HINDUSTAN LEVER LTD.

RAM MOHAN RAY & ORS.

(With cannected appeal) March 1, 1973

(A. ALAGIRISWAMI, I. D. DUA AND C. A. VAID!ALINGAM JJ.)

Industrial DiJ/putes Act (14 of 1947) ss. 9A, 33A and 33C and 4th Schedule items 8, 10 and 11-Scope of Industrial DiJ/pute-Reference to Tribunal Applications by Workers pending reference-DiJ/posed of by different Tribunal-Contradidory findings-Procedure not illegal.

Constitution of India, 1950, Article 13cope of.

Before September 196.6 the marketing organisation of the employer company was in three divisions.

Thereafter it was organised into two divisions. There were extensive and prolonged consultations. between the employer and the employees but the reorganisation was not approved by the employees. The new scheme was introduced on the 5th or 6th 5eptember and the industrial dispute arising therefrom was referred to the Tnbunal on 30th September. The workers presented themselves for work every day and offered to work according to the old scheme but they were not given any w(!rk. They were told that as long as they refused to work under the new scheme they would not be paid any wages. Some workers had voluntarily retired and the vacancies were not filled. Therefore, pending th~ adjudication on the reference already made, sen workers filed applications under s. 33A of the Industrial Disputes Act, 1947, alleging that during the pendency of the adjucation, their service conditions bad been changed adversely and that their salary for the month of October had not been paid.

The Industrial Tribunal was different in the two cases as also the evidence let. in. in the two cases.

In the main reference, the Tribunal held in favour of the" employer.

With reference to the applications of the employees, the other Tribunal held in favour of the employees on the grounds that the conditions of . work had been changed to the workers' prejudice, that the reorganisation was likely to lead to re

trenchmen~ that the matter thus fell under item I 0 of Schedule 4 to the Act and that therefore, the employees were justified in refusing to work.

Both parties appealed to this Court.

HELD : On a consideration df the material in each of the awards both the awards should be upheld.

[628 A-BJ . (I) The evidence given in the main reference not being a part of the evidence in the applications filed by the employees it is . not open to this Court to take it mto consideration in deciding the appeals filed by the employer as against the award in favour of the employees. [628AJ

(2) This Court, in considering a matter under Art. 136, does not ordinarily reassess the evidence on the basis of which the Tribunal came to its conclusion. It will interfere with ftndings of fad> only if they are unsupported by any evidence or are wholly perverse.

[628 D-BJ

(3) The reorpnisation is neither a change in usage fallin11 tmder item 8 of the 4th Schedule to the Act, nor rationalisati0n falling under item 10, nor an increase or reduction in .the nUIJlber of. persons employed in any department falling under item 11; and hence, it w.s not necessary .. ,, give any notice under s. 9A of the Act. (633 D-BJ

HINDUSTAN LEVER V. R. M. RAY 625

(a) The employer has a right to organise his work in the manner he pleases.

[631C]

(b) The various decisions shoW that whether any particular practice or allowance or concesSion had become a condition of service would always depend upon the 'facts and circumstances of each. case..

On the evidence and findings given by the Tribunal it cannot be held that there has been any change in the terms and conditions of service of the workers in this case to their detriment. [633 C-El

Parry & Campany's [19701 1 L.L.J. 429; Dharangadhara Chemical Works Ltd. v. Kan/u Kalu & Ors. [1955] 1 L.L.J. 316; Chandramalai Estate' It; Workmen [1960] 2 L.L.J. 243; The Graham Trading Co.

(India) Ltd. v. It~ Workmen [1960] 1 S.C.R. 107; Workmen of HindUJ>o tan Shipyard Ltd. v. l.T. [1961] 2 L.L.J. 526; McLeod & Co, v. Its Work: men [1965]

1 L.L.J. 396; Indian Overseas Bank v.

Their Work7?1en [1967-68] 33

F.J.R.. 457; Indian Oxygen Limited v. Udaynath Singh [1970] 2 L.L.J. 413; Oil & Natural Gas Commission v. Their Workmen [1972] 42 F.J.R. 551 and Tata Iron & Steel Co. v. Workmen A.l.R. [1972]

S.C. 1917, referred to.

(c) The Tribunal held on the basis of oral as well as documentary evidence that the contention of the workers that it was a condition of serviCe of every employee to work for only One division at a time was not established.

The arrangement of the words and phrases in item 10 shows that only rationalisation or standardisation or improvement of plant or technique which is likely t.o lead to retrenchment of workmen that would fall under that item and not mere rationalisation or standardi sation. The retrenchment contemplated is retrenchment as defined in s. 2(00), which does not include voluntary retirement of the workmen.

Therefore. the \VOrkers cannot make a grievance of the voluntary retirement and non-filling Of vacancies and try to bring the matter under item

10. The employer had the right to decide the staff complement and to fi11 only such jobs as continued to exist and not automatically replace every individual.

[630 A-HJ

Therefore, there is no reason for differing from the findings of the Tribunal that there bas been no change in usage adversely affecting the workers coming under item 8, and that there has been no retrenchment under ilem 10. [63201 ( 4) The 4th schedule relates to conditions of service for change of which the notice is to be given, and s. 9(A) requires the employer to give notice under that section to the workmen likely to be affected by such change. The word 'affected' in the circumstances could only refer to the worken being adversely affected and unless it could be shc.wn that the abolition of one department has adversely affected the workers it cannot be brought under item 11.

[631 A-CJ

["The. question whether the prolonged and detailed discussion between the. parbes was a substantial compliance wilh the provisions of s. 9 A not decided]. f633El

(5) But the non-payment of wages in the circumstances of this case amounts to "!' alteration in the conditions of serviee and the fact that the scheme was 10troduced before the reference under s. lO was made does not bar an application under s .. 33A. The tribunal was justified in coming to lhe conclusion that 1his alteration in the conditions of service could not have been made without the notice under s. 9A. [634 OD; 635 B-C:

(a) The applications in this case were not for wages due for the <month of September but for October.

[634E]

(b) The refusal to pay wages was not a solitary instance in respect of which an application could have' been Irulde under s. 33C. It was a con tinued refusal and the cause of action arises de die in diem. If the refusal of the workers to work under reorganisatidn scheme is justified then the refusal by management to pay unless they work under the reorganisation scheme would amount to alteration of the conditions of service <if Workers. [634 GHJ

(c) Even if an application had been made under s. 33C the whole scheme would have been considered and it is not fair at this distance of time to drive the workers to file application under that section, the procedure for which would be the same as under s. 33A, merely on die ground that the introduction of the scheme had taken place before the reference to the adjudication was made. [636 B-C]

(d) The Tribunal had found that the reorganisation scheme had rendered some workers surplus, that the scheme had seriously prejudiced tile workers, and that the apprehension of the workers that the reorganisation would result in some members of the staff becoming surplus had come true. [635 A-Bl

North Brooke Jute Co. Ltd. [1960) 3 S.C.R. 364, National Coal Co. v.

L. P. Dave, [1956] A.I.R. Patna 294, Shamo, Biscuit Co. v. Their Workmen [1952] 2 L.L.J. 353, referred to:

Ram Nath Koeri v. Lakshmi Devi Sugar Mills & Ors. [1956] 2 L.'L.J. 11, approved.

(e) If all the evidenee which was let in in the main referenae were available to the Tribunal which decided the applications of the workert, the result might have lieen llift'erent. But it could not be said that the Tribunal is wrong in having proceeded to dispoee <if the matte~ the way it. did. f,636 A-Dl

CML APPELLATE JUIUSDrcnoN : Civil Appeals Nos. 675 to 681 of 1967. '

.Appe8Js by special leave from the Award dated , March 23, 1967 of the Third Industrial Tribunal, West Bengal in Misc. Cases Nos. 161, 160, 162-64 and 167 of 1966.

AND Civil Appeal No. 1759 of 1971 Appeal by special leave from the Award dated August 11, 1969 of the Third Industrial Tribunal, West Bengal, Calcutta in Case No. vm:-373 of 1966 published in the. Calcutta Gazette dated 27-9-1969. ·

S. V. Gupte, G. B. Pai, Bhuvan.esh Kumari, B. Ram Rakhlanl and/, B. Dadochanji & Co. for the. appellant. (In C.As, 675- 681/67). .

V. M. Tarkunde, ]Wthin TJas, litendra Sharma and s. IC.

Ganguli & Co. for the appellant. (In C.A. 1759/71). . -'

A V. M. Tarkunde, Jitendra Sharma and Janardari Sharma, for

the Respondent.

The Judgment of the Couvt was delivered by

ALAGIRISW AMI; J .-The first batch of appeals are by the Hindustan Lever Ltd. (hereinafter called the Employer) and Civil Appeal No. 1759 of 1971 is by the Mazdoor Sabha of the workers of the same employer in its Calcutta Branch.

The Calcutta Branch was concerned only with marketing. From the year 1956 at least, if not earlier, the company's marketing organisation was in three divisions, the Soaps Division, the Foods Division and the Toilet Preparations Division. From 6-9-66 the Company reorganised this marketing organisatioi:i into two divisions, the Main Lines Division and the Speciality Lines Division.

On 30-9-66 the Government of West Bengal referred to the Third Industrial Tribunal the following question for adjudication :

"Is the human rationlilisation as a measure of economic reorganisation of the Company reflected through job-integration that have either been effected or proposed to be effected justified ? To what relief, if any, are the workmen entitled?" Pending adjudication of this issue seven workers filed applications under seotion 33A of the Industrial Disputes Act before the same Tribunal alleging that during the pendency of the adiudication their service conditions had been changed adversely and their salary or the month of October 1966 had not been paid. The Tribunal held in favour ol. the workers and passed its award on 23-3-1967. By special leave granted by this Court the employer has filed the above 7 appeals.

The main reference was finally disposed of on 11-8-69 by the same Tribunal holding in favour of the employer and the workers have, therefore, filed Civil Appeal No. 1759 of 1971 by special leave granted by this Court.

It should be mentioned that the Presiding Officer of the Industrial Tribunal was different in the two cases but the different conclusions arrived at by the two Presiding Officers were not due to G the accident of difference in personnel. There was a vast mass of evidence let in by the employer in the maili refererrce on a consideration ol which the Tribunal held in favour of the employer.

On the other hand the evidence in the applications, filed under section 33A of the Industrial Disputes Act, let in by the employer was meagre and the Tnbunal came to the conclusion un the material available before it that the conditions of work of workers H had been changed to their prejudice, that. the reorganisation was likely to lead to retrenchment and that the matter thus fell under Item 1 O of Schedule IV of the Industrial Disputes Act. The evidence given in the main reference not being part of ti)e evidence in these 7 cases it is not open to this Court to take it into consideration in deciding these 7 appeals. On an exhaustive consideration of the material in bpth the awards we have come to the conclusion that both the awards should be upheld.

Though the decision in the appeals by the management is based on the finding .of the Tribunal that the conditions oi work had been changed to the disadvantage of the workers, and the decision in the appeal filed by the workers is in effect that the conditions have not been so changed, that is due to the evidence available in the o cases. Mr. Tarkunde appearing on behalf of the workers in the appeal filed by them in C.A. No. 1759 of 1971 in effect invited us to re-assess the evidence in that case.

His whole point was that the reorganisation effected by the management in September 1966 was one which attracted items 8, 10 and 11 of the IVth Schedule to the IndU9trial Disputes Act and as such a notice in accordance with Rule 34 of the West Bengal Industrial Disputes Rules and Form (E) appended to those rules, under section 9A of that Act was necessary. He was at pains to estab'lish this proposition lest it should effect the workers in the others 1 appeals filed by the employer.

This Court in considering a matter under Article 136 does not ordinarily re-assess the evidence on the basis of which the Tribunal came to its conclusions. It will interfere with the findings of facts by the Tribunal only if it is unsupported by any evidence or is wholly perverse. It will not interfere with findings of the facts if two views are possible as to the conclusions to be arrived at' on the basis of the evidence even though the conclusions arrived at by the Tribunal might not commend itself to this Court. Mr.

Tarkunde even indicated that he was not very much interested in the success of the appeal of the workers in the sense that he wanted the scheme oi reorganisation introduced by the employer to be dropped.

According to him the employer had the right to reorganise his business subject only to his compliance with the provisions of section 9A of the Industrial Disputes Act, which according to him has not been done in this case. He wanted to establish this proposition only for laying a foundation for the argument that when after the introduction of the reorganisation by the employer the workers refused to work except on the basis of the previous system of working. they were perfectly within their rights and it was, therefore, illegal for the management to have refused to pay them their salary and that this was an. alteration of the conditions of their semce during the pendency of an adjudication of an industrial dispute before the Industrial Tribunal. But in the view we are taking regarding the correctness of the award of the Industrial Tribunal on the applications of the workers under.section 33A the workers would probably. have no grievance.

We shall first of all deal with the appeal by the workers. Two points were raised by Mr. Tarkunde :

1. That it was necessary to give notice under section 9A and wait for 21 days before implementing the scheme of reorganisation, and

2. as notice was necessary, the scheme cannot be said to b; e justified when it was implemented.

As regards non-payment of wages, as subsidiary paints, he raised the questions :

1. the workmen were justified in refusing to work under the new scheme, and

2. the non-payment of wages amounted in the circumstances of the case to an alteration in the conditions of service to the prejudice of workers.

These two are really questions which arise in the appeals flied by the employer and not in this appeal.

According to Mr. Tarkunde the very fact that three Divisions were sought to be reduced to two would show that it would increase the workload on the workmen and result in retrenchment. We do not think that the matter could be disposed of on such a priority consideration. His grievance also was that the employer had agreed to. consult the workers but did not do so.

He also urged that three godowns which previously existed were reduced to two godowns and that proved a eater burden on the Godown Keeper. He further urged that the Journey Cycles, i.e. the period during which salesmen were expected to be on tour contacting the various dealers were increased from 4 weeks to 6t weeks and that this also proved a greater burden on the salesmen. He urged that the Sabb.a had a reasonable apprehension that there will be retrenchment if the 6t week cycles were introduced.

Bui he conceded that this was avoided in actual working.

As already mentioned earlier, he contended that the Sabha has now no objection to the present arrangement but the employer contends that conditions are very unstable and they now have 3 and even 4 divisions. According to him the reorganisation is either a change in usage falling under item 8 of IVth Schedule to the Act or rationalisation falling under item 10 or incrase or reduction in the number of persons employd in any department net o.:casioned by circumstances over which the employer has no control falling under item 11.

According to him the workers having been accustomed to working under 3 divisions, reorganisation into 2 divisions amounted to a change in usage.

He also urged that rationalisation and standardisation per se would fall under item 10 even if they were not likely to lead to retrenchment of workmen and only improvement of plant or technique would require that they should lead to retrenchment of 8-l 761Sup.C.I./73 •

workmen in order to fall under item 10. A further submission of his i.vas that standardisation merely meant standardisation of wages.

We are not able to accept this argument. It appears to us that the arrangement of words and phrases in that item shows that only rationalisation or standardisa'tion or improvement of plant or technique, which is likely to lead to retrenchment of workmen would fall under that item. In other words, rationalisation or standardisation by itself would not fall under item 10 unless it is likely to lead to retrenchment of workmen. The reference to rationalisation at page 257 of the report of the Labour Commission and the reference to standardisation of wages in it are not very helpful in this connection.

Standadisation can be of anything, not necessarily of wages.

It may be standardisation of workload, standardisation of product, standardisation of working hours or standardisation of leave privileges. Indeed in one deci sion in Alembic Chemical Works Co. Ltd. v. The Workmen(') there is reference to standardisation of conditions of service, standard\sation of hours of work, wage structure. That case itself was concerned with standardisation of leave. The whole question whether this reorganisation falls under item 10 depends upon whether it was likely to lead to retrenchment of workmen.

On this question, as already indicated, the two Tribunals have arrived at two different conclusions. But as already indicated, it depended upon the evidence in each case.

It is not disputed that the reorganisation has not resulted in any retrenchment. Moreover, during the o;;0urse of rather prolonged negotiations between the parties the employer made it abundantly clear again and again that no body would be retrenched.

It was clearly made part and parcel of the scheme of reorganisation.

Hindustan Lever Ltd. being a large organisation covering the whole of the country there was no difficulty abOut giving effect to 1this reorganisation scheme without retrenching anybody. It was, however, urged on behaY of the workers that there have been a numi, er of voluntarily induced retirements and that many posts were not filled after the holders of these posts had retired or left. We are of opinion that the retrenchment contemplated under Hem 10 is retrenchment as defined in clause ( oo) of section 2 where it is defined as the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include voluntary retirement of the workman.

The workers cannot, therefore. make a grievance of the voluntary retirement and non-tilling of vacancies and try to bring it under item 10.

As regards item 11 it was urged that as one department out of three has been abolished, ithis item applies. Though to bring the matter under this item the workmen are not required to show

that there is increase in the workload, it must be remembered that the 4th Schedule relates to conditions of service for change of which .notice is to be given and section 9A requires the employer 'to give notice under that section to the workmen likely to be affected by slich change. The word 'affected' in the circumstances could only refer to the workers being adversely effected and unless it could be shown that the abolition of one department has adversely affected the workers it cannot be brought under item 11. The same consideration applies to the question of change in usage under item 8. Let us, therefore, see what was the scheme of reorganisation to which the workers took exception.

There can be no dispute that the employer has got the right to organise his work in the manner he pleases as w:is held in Parry & Company's(') case.

As we have pointed out earlier there was extensive and prolonged consultation between the parties.

The real grievance of the workers seems to be that the reorganisation of the working did not have their approval.

Before the Tribunal the objection ol the S; abha to the Company's scheme of reorganisation was that it as a condition of service_ of every employee to work for only one division at a time after amalgamation af the three companies and for only one company prior to amal- 'gamation. But the conditions in the levters of appointment of every worker in the company show the contrary.

The Tribunal also found that the Salesmen of the company did in fact handle products of more 1han one division a.t..a time in the course of joint selling operation since 1960. It was admitted that they also did it in the course of integrated selling in Assam since 1964 but that is said to be tecause that was done on an experimental basis. It was admitted that there are many employees in different departments of the company who by virtue of their jobs cannot be attached to any one division. The Tribunal, therefore, held on the basis of oral as well as documentary evidence that the contention of the workers that it Wlls a condition of service of every .employee to work for only one division at a time was not established. It Is in evidence that the company on occasions transferred products from one group to the other group to meet the business exigencies of the company.

After referring to such instances the Tribunal has held tha!I in certain cases a system of joint selling of products of the three divisions by the same salesmen through Sales Vans in several markets in India was adopted. According to the employer if the three divisional set up had been continued, it would have adversely affected

the business of the company and kept a large number of salesmen of the Foods Division only partly occupied and the company could have had no option but to retrench some number of salesmen work-

(I) [1970] I.L.L.l. 429.

ing in the Foods Division. It, itherefore, effected the reorganisation to meet the challenge of. change in marketing conditions.

The scheme of reorganisation in this case was : Firstly, as a result of the regrouping of the products from the three divisions into two lines, the sales management staff of the company was redeployed on a geographical basis instead of product group basis.

Secondly, the employer reorganised its trade outlets so that Re- Distritution Stockists would handle all the products of the company rather than the products of any particular division. Thirdly. the entire sales force was redeployed over two products groups, i.e. Main Lines and Speciality Lines. The Tribunal following the decision of this Court in Parry & Co. case held that the employer has the right to decide the staff complement and to fill only such jobs as continued to exist and not automatically replace every individual. The Tribunal has gone elaborately into the question of workload and come to the conclusion that there is no increase in the workload.

We have already referred to the question of journey cycles. We see no reason to differ from the finding of the Tribunal that there has been no change in usage adversely effecting the worker. and that as there has been no retrenchment item 10 of Schedule IV is not attracted nor is item 11.

It is hardly necessary to refer to the various decisions which were cited before us as to what would constitute conditions of service the change of which would require notice under section 9A of the Act. In Dharangadhara Chemical Works Ltd. v. Kantu Kalu & Ors. ( 1) the Labour Appell:rte Tribunal of India held that the increase in the weight of bags to be carried from 1 cwt to 1 t cwt was a change in !he workload and the com11any was bound •to pay wages as the workmen were willing to work t did nJt work on account of the unreasonable attitude adopted by the management. In Chandramalai Estate v. Its Workmen(') the payment of Cumbly allowance was held to have become a condition of service . In The Graham Trading Co. (India) Ltd. v. Its

Workmen(") it was held that the workmen were not entitled to Puja bonus as an implied term of employmnt. In Workmen of Hindustan Shipyard Ltd. v. l.T.(') in the matter of withdrawal of concession of coming late by half an hour (than the usual hour), it was held that the finding of the Industrial Tribunal that section 9A did not apply to the case did not call for interference. But the decislan proceeded on 1he basis that the Court will not interfere in its jurisdiction unless there was any manifest injustice. In McLeod & Co. v. Tis Workmen(') the provision for' tiffin was held to be an amenity to which the employees were entitled, and

(l) [1955] I L.L.J. 316.

(3) [1960] I S.C.R. 107,

(5) !1964] I L.L.J. 386.

(2) [1960] 2 L.L.J. 243.

(4) [1961] 2 L.LJ. 526.

Hl"IDUSTAN LEVER v. R. M. RAY (Alagiriswami, J.) 633

the provision of cash allowance in lieu of free tiffin directed to be made by the industrial tribunal could not be considered to be

erroneous in law. In India Overseas Bank v. Their Workmen(') "key allowance " was treated as a term and condition of service.

In Indian Oxygen Limited v. Udaynath Singh(') withdrawal by the management of the supply of one empty drum at a time at reasonable intervals was held not to contravene section 9A and

33. In Oil & Natural Gas Commission v.

Their Workmen(') where there was nothing to show that it was a condition of service that a workman should work for 6t hours only, no notice of change was held to be required under section 9 A for fixing the hours of work at eight. In Tata Iron & Steel Co. v. Workmen(') change in weekly days of rest from Sunday to some other day was held to require notice. A close scrutiny of 1the various decisions would show 'that whether any particular practice or allowance or concession had become a condition of service would always depend upon the facts and circumstances of each case and no rule applicable to all cases could be culled out from these decisions. In the face of the elaborate consideration of the evidence and findings made by the Tribunal we are unable to hold th3'1: there has been any change in the terms and conditions of service of the workers in this case to their detriment. It follows, therefore, that section 9A is not attracted. It is,. therefore, unnecessary to consider the question whether the argument advanced by Shri Gupte on bhalf of the employer that in view of ithe very prolonged and detailed discussions that went on between the parties there was a substantial compliance with provisions of section 9A and othe mere faot that a formal notice was not given under section 9A would not make the reorganisation scheme not valid.

In the applications filed by the workers the Tribunal was c0nscious of the employer's right to reorganise his business in any fashion he likes for purposes of economy or convenience and that no body is. entitled to tell him how he should conduct his business.

But it was of the opinion that this right of 1he employer is subject to the limitations contained in section 9A. It specifically considered the applicabfili1y of item 10 of the Fourth Schedule to the Act and relying upon the decision in North Brooke Jute Co.

Ltd. (1) held that no schenie of rationalisation could be given effect to if it was not preceded by a notice under section 9A. It did not c<msider it necessary to give a final decision regarding the legality or otherwise of the scheme introduced by the company.

But it considered .whether the workers' refusal to work under the new scheme was justified. On the evidence it held tha't the Union

had the apprehension that the proposed reorganisation would

(I) (1967-68) (33) F.J.R. 457.

(3) (1972) 42 F.J.R. 551.

(5) [1960) 3 S.C.R. 364.

(2) [1970) 2 L.L.J. 413.

(4) A.l.R. 1972S.C.1917.

result in some members of the staff becoming surplus, and that A this apprehension was not without justification, and that the apprehension became true when the reorganisation was actually introduced.

It also held that the workload of the various applicants increased as a result of the reorganisation.

It, therefore, held that worke.rs were within their legitimate right to refuse ti:> do the work under the new scheme as no notice has been given under item 9A.

B It held that however laudable the object of the reorganisation may be, it cannot be doubted for a moment on the evidence on record that the scheme has seriously prejudiced the workers. It, therefore, directed the employer to pay all the workers their wages for October

1966.

Mr. Gupte appearing for the employer contended relying on the decision in the case of North Brook Jute Co, Ltd. v. Their Workmen (supra) that the 1.1lteration .of the conditions of service in •this case, even 1f it should be held that non-payment of wages amounted to alte.ration of conditions of service, was made not when a reference under section 10 was pending but that •the reference itself having been made after the reoganisation, no application could be made under section 33A. Technically no doubt this contention is correct because the scheme was introduced on the 5th or 6th of September and the reference was made on 30th of Sptcmber.

But the applications in this case were not for the wages due for the month of September but for October. The applications proceeded on the basis that the non-payment of wages was an alteration in the conditions of service, and it is to that question that we must first address ourselves. Mr. Gupte contended that non-payment of wages is not an alteration of conditions of service and that no applicirtion under section 33A could be made in such cases as the remedy available was under section 33C. We are not able to appreciate &is argument. Indeed payment of wages is one of the most important among the workers' conditions of service. The worker works essentially only for the wages to be paid to him.

Therefore, the question that would really have to be answered is whether the refusal of the worker to work was justified or not.

It is in evidence that the workers presented themselves for work every day and offered to work according to the old scheme but that they were not given any work according to the old scheme They were told that as long as they refused to work under the new scheme they would be paid no wages. The refusal to pay, there~ fore, was not a solitary instance in respect of which an application could have been made under section 33t:. It was a continued rec fusal.

It was, lherefore, a permanent alteration of the conditions of service. The cause of action, so to say, arises de die in diem.

If the refusal of the workers to work under the rorganisation scheme is justified then the refusal of the management to pay unless they worked under the reorganisation scheme would amourn

to alteration of the conditions of service oi workers. If on the other hand the workers were not justified in doing so then no other question arises. But in the face Of the findin)l of the Tribuanl

that the reorganisation scheme rendered some workers surplus and that the scheme had seriously prejudiced the workers, and that the apprehension of the workers that the reorganisation would result in some member of. the staff becoming surplus came true, it cannot be said that the failure of the employer IO give notice under section 9A and introducing the scheme of reorganisation without such notice is jutified. It means that the workers were justified in rofusing to work under the new scheme.

It follows that the refusal to pay their wages amounted to alteration of conditioJ:!s of service and the applications were, therefore, rightly made under section 33A.

Even apart from thllt it was urged by Mr. Gup, te relying upon the decision in National Coal Co. v. L. P. Dave( ) that non-payment of wages was neither an alteration in the conditions of service nor is it a punisluflent and as such ca:nnot come within the mischief of section 33 of the Act. The Patna High Court relied also for its decision on the decision in Shama Biicuit Co. v.

Their Workmen(').

The facts of that case are not quite clear.

The Court gives no reason tor its view that the non-payment of wages is not an alteration of conditions of serv.ice applicable to workmen and that it was only a case of default of payment of wages on the pay day falling under Payment of Wages Act.

The facts there were in any case different from the facts of the present case. We may refer to. the decision of the Allahabad High Court in Ram Nath Koeri v.Lakshmi Devi Sugar Mills. & Ors.(') where it wa& observed that the payment of wages is one of the essential ingredients of the contract of employment and that the word 'conditions' includes the idea conveyed by the word 'terms' but goes beyond it and is not confined to what is included in that word. The Court also held that 'terms and conditions of employment' is wider in scope than the expression 'terms and conditions of labour'.

But as we have already observed failure or refusal to pay wages for a certain period may necessitate proceeding under section 33C, but refusal to pay wages indefinitely on the refusal of the workers to work according to a scheme of reorganisation which was not a valid one, because of the failure to give notice under section 9A, cannot but be considered to be an altera1ion in the conditions of service of the workers.

Mr. Gupte complained that the Tribunal has not decided the question whether the reorganisation was justified.

He also contended that the applications by the workers as well as the reference

(1) A.LR. 1956 Patna 294.

(3) [1956] 2 L.L.J. II.

(2) [1952] 2 L.L.J. 353.

made by the company should have been heard together and should not have been disposed of separately. That is really the main complaint of die employer. As we have pointed out earlier if all the evidence which was Jet in in the reference were available to th~

Tribunal which decided the applications of the workers, the result might well have been different. But we do nO't consider that the Tribunal was wrong in having proceeded to dispose of the matter in the way it did. Mr. Tarkunde rightly contended that even if an application had been made under section 33C, the whole scheme would have to be considered and i<t is not fair at this distance of time to drive the workers to file applications under section 33C, the procedure for which would be the same as under section 33A, merely on the ground that the introduction of the scheme had taken place before the reference to adjudication was made. We consider that as an application under section 33A has to be decided as if it were a reference under section I 0, the fact that the scheme had been introduced earlier than the reference to arbitration under section 10, does not bar• an application under section 33A in the circumsitances we have explained.

We thus come to the conclusion (I) that non-payment of wages in the circumstances of this case amounts to an alter11:tion in the conditions of service, (2) the fact that the scheme was ill'troduced before the reference under section I 0 was made does not bar an application under section 33A, and (~) that the Tribmal was .iustified in coming to the conclusion that this alter&tion in the conditions of service could not have been made without notice under section 9A.

The result is 1hat all the appeals are dismissed. There will be no order as to costs.

V.P.S.

Appeals dismissed.

HINDUSTAN LEVER LTD

RAM MOHAN RAY & ORS

March 1, 1973

A. ALAGIRISWAMI

I. D. DUA

ss. 9A, 33A and 33C and 4

Constitution of India

Article 13

5th or 6th 5eptember

s. 33A

Industrial Disputes Act, 1947

Schedule 4

Art. 136

s. 9A

[1960] 1 S.C.R. 107

s. 2(00)

s. 9(A)

s. 9

s. 9A

s. 33C

s. 33C

s. 33A

[1960) 3 S.C.R. 364

S. V. Gupte

G. B. Pai

Bhuvan.esh Kumari

B. Ram Rakhlanl

V. M. Tarkunde

litendra Sharma

A V. M. Tarkunde

Jitendra Sharma

Janardari Sharma

ALAGIRISW AMI

Hindustan Lever Ltd.

Calcutta

Government of West Bengal

Third Industrial Tribunal

Industrial Disputes Act

section 33A

Industrial Disputes Act

Tarkunde

section 9A

Article 136

section 9A

Industrial Disputes Act

section 33A

section 9A

IVth Schedule to the Act

section 2

section 9A

Parry & Company

Assam

India

Parry & Co.

Schedule IV

section 9A

Labour Appell:rte Tribunal of India

section 9A

section 9A and

33

section 9

section 9A

Gupte

section 9A

section 9A

section 9A

Fourth Schedule

North Brooke Jute Co.

Ltd.

section 9A

[1960) 3 S.C.R. 364

section 10

section 33A

5th or 6th of September

30th of Sptcmber

section 33A

section 33C

section 33

section 9A

section 33A

Gup

section 33

Patna High Court

Payment of Wages Act

Allahabad High Court

section 33C

section 9A

section 33C

section 33C

section 33A

section 33A

section 10

section 33A

section 33A

section 9A


SHADI LAL GUPTA v.

STATE OF PUNJAB

March 7, l 973

[A. ALAGIRISWAMI, I. D. DUA AND C. A.

VAIDIALHiGAM JJ.J

Punjab Civil Service (Punishment and Appeal) Rules 1952-Rule 8- Appellant charge sheeted for disobedience to superiors and ftr negligence of duty-Personal hearing was given' to him but no copy of the enquiry officer's report given 1-0 appellant-whether the Rule was ritiated and the

principle of natural justice violated.

Appellant was a Clerk in the Treasury at Ludhiana. He filod a suit for three different reliefs to which only one that now survives is regarding the order withholding his increment for one year with cumulati\e effect. On

I(}ll-61 he was charged sheeted on the ground that he was disobedient to his superior and negligent in the discharge of his duties and J. few specific instances of his carelessness and negligence were mentioned in the charge sheet.

Thereafter the appe11ant submitted. his explanation and a personal hearing was also given to him by the authorities.

The appellant com 4 plained that he was not given any opportunity to adduce any evidence in defence and no prosecution witnesses were examined in his presence. The contentions of the appelant are that (i) by the failure to give him a copy of the report df the Treasury Officer who made a local inquiry, and taking it into consideration behind his back, he has been prejudiced and (ii) Rule 8 of the Punjab Civil Services (Punishment and Appeal) Rules 1952 has been contravened.

Rule 8 provides, inter alia, that no order for censurei \\"ithholding of increments, recovery from pay of any pecuniary Joss to the Govt., shall be passed imposing a penalty on a Govt. Servant, unless he has been given an adequate opportunity of making any representation that he may desire to make, and such representation has been taken into consideratign.

Dismissing the appeal.

HELD : (i) Under Rule 8 of the Punjab Civil Service (Punishment and Appeal) Rules 1952, the only requrement is that the officer concerned should be given an adequate opportunity of making any representation th.at he may desire to make.

There is no provision for examination of witnesses, cross examination of witnesses and furnishing a copy of the report of the enquiry officer etc.

He need not be told about the punishment which is sought to be imposed on him, either at the time the chargesheet was .served on him or at any other stage. In the present case, these \Vas, no failure to 'foilow the relevant rules, which only require that the officer concerned should have an opportunity of making a. repreSentation in respect of the chares made against him and the officer. coricerned had an opportunity to 1nake a representation and his representation was considered by tlie authorities in taking Jiscplinary action against him.

(ii) The rules of natural justice have also not been Yiolated in the present case.

The requirements of the rules of natural justice arc :-(a) the person accµsed should know the nature of the accusation made; (b) that he should be given an opportu"ity to state his case; and (iii) that the tribunal should act in good faith Byrne & another v. Kinematograp/1 Rentery Society Ltd .. [1958) A.E.R. 579. referred to. [646 ABl

(iii) In any proceedings even by a domestic tribunal. the rules of natural justice would have to be observed; but the principles to be applied would depend upon the circuinstances of each case.

(iv) };-, the present case, the principle of natural justice had not been violated because the appellant \Vas not given an opportunity to make a representation in respect of the Treasury Officer's report.

When the authorities \\'anted a local enquiry to be made, it \\.-as with a view to check up with records the representation made by the appellant. The report does not ac!J one single instance more than what is already found in the allegations.

If the report had contained anv material extraneous to the charges aga;:ist the appellant, then only he could be said to have been prejudil.-ed.

The report merely sets up the evidence in support of the allegations There'fore, the appellant has not been prejudiced by the

Trasury Officer's report being taken into consideration before the order of punishn1ent was passed against the petitoner. [6..t6 H: 647 A-BJ

CIVIL APPELATE JURISDICTION: Civil Appeal No. 1527 of 1971.

Appeal by special leave frctm the judgment and order dated October 12. 1970 ol' the Punjab and Haryana High Court at Chandigarh in Regular S.A. No. 1370 of 1969.

G. L. Sanghi, for the appellant.

V. C. Mahajan and R. N. Sachthey, for the Respondent.

The Judgment of the Court was delivered by-

ALAGIRJSWAMI. J.-This appeal is by way of special leave against the judgment of the High Court of Punjab and Haryana dismissing the Second Appeal filed by the appellant.

He was a clerk in the Treasury at Ludhiana. He filed the suit out of which this appeal arises for three different reliefs out of which the only one that now survives is regarding the order withholding his increment for one year with cumulative effect.

The sole point raised on behalf. of the appellant before the High Court was overruled by it on the basis of the full bench decision of the High Cour>t in Malvinderjit Singh v. The State of Punjab & Ors.(') which overruled the decision in Kal; van Singh

v. The State of Punjab(').

This is perhaps the first case that comes to this Court in the matter of a minor punishment.

The appellant relied upon the decision of this Court in B. D. Gupta v. State of Haryana('), the facts c[ which art ra'lher complicated, and are unnecessary for the purpose of this case. One of the points that arose in that case was regarding the mingr punishment of censure, though it was an incidental one in an appeal which involved a much more important question. Itwas held that the show cause notice in that case did

(I) (1970) 2 I.LR. (Punjab) 580.

(3) A.LR. 1972 (S.C.) 2472.

(2) (1967) 21.L.R. (Punjab) 471.

~ ( B

• c ·~

G •

not give the appellant (the aggrieved Government servant) any real opportunity to defend himself. That is not the case here. . . - The charge-sheet served on the appellant on 10-11-61 was. to the follow.ing effect : .

"(i) That you have been careless and negligent in the performance of your duties at Sub-Treasury, Sirhind, as per concrete instances mentioned in the enclosed state- . ment bf allegations. · (ii) That-you have been disobedient to the Assistant Treasury Officer, Sirhind." and an elaborate statement of allegations was enclosed alongwith; the charge-sheet, which is set out below :

STATEMENT OF ALLEGATIONS "While Shri Shadi, Lal Gupta, Clerk, Sangrur Treasury, was working as Routine Clerk, Sifhind Sub-Trca- sury, he had been disobedient to the Assistant Treasury Officer, Sirhirid and negligent in the discharge of his duties, and a few instances of his carelessness, negligence and disobedience are given below :-

1. Shri Shadi Lal Gupta was allotted the work of

passing Deposit Repayment Orders issued by the Courts and it was found vide some instances quoted below that he calculated wrong balances in the Deposit Receipt Registers which were likely to . cause over-payment in certain cases ; md refusal to make payment in other cases at some later stage.

(a) .While passing DRO No. 17, .dated 15th November, 1960 on 18-11-1960 the balancewas calculated by him as Rs. 327 .60 in- . stead of Rs. 317.60 N.P. ·

(b) While passing DRO 15 dated 10-11-1960

on 25th November, 1960, the balance was calculated by'him as Rs. 56.44 N.P. instead of Rs. 56.33 N.P. (c)

(d)

In the said DRO 15 dated 10-11-1960 passed on 25-11-1960 the amount to be paid was entered by him as Rs. 7 4 /- only instead of Rs. 74.11 N.P.

While passing payment of Rs. 131.06 N.P. in respect of DRO 17 dated 15-11-1960 on 18-11-1960 the tialance in the deposit receipt Register was calculated by him as Rs. 595.23 N.P. instead of Rs. 495.23 N.P'.

(e) In passing payment of Rs. 28.71 N.P. relating to DRO 23 dated 5-12-1960 on 7-12-1960 the balance was worked out by him as Rs. '261.71 N.P. instead of Rs. 281.71 N.P.

(f) The passing payment of.Rs. 1562.70 N.P.

in respect of DRO 124 dated 8-11-1960 repaid on 9-11-1960 the actual payment was shown as Rs. 1600/- in .the deposit receipt register.

2. He passed cheque No. 335553 dated 13-11-1960

on 15-11-1960 withou1 verifying the particulars of the cheque in question as the cross eµtry of the cheque was wrong and he did not point it out, Similarly cheque No. 395202, dated 21-11-1960 for Rs. 126/- was passed on 24-11-1960 by him without verifying the identifier of the payee, as neither he asked/ him to produce his half of the P.P.O. quoted by him in his identification nor did he confirm the fact from the Sub-Treasury record.

3. I.nward letter No. 419 and 430 were received from the Deputy Commissioner, Patiala on 6-12-1960 which remained undisposed of b\Y him till 3-1-1961.

Letter No. 695, dated 14-11-1960 regarding verification of credits received from the N.T. (Recovery) was not disposed of by him till 3-1-1961.

He also did not diarise them.

4. On 30-12-1960, the Assistant Treasury Officer asked him verbally to attend office on 31-12-1960 to clear arrears on his seat. He refused to do so.

Thereon he gave him written orders to that effect and he. refused to note them. Again he sked him to record his refusal in black and white but he declined even to do so.

5. He refused to write-up the Assistant Treasury Officer's set of Double Lock registers on his ordering him to do so as is evidenced by the fact that when he asked him even in writing on 13-1-1961, after obtaining Treasury Officer Patiala's orders 10 write up his set of double lock registers, he stated in his application dated 16-1-1961 that he had no objection to carry out the work under protest for some days upto the decision of the Treasury Officer, Patiala.

The carelessness, negligence and disobedience of the official has rendered him liable to disciplinary action."

Thereafter the appellant seems to have submitted his explanation and the then Deputy Secretary, Shri Banwari Lal seems also to have given him a personal hearing.

The appellant complained that he was not given any opportunity to adduce any evidence in defence and no prosecution witnesses were examined in his presence.

Shri Banwari Lal seems to have fch it necessary to have a local enquiry and, therefore, asked the Treasury Officer to send

a report after a local enquiry.

One of the complaints of the appellant was that these proceedings were started because one Yash Pa} Kaura, the Treasury Officer was inimically disposed towardf. him.

But we consider that point irrelevant l:lecause how the proceedings came to be initiated would not in any way affected the validity or otherwise of the disciplinary proceedings.

The Treasury Officer who sell'! up the report, after the local enquiry, was another person.

Two contentions were urged on behalf of the appellant : (I) that by the failure to give him copy of the report of the Treasury Officer and taking it into consideration behind his back, he has been prejudiced; and

( 2) Rule 8 of the Punjab Civil Services (Punishment and Appeal) Rules 1952 has been contravened,

l'nder Rule 4 of the above rules the following penalties may,. for good and sufficient reason be imposed :

\i) Censure;

(ii) Withholding of increments or promotion, including s1opp3ge at an efficiency bar, if any;

(iii)

(iv)

Reduction to a lower post or time-scale, or to a lower stage in a time scale; Recovery from pay of the whole or part ci any pecuniary loss caused to Government by neghgence of breach or order;

( v) uspension;

(vi) Removal from the Civil Service of the Government which does not disqualify from future employment.

(vii) Dismissals from the Civil Service of the Government which ordinarily disqualifies from future employment;

Rule 8 is to the following effect :

"8. Without prejudice to the provisions of Rule 7. no order under clauses (i), (ii), or (iv) of Rule 4 shall be passed imposing a penalty on a Government servant, .unless he has been given an adequate opportunity or )naking any representation that he may desire to make, and such representation has been taken into consideration."

There are two provisos to the rule which it is unnecessary to set out for •the purposes of this case.

Under this rule the only requirement is that the officer concerned should be give_n an adequate opportunity of making any representation that he may desire to make. There is no provision for examination of witnesses, cross examination of witnesses and furnishing a copy of the report, all requirements which we find in Rule 7. Therefore, in this case if the punishment had been imposed after the charge-sheet had been served on the appellant and he had made his representation and also been personally heard by Banwari Lal, it would have been perfectly legal.

Rule 8 does not require anything more than that the allegations on the basis of which the officer concerned 1s charged should be made known to him and he should be given an opportunity to make any representation with regard to them.

He need not be told the punishment which is sought to be imposed on him, either at the time tile chargesheet is served on him or any other stage. There is no question of his being given an opportunity a second time after the enquiry is. completed in respect of the

punishmnt sought to be imposed on him unlike in a case covered by Rule 7.

Rule 7 of these Rules deals with cases whi!re the major punishment of dismissal, removal or reduction in rank are proposed to be imposed and sub-rule 6 of that rule specifically provides that fa such a case after the pµnishing authority has arrived at a provisional conclusion in regard to the penalty to 1?e imposed, the accused officer shall be supplied with a copy of the report of the enquiry1ng authority and be c.illed upon to show cause against the particular penalty proposed to be infiicted on him. The words

"without prejudice to the provisions of rule 7" occurring at the beginning of. Rule 8 are sought to be taken advantage of to contend that even in the case of minor punishments referred to in that rule, of censure, withholding of increments and recovery from pay, an opportunity should be given to show cause against the punishment proposed to be imposed. Those words do not fit in in the context and cannot mean that in a case of minor punishpient not only the -provisions of rule 8 but also the provisions of rule 7 should be followed. The rules must be interpreted in their proper setting and if so interpreted, those words would not bear the interpretation

sought to be placed on them. The provisions oJ' rule 7 are necessitated by the provisions of Article 3 U ( 2) of the Constitution.

As far as other punishments are concerned, the only right which a Government servant is entitled to is that the action proposed should be in accordance with the rules made under the proviso to Article 309.

That rule, rule 8 does not contemplate anything more than an adequate opportunity of making a representation.

We are, therefore, unable to accept this contention.

We shall now consider some of the decisions cited befo_re us.

It is first necessary to refer to the decision in Ka/Jan Singh v. The State of Punjab (supra) which has been overruled by the Full Bench in Malvinderjit Singh v. The State of Punjab & Anr. (supra). The High Court was not quite right in dismissing the appellant's appeal on the basis of Malvinderjit Singh's case.

Kalyan Singh's case was overruled only as regards the question whether a copy of the report of the Vigilance Department on the

basis of which proceedings were initiated, should be given to the concerned officer or not. We are not cqncerned with that question in this case. But the Full Bench also dealt with the question of the procedure to be adopted in the case of imposition of minor punishments and it held :

"(a) that for the minor punishment to _public servants for their J)lisconduct the autltorities have designedly provided for a simple and summary prqcec!t1re of representations only, untrammalled by any furnishing of copies of documents or material on which the allegations are based or the right of cross-examination or the right of leading defence evidence which are all provided in the case of enquiries qua major punishments. The furnishing of doc.uments as provided for in rules 7 ancl 9 of the Punjab Civil Services (Punishment and Appeal)

Rul\:S, 1952, stands excluded under rule 8.

Basically the right to secure copies of documellts or other specific material is a r.roce<jural right which accrues if it is so granted in express terms by a'\statute. Nobody can be said to have any inherent right~ secure copies or to have any access to confidential State records.

Such a right can only be a creature of a statute. On an overall view of the specific language of rule 8 of the Rules, its setting in the relevant rules and the scope and ambit thereof,

all collectively tend to negative .any such procedural right.

(b!) That the words 'adequate opportunity' in the context of rule 8 of the Rules may mean_no more than an adequacy of time to make a representation which alone is guaranteed by rule 8. It is possible to place

such a limited meaning upon these words, but even if a more liberal construction is placed, these words cannot be elongated enough to cn:>ate a specific procedural right to secure copies and materials. Moreover, the adequacy of opportunity to make reprsentation under rule 8 cannot possibly imply a larger right than what has been judicially interpreted 10 be the basic requirements of a reasonable opportunity of being heard or to show cause again9t specific allegations.

( c J That under rule 8 of the Rules, unlike rule 7, the employee has only one opportunity of making a representation. No enquiry need be conducted as under rule 7 and no evidence need be recorded in the presence of the employee. .It is open to the punishing authority to collect any material either itself or through any specialised a2ency like the Vigilance Department to acquaint itself with the real facts in order to take a decision whether any action is to b~ taken against 'the employe.e,

and, if so, what action is to be taken. But if such an enquiry is made and material is collected on the basis of which a prejudicial view is taken against the employee and he is chargesheeted under rule 8 with a view to impose one of the three minor punishments, then the employee is entitled to an adequate opportunity to make a representation to show that ( 1) he is not guilty and

(2) that "he proposed punishment should not be imposed on him, being excessive. It would be impossible for an employee to make such a representation unless it is made known to him the material on the basis of which it has been decided that he is gnilty and that the particular punishment be imposed on him ...... Without being supplied with such a material he cannot make an effective and real representation.

The only case in which the punishing authority would be justified in withholding such a material, would be where under the second proviso to rule 8. sufficient reasons are recorded in writin~ to the effect that it is not practicable to observe the requirements of the rule and .that this can be done without injustice to the officer concerned. ( d) Thait the words 'adequate opportunity in the context of rule 8 of the Rules connote "reasonably suffi cient opportunity" in every respect, to make a representation against the action sought to be taken against the employee. Before an employee can be said to have had this 'adequate opportunity', the employee has to be told the charges of misconduct and then he must have an opportunity tci be heard in answer to those charges."

A The ase in R. D. Raw a v. State ( 1) was also noticed in the above Full Bench decision. In that case two charges were made against Rawal and one of the c)).arges was held not established. Another charge was on the basis that certain action takcm by him was ma/afide.

The ma/afides were held not estaW.ished but the impugned order withholding one increment was passed on the grow1d B that some lapses on his part had resulted in excess payment t6 a contractor. This order was set aside by the High Court. That decision could be explaine<.l on the basis that the officer concerned did not have an opportunity ol showing that there was no lapse on his part.

We may also refer to the decision in Roop Lal v. State of C Punjab(') of the Punjab and Haryana High Court.

The ratio of decision in that case is stated as follows :

"In the present case if the procedure under rule 7 of the Rules had been. followed and instead of a ma.ior punishment a minor punishment had been inflicted, no fault could be found therewith but if no enquiry was held as envisaged under rule 7 ibid and the minor punishment was proposed to be inflicted under rule 8 thereof, then the procedure prescribed under rule 8 had to be fo.llowed." We lhus come to the conchl$ion that there was no failure in this case to follow the relevant rules, which, as we have already indicated, only require that the officer concerned should have an opportunity of making a representation in respt of the charges made against him. This leaves the question of whe1."'<ler any prin- .ciples of natural justice have bjeen violated in this case.

The r)lles of natural justice would undoubtedly have to be observed in any proceedings even by a domestic tribunal. But the principles of mrtural justice to be applied would depend upon the circumstances of each case. In Suresh v. Kera/a U11ivmll)'( 8) this Court pointed out that the question whether the requirements of natural justice have been met by the procedure adopted must depend to a great exten~ on the facts and circumstances of the case in point, the constitution of the Tribunal and the rules under which it functions. After referring to the decisions in Russel v.Duke of Norfolk & Ors.,(') Local Government Board v. Alridge(1) and De Verteuil v. Knaggs &Anr.(•) this Court also referred to the observations of Lord Harman, J. in Byme & Anr. v. Kinematograph Renters Satiety Ltd.(') to the following effect :

(I) 1967 C.L.J. 439.

(3) [1969] l S.C.R. 3i7.

(5) [19151A.C.120.

(7) [1958] All B.R .. 579 ..

9~L761Sup.C.IJ:73

(2) 1971 (I) S.L.R. 41.

(4) 19491 All E.R. 108 at Ill.

(61 [1918] A.C. 557.

646 SUPREME COURT RBPOR'l'.S [1973) 3 S, C, ll.

"What, then, are the ruirements of natural justice in a case of this kind 7 FIISt, I think that the person accused should know the nature of the accusation made; secondly that he should be given an opportunity to s~ his case; and thirdly, of course, that the tn'bunal.should act in good faith. I do not think that there really is anything more."

and went on to lay down the same principle in its own words :

"Suffice it to say that in the case l:lefore us there was a fair inquiry against the appeUant; the officer appointed to inquire was an impartial person; he cannot be said to have been biassed against the appellant; the charge against the appellant was made known to him before the commencemQ!lt of the inquiry; the wi'lnesses who gave evidence against him were examined in his presence and he was allowed to cross-examine them and lastly he was given every opportunity to present his case before the Inquiry Officer. Hence we see no merit in the conte\lltion that there was any breach of the principles of natural justice. It is true that the Vice-Chancellor did not make

availaQle to the appellant a c91iy of the eport submitted by the Inquiry Officer. Admittedly the appellant did not ask for a copy of the report. There is no rule requiring the Vice-Chancellor to provide the appellant with a copy o( the report of the Inquiry Officer before he was called upon to make his representation against the provisional decision taken by him. If the appellant felt any difficulty in making his representation without looking into the report of the Inquiry Officer, he could have very well asked for a copy of that report. His present grieva.nce appears to be an after thought and we !!CC no subs tance in it." ·

As we have indicated earlier, if Shri Banwari Lal had impi>sed the punishment after he had given a hearing to the appellant, the order would have been perfectly legal and it could not have been . said that any principle of natural justice had been violated. The criteria indica1ed above would have been satisfied. But what is urged before us in this case is that as the report of the Treasury Officer, which we have already referred to earlier, was taken into consideration without showing it to the appellant he has been seriously prejudiced and the principles of natural justice have been violated in so far as he has not had an opportunity of making his representation in respect of 1hat report. We find no substance in this ci>ntention. When Shri Banwari Lal wanted a local enquiry to be made he apparently wanted the representations made by the

anpellant to be checked up wi1h the records and that is what has

been done as is clear from a comparison of the allegations on the basis oi which the chargesheet was served on the petitioner, and the report of the Treasury Officer. We have carefully gone through it and it does not add one single instance more than what is already found in the allegations. It merely sets out the evidence in support of these allegations. We are, therefore, of the opinion that the appellant has not been in any w a.y prejudiced by the Treasury Officer's report being taken into consideration before the order of punishment was passed against the petitioner. If before the Treasury Officer had sent his report he had associated the appellant in the enquiry he held it would not have been necessary to give him a copy of the report he sent. I! the report had contained any material extraneous to the charges against the appellant, or any thing in addition to what is found in the original allegations against him then only he could be said to have been prejudