2) As the permit had been granted to the petitioner in pursuance of an inter-State agreement, the State Transport Authority in Mysore had rightly granted the counter-signature and the counter-signature could not be revoked later.

The first point is not raised before us. Regarding the second point the High Court held that "a scheme under Chapter IV-A (of the Act) will override any agreement including an inter-State agreement.

Unless such scheme itself exempts permits granted in pursuance of inter-State agreements such permits will also be 5Ubject to the scheme." The High Court further held that "as the Kolar Scheme does not exempt permits granted in pursuance -0f inter-State agreements, the petitioner cannot claim countersignature of his permit when the operation of his stage carriage in this State is inconsistent with the scheme."

Before us the learned counsel for the appellant, Mr.

Ram Reddy, has raised Kour points : ( 1) As the appellant is an existing permit holder within clause ( d) of the Scheme, the counter-signature cannot be revoked;

(2) Assuming that the appellant does not come under clause (d); the counter-signature should not be revoked. it could only be modified with the condition that the appellant should not pick up or drop passengers on the overlapping portion of the route; (3) that inter-State agreements override the provisions of Chapter IV-A of the Act, and ( 4) that the scheme imposing total exclusion of private carriers offends the provisiO!n's of Art. 301 of the Constitution. ·

Regarding the first point, the learned c0unsel urges that the expression "existing permit.holder" in clause (d) of the Scheme has to be interpreted as if ihe scheme is read on January 1, 1969 when orders under s. 68F(2) of the Act came into effect. He

refers to the fdllowing passage in the otder of the Regional Transport Authority, dated Dece1!1ber 30, 1968 :

"Further we have resolved to give effect to the Approved Scheme of Kolar Scheme with effect from 1-1-1969 in accordance with Section 68F(2) and resolved to take the ; following action under Section 68F(2) of the M.V. Act 1939 (as appended hereto)."

It seems to us that this is not a correct way of interpreting the Scheme. The scheme as approved, was published in the Government Gazette under s. 68D(3) on January 25, 1968, and

on March 1, 1968, the Mysore undertaking applied under s. 68 F ( 1) to operate buses from January 1968 or a later date. As held by this Court in Abdul Gafoor v.

State of Mysore(') "when a scheme prepared and published under s. 68-C has been approved and an application has been made in pursuance of the scheme and in the proper manner as specified in Ch. IV nothing more remains to be decided by the Regional Transport Authority and it has no option to refuse the grant of the permit"

and "when taking action under s. 68-F ( 1) the Regional Transport Authority does not exercise any quasi-judicial function and acts wholly in a ministerial capacity." It seems to us that even if the date of publication may not be the appropriate date-we do not decide that it is not an appropriate date-atleast the date on which th.~ transport undertaking applies under s. 68F(l) for a pennit must be the date with reference to which the expression "existing permit holder" must be interpreted. If thi:i is the crucial date, then ii is quite clear that the appellant was not an existing permit holder because he did not obtain his countersignature till July 1968.

The observations of Raghubar Dayal, J. in Sri Satyanarayana Transports (P) Ltd. Guntur v. Andhra Pradesh State Road Transport Corporations(') do not assist the appellant.

In that case the Court was dealing with the objection that it was the duty E of the Road Transport Corporation to furnish the date of implementation of each scheme as a part of the proposal, the date being a material particular. In this connec!ion the Court observed :

"The question whether the State Government can fix a date or not is not for determination in this appeal and we do not express any opinion on that point.

Suffice it to say that the Regional Transport Authority has the power to fix a date after the scheme has been approved by the State Government, as it is that authority which has, under s.68F, to issue a permit to the State Transport Undertaking for plying motor vehicles and to cancel existing permits. The date up to which th.e existing permits are to continue and the date for the State Transport Undertaking to commence plying motor vehicles should be such that there be a continuity of transport services on the notified route and that there be no dislocation of transport arrangements."

The Court was not considering the crucial date for the purpose of interpreting the expression "existing permit holder" in a scheme.

(I) [1962] I S.C.R. 909.

(2) Civil Appeal No. 347of1961 ; judgment on October 3, 1961.

Apart from that the appellant must fail on the ground that he was not a permit holder at all even if the crucial date be January 1, 1969.

His counter-signature must be deemed to have lapsed when the High Court dismissed the writ petitions in which the Kolar scheme had been stayed on October 7, 1968. In our opinion the order of the Regional Transport Authority granting the counter-signature "subject to the decision of the High Court of Mysore about thevalidity of the Nationalisation Scheme of Kolar Pocket," in the context which we have reproduced above, me'ims that if the writs failed the counter-signature would automatically lapse.

It will be recalled that this Court held in The Samrath Transport Co. v. The Regional Transport Authority(') that the Regional Transport Authority is within its rights not to entertain an application if the Scheme had been approved and published.

This Court observed :

"The Regional Transport Authority is authorized for the purpose of giving effect to an approved scheme to refuse to entertain an application for renewal of any other permit.

This power does not depend upon the presentation of an application by the State Transport Undertaking for a permit.- This power is exercisable when it is brought to the notice of the Authority that there is an approved scheme and, to give effect to it, the application for renewal cannot be entertained."

The Regional Transport Authority must have been aware of this and it must be because of the stay order that the counter-signature was granted to the appellant by it. ·

In view of our decision that the appellant's counter-signature lapsed when the writ petitions were dismissed, the second point does noi arise.

Regarding the third point, we were unable to appreciate how an inter-State agreement overrides the provisions of Chapter IV-A. The inter-State agreement is not law and to hold that an inter-State agreement overrides Chapter IV-A would be to completely disregard the provisions of s. 68 B of the Act which provides 1hat "the provisions of this Chapter and the rules and orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in Chapter IV of this Act or in any other law for the time being in force or in any instrument having effect by virtue of any such law." In this connection reference was made to Art; 162 and Art. 298 of the Constitution.

But we were unable to appreciate what relevance these articles

(I) [1961) 1 S.C.R. 631 at 639.

have to the point at issue. Assuming that a State has power to enter into agreement with another State in exercise of its executive powers under Art. 162, and under Art. 298 it can carry on trade or business, we are unable to see what light these facts throw on the question before us.

We stopped the learned counsel from developing the fourth point because this point was not taken up in the High Court.

In the result the appeal fails and is dismissed. In the circumstances there will be no order as to costs in this Court.

G.C.

Appeal dismissed.

R. D. AGARWALA & ANR. ETC

UNION OF INDIA & ANR

February 23, 1970

M. HIDAYATULLAH, C.J.

C. SHAH

K. S. HEGDE

A. N. GROVER

A. N. RAY, JJ.

Art. 132(1)

Art. 132(1)

Sarjoo Prasad

Prem Nath Chadda

K. L. Mehta

S. K. Mehta

K. R. Nagaraja

M. G. Gupta

Sona Bhatiani

R. N. Sachthey

M. C. Setalvad

Govind Das

B. P. Singh

M. C. Chagla

K. K. Jain

Bishamber Lal

H. K. Puri

R. V. S. Mani

S. P. Nayar

K. L. Mehta

Hidayalullah

Art. 132(1)

Constitution of India

Rajasthan High Court

Art. 132(1)

Supreme Court

India

T. N. RAGHUNATHA REDDY

S. M. SIKRI

V. BKARGAVA

C. A. VAIDIALINGAM

Motor Vehicles Act

s. 68

Mysore

Andhra Pradesh

s. 43(1)

Motor Vehicles Act, 1939

Government of Mysore

April 25, 1968

Cilddapah

Bangalore

s. 63

May 13, 1971

s. 68

Motor Vehicles Act

Mysore State Transport Undertaking

March I, 1968

s. 68F(l)

Mysore State Transport Authority

July 6, 1968

October 7, 1968

Art. 226

s. 68F(2)

s. 68F(l)

State Road Transport Corporation

Octnber 7, 1968

High Court of Mysore

s. 68

Articles 162 and 298

P. Ram Reddy

P. Parameslt'ara Rao

A. V. V. Nair

G Niren De

R. Gopalakrishnan

S. P.

Nayar

Shyamala Pappu

Vineet Kumar

Sikri

T. N. R•aghunatha Reddy

s. 43

Motor Vehicles Act, 1939

October 8, 1964

State of Mysore

s. 68

Motor Vehicles Act, 1939

Cuddapa

April 4, 1967

April 13, 1967

Mysore State

State of Andhra Pradesh

Mysore State

January 25, 1968

March I. 1968

Regional Transport Authority, Cuddapah

Cuddapah

s. 63

May 16, 1968

State Transport Authority, Mysore

Myso

Mysore State Tr3i11Sport Authority

R.T.A. Cuddapah

March 10, 1969

March 15, 1969

Ram Reddy

Art. 301

s. 68F(2)

Section 68F(2)

Section 68F(2)

s. 68D(3)

March 1, 1968

Mysore undertaking

s. 68

s. 68

s. 68

s. 68F(l)

Raghubar Dayal

October 3, 1961

s. 68

Art. 298

[1961) 1 S.C.R. 631

Art. 162

Art. 298


H.P.GUPFA

HIRALAL

February 24, 1970

[J. M. SHELAT AND G. K. MITTER, JJ.] B

Jndian Companies t (of 1956). s. 201-Jurisdiction to t? cop/aint Jor failure to pay dividend-Whether at place where cumpany s registered .-0ffice or shareholder's registered address.

The respondent filed. complaints before the Magistrate t Meerut under s. 207 of the Companies Act, 1956 on an allegation of failure on the part of appellant, the director-i0rcharge of a Company whose registered office C was at Delhi, to pay the respondent dividends on shares held by h•_m, although the dividends were declared by tire company for the respective years. The appellant contended that the Magistrate at Meerut _had no jurisdiction to try the complaints and that the Magistrate at pel~1 '."'ere 1he registered office of the Company was situated had the 1unsd1cllon.

The Magistrate rejected the appellant's contenllon on the ground that as the dividends had to be paid at the registered address of the respondent, ·\vhich was at Meerut, the Court, at Meerut had jurisdiction.

This view D was upheld in appeal by the Sessions Judge and in revision by the High Court.

In appeal on certificate, this Court :

HELD : The Court at Delhi and not at Meerut was competent to try the offences.

It is clear from s. 205(5) that the company could pay dividend either in. cash or by posting a cheque or a warrant at the registered aJdrcss of E the respondent. Article 132 of the Articles of Association also authorises the Company to pay dividend either in cash or by posting a cheque . or a warrant IQ the shareholder at his registered address. The effect of Art. 132 is that when a dividend warrant is posted at the registered address of th.e shareholder that would be equivalent to payment.

Onoe "' warrant is so posted the company is deemed to have paid and discharged .its obli gation.

The Articles of Association constitute an agreement between the F company and the shareholders, and the latter are entitled to the -payment of dividend in the manner ]aid do\\1n in the' Articles and in that manner alone.

Arlicle 132 thus not only authorises the company to make the payn1cnt in the manner laid down ther-cin but amounts to a request by the shareholders to be paid in the manner so laid down.

When. therefore, the company posts the dividend warrant at the registered address of a shareholder, that being done at the shareholder's request, the post office becomes the agent of the sh-areholdeT, and the Joss of z. dividend warrant G cduring transit thereafter is the risk of the shareholder. [793 Fl

That being the position, the place where a dividend warrant would be posted, is the post offioe a1 such place being the agent of the shareholder, is the place where the obligation to pay the debt is discharged in the present case at Delhi where the company has its registered office.

It follows that the offence. under s. 207 of the Act would also occur at the place where the failure. to discharge that obligation arises, n.amely, the H failure to post the dividend warrant within 42 days. The .venue of the offence, therefore. would be Delhi and not Moerut, and the court compe- Aent to try the offence would be that court within whose jurisdK:tion the

offence takes place, i.e., Delhi. This should be so both in law and common sense, for, if held otherwisc1 the directors of compaines can be prose~

cute<l at hundreds of places on an allegation by shareholders that they ha\'e not received the warrant.

That cannot be the intention of the legis~ lature when it enacted s .. 207 and made. failure to pay or post a dividend

warrant within 42 days from the declaration of the dividend an offence.

[794 CJ

lndore Malwa United Mills Ltd. v. Co1n1nissioner of lncometax, [1966] 59 l.T.R. 738, fOllowed.

Hickn1an v. Kent or Ro1n111ey Marsh Sheep Breeders' Association, (1951] ! Ch. ~81, Beattie v. Beattie, [1938] Ch. 708, Thair/wall v. The Great Sorthern Railway Co., [1910] 2 K.B. 509, Nor.man v. Rickett&, 3 T.L.R.

18.2 and Regina' v. Ja111es Milner, 175 E.R. 128, referred to.

(RIMINAL APPELLATE JURISDICTION : Criminal Appeals Nos. 225 to 232 of 1966.

Appeals from the judgment and order dated April 1, 1966 of the Allahabad High Court in Criminal Revision Nos. 895, 894, 876, 877, 897, 899 and 898 of 1964.

H. R. Gokhale, K. K. Jain, Bishamber Lal and H. K. Puri, for the appellant (in all the appeals).

The respondent did not appear.

The Judgment of the Court was delivered by Shelat, J, All those appeal§, founded on a certificate granted by the High Court of Allahabad, raise a common question as to jurisdiction.

The appeals arise from complaints filed by the respondent in the Court of First Class Magistrate at Meerut under s. 207 of the Companies Act, 1956 on an allegation of failure on the part of the appellant, the director-in-charge of Mis Iron Traders (Private) Ltd., to pay to him dividends on shares held by him, although the dividends were declared by the company for the respective years.

The question being common, all these appeals are .disposed of by a common judgment.

The appellant contended that the Magistrate at Meerut had no jurisdiction to try the complaints and that the Magistrate at Delhi, where the company's registered office is situate, who would have the jurisdiction. The Magistrate rejected the contention and held that as the dividend had to be paid at the registered address . of the respondent, which was at Meerut, it was the Meerut Court which had the jurisdiction. The Sessions Judge, on appeal, uphl~ !he order of the l\; lagistrate .and in revision the High Court, re1echng the appellant s content10n, confirmed the view taken by the Magistrate and upheld by the Sessions Judge. The High Court in taking the aforesaid view observed :

"The object behind the statute is to ensure prompt payment of dividend to a shareholder. That payment may be made to him directly or it may be made by sendinj! a cheque or warrant to his registered address. If a

shareholder complains that he has not received payment he is entitled to proceed against the company and its Directors by filing a complaint at the place where he resides because the Jaw demands that payment should have been made to him there .. ,

The High Court's reasoning was clearly based on the premise that payment of dividend has to be made at the place where the shareholder resides, and therefore, it is the Magistrate within whose jurisdiction the shareholders registered address is situate who has the jurisdiction. The contention in these appeals is that such a view is not in accord with sec. 207. The question is of some importance, for, if the view taken by th~ High Court is correct, it would mean that directors of companies would be liable to be prosecuted at hundreds of places where the registered addresses of their shareholders are on allegations that dividends are not paid to them.

Section 205 deals with dividends and the manner and time of . payment thereof. Sub-sec. 1 provides that 1no dividend shall be declared or paid by a company for any financial year except out . of the company's profits for that year arrived at in the manner therein set out.

Suti..ec. 3 provides that no dividend shall be payable except in cash. Sub-sec. 5(b), however, empowers payment of dividend by cheque or dividend warrant sent through the post directed to the registered address of the shareholder entitled to the payment of the dividend or in the case of joint shareholders to the registered address of that one of them who is first named in the register of members or to such person or to such address as the shareholder or the joint shareholders may in writing direct.

Sec. 206 provides that no dividend shall be paid by a company in respect of any share thllrein except to the registered holder of such share or to his order or to his bankers, or where a share warrant has been issued to the bearer of such warrant or to his bankers. Sec. 207 lays down the penalty for failure to distribute dividends declared by the company and provides that where a dividend has been declared by a company but has not been paid or a cheque or a warrant in respect thereof has not been posted within 42 days from the date of declaratiop to any shareholder entitled to the payment of the dividend, every director of the company, its managing agent or secretaries and treasurers shall, if he is knowingly a party to the default, be punishable with simple imprisonment for a term which may exiend to 7 days and shall also be liable to fine. But the section further provides that no offence shall be deemed to have been committed within the meaning of the foregoing provision in the cases therein set out.

A .dividend once declared is a debt payable bv the company 1o its registered shareholders. It is clear from s. 205 that although

under sub-s. 3 no dividend shall be payable except in cash, sub-s. 5 authorises a company to pay the dividend by a cheque or a warrant. Therefore, dividend can be said to have been paid either when it is paid in cash or when a cheque or a wa1rant is sent through the post directed to the registered address of the shareholder entitled to payment thereof.

Indeed, sec. 207 itse1! lays down that the offence thereunder is committed when dividend is either not paid or a cheque or a warrant in respect thereof has not been posted within the time prescribed therefor.

Once, therefore, a dividend warrant is posted at the registered address of the shareholder, dividend is deemed to have been paid.

The section casts an obligation on the company to pay the dividend, which is declared, to the shareholder entitled thereto within 42 days from its declaration.

The offence under the section takes place when there is failure to pay or a cheque or a warrant therefor is not posted to the registered address of the shareholder. It will be noticed that the section makes the failure to post within the prescribed period and not the non-receipt of the warrant by the shareholder an offence. Therefore, the obligation to pay within the prescribed period is satisfied once the dividend is paid or a cheque or a warrant therefor is posted at the registered address of the shareholder.

Prima facie, both the obligation to post the dividend warrant and the failure to satisfy that obligation w, ould occur at the place where the . obligation is to be performed and that would be the registered office of the company and not the address at which the w'arrant is to be posted.

But the question is since the dividend, when declared, becomes a debt payable by the company to the shareholder and the company becomes a debtor, does the common law rule that the debtor must seek out the creditor apply?

There are two considerations which must not be lost sight of before that rule is applied.

The first is that s. 207 does not make the non-receipt of the dividend warrant by the shareholder within 42 days an off.ence.

The offence consists in the failure to post the dividend warrant within the prescribed period.

The provisions of s. 205 empower payment of dividend by a cheque or a warrant and treat the posting of a cheque or a warrant as payment. Therefore, payment in cash or the posting of a cheque or a warrant are equivalent and the obligation to pay is discharged when either of them is done. The second consideration is that the power to pay dividend by posting a cheque or a warrant provided in sec. 205 ( 5) isincorporated in the Articles of Association of the company by Art. 132.

That article reads :

"Unless otherwise directed by the company in General Meeting any dividend may be paid by cheque or farrant sent through the post to the registered address of the member entitled or in . the case of joint holders to the registered address of that one whose name stands first on the register in respect of the joint holding and every cheque so sent shall 'be made payable to the order of the person to whom it is sent."

Section 36 of the Act, which is in the same terms as sec. 20 of the English Companies Act, 1948, provides that subject to the provisions of the Act the Memorandum and Articles of Association, when registered, bind the company and the members thereof to the same extent as if they respectively have been signed by the company and by each member, and contained covenants on its and his part to observe all the provisions of the Memorandum and of the Articles. It is well established that the Articles of Association constitute a contract between a company and its members in respect of their ordinary rights as members .. [see Hickman v.

Kent or Romney Marsh Sheep Breeders' Associaticn (') and Beattie v. Beattie(")]. If under a contract, a promisee prescribes the manner in which the promise is to be performed, the promisor can perform the promise in the manner so prescribed. (see s. 50 of the Contract Act). Thus, if A desires B, who owes him Rs. 100/- to send him a note for that amount by post, the debt, is discharged as soon as B puts into the post a letter containing the note duly addressed to A. (see illustration ( d) to s. 50 of the Contract Act.) In this connection the decision in Thairlwa/l v.

The Great Northern Railway Co.(3 ) shows how the problem is dealt with by the English Courts. The plaintiff there, who held certain stocks of the defendant company, filed an action to recover dividend payable on those stocks.. The defence was that the dividend was paid having been sent by post to the registered address of the plaintiff. The question was looked at from the point of view whether there was any agreement by or obligation on the plaintiff to accept the dividend warrant as payment. If there was any such agreement, the principle laid down in Norman v.

Ricketts(') would apply, namely, that a debtor or a creditor can .agree to make and accept payment of the debt in some form

other than cash and that when the creditor asks his debtor to send

the amount by post, then if the debtor sends a cheque for the amount by post the risk of loss in transit falls on the creditor and G the posting is equivalent to payment.

Further the stock certificates had upon the back of them a clause that dividend would be payable by wan:ant which would be sent by post to the proprietor's registered address, or to any person duly authorised to give a receipt for the same. Sec. 9 of the Act of 1890, under which the defendant-company was incorporated, also provided that the

(I) [1915J I, Ch. 881.

(3) [1910] 2, K.B. 509.

(2) [1938J Ch. 708.

(4) 3 Times L. R. 182.

lL p, GUPTA v. HlllALAL (Shela/, !.) 793

terms and conditions on which the stock was issued shall be stated on the certificate thereof. In the six m0nthly 1eport of accounts issued by the directors to the stock-holders there was a statement that ili~ profits of the company had enabled the directors to declare a dividend and there was at the back of that report a notice that .the dividend warrants would be payable on a certain date and would be sent by post to the stockholders on the previous day. . Under s. 90 of the Companies Act, 1845 it was withm the power of the directors to fix the date at which and the mode in which dividends should be paid, subject of-course to the control Qf a general meeting. The stockholders of the company at their general meeting had declared the amount of dividend as proposeJ by the directors but had passed no resoiution as to how payment was to be made.

It was held that though no such resolution was passed by the stockholders, they had notice as to how the directors proposed to pay the dividends and as no alteration was made in those proposals, the stockholders were held to have decided among themselves by a proper resolution that the dividend shollld be paid on a certain day and in the manner proposed by the directors.

Such a conduct was equivalent to a request, and therefore, the stockholders became entitled to payment in that way and in that way alone.

Con&quently, when the dividend warrant had been sent by post the dividend was paid and the company's obligation to pay stood discharged.

It follows, therefore, that once a mode of payment of dividend is agreed to, namely, by posting a cheque or a warrant, the place where such posting is to be done is the place of performance and also the place of payment, as such performance in the manner agreed to is equivalent to payment and results in the discharge of the obligation.

F It is clear from s. 205 ( 5) that the company could pay dividend either in cash or by posting a cheque or a warrant at the registered address of the respondent.

Art. 132 . of the Articles of Association also authorises the company to pay dividend either in cash or by posting a cheque or a warrant the shareholder at his registered address.

The effect of Art. 132 is that when a G dividend warrant is posted at the registered address of the shareholder that wollld be equivalent to payment. Once a warrant is so posted the company is deemed to have paid and discharged its obligation.

As aforesaid, the Articles of Association constitute an agreement between the company and the shareholders, and the latter are entitled to the payment of dividend irrthe manner laid H down in the Articles and in that manner alone.

Art. 132 thus not only authorises the company to make the payment in the manner laid down therein but amounts to a request by the share holders to be paid in the manner so laid down. When, therefore, LIOSupCI(NP)7C-6

the company posts the dividend warrant at the registered address of a shareholder, that being done at the shareholder's request,

th.~ post otnce becomes the agent of the shareholder, and the loss of a dividend warrant during transit thereafter is the lisk of the shareholder. In Indore Malwa United Mills Ltd. v.

Commissioner of Income-tax(') this Court, on a question arising whether on the facts there payment was made in taxable terdtory, held that if by an agreement,, express or implied, between the creditor and the debtor, or by a requeat, express or implied, by the creditor, the debtor is authorised to pay the debt by a cheque and to send the cheque to the creditor by post, the post office is the agent of the creditor to receive the cheque and the creditor receives payment as soon as the cht-..que is posted to him. That being the position, the place where a dividend warrant would be posted, the post office being the agent of the shareholder, is the place wllere the obligation to pay the debt is discharged-in the present case at Delhi where the company has its registered office.

It follows that the offence under sec. 207 of the Act would also occur at the place where the failure to discharge that obligation arises, namely, the failure to post the dividend warra11t within 42 days. The venue of the offence, therefor.~. would be Delhi and not Meerut, and the court competent to try the offence would be that court within whose jurisdiction the offence takes place, i.e., Delhi. This should be so both in law and common sense, for, if held otherwise, the directors of companies can be prosecuted at hundreds of places on an allegation by shareholders that they have not received the warrant. That cannot be the intention of the legislature when it enacted sec. 207 and made failure to pay or post a dividend warrant within 42 davs from the declaraiion of the dividend an offence. ·

This view is also in acx:ord with the principle laid down by Maule J. in Rt!gina v. James Milner(') that the felony of not surrendering at a district court to a fiat in bankruptcy, under Stat.

5 and 6 Viet. c. 122, s. 32 is committed at the place where the district court is situate; and an indictment for the offence cannot be sustaiined in a different county from that in which the person was a trader or in which he committed an act of bankruptcy. On the same principle the High Court of Calcutta has also held in Gunanand Dhone v.

Lala Santi Prakash Nanle.v(') that it is the court within the local limits of whose jurisdiction the accused is liable to render accomtts and fails to do so bv reason of having committed a breach of trust alleged against him that has the jurisdiction.

co (1966) 59 I.T.R. ns.

(2) 175 E.R. 128.

(3) 29 C.W.N. 432.

H. p. GUPTA v. HJRALAL (She/at, ], ) 7 9 5

The offenef under s. 207 is the failure to pay dividend or to post a cheque or a warrant Jor the dividend amount.

Since the obligation to post the warrant arose at the registered office of the company, failure to discharge that obligation also arose at the registered office of the company.

Therefore, the alleged offence must be held to have taken place at the place where the company's registered office is situate and not where the dividend _ warrant, when posted, would be received.

In that view, the High Court was in error in holding that the Magistrate at Meerut had the jurisdiction to try the said complaints. The appeals must accordingly be allowed and the High Courts orders set aside. Order accordingly.

Y.P.

Appeals all<JWed.

H.P.GUPFA

HIRALAL

February 24, 1970

M. SHELAT

G. K. MITTER, JJ.

s. 201

s. 207

Companies Act, 1956

s. 205(5)

Article 132

Art. 132

Delhi

s. 207

Allahabad High Court

H. R. Gokhale

K. K. Jain

Bishamber Lal

H. K. Puri

Shelat

High Court of Allahabad

s. 207

Companies Act, 1956

Mis Iron Traders (Private) Ltd.

Meerut

The appellant contended that the Magistrate at Meerut had no jurisdiction to try the complaints and that the Magistrate at pel~1 '."'ere 1he registered office of the Company was situated had the 1unsd1cllon.

sec. 207

Section 205

sec. 1

sec. 5(b)

Sec. 206

Sec. 207

s. 205

s. 3

s. 5

sec. 207

s. 207

s. 205

sec. 205

Art. 132

Section 36

sec. 20

English Companies Act, 1948

s. 50

s. 50

Sec. 9

s. 90

Companies Act, 1845

s. 205

Art. 132

Art. 132

Art. 132

sec. 207

sec. 207

Maule

s. 32

High Court of Calcutta

s. 207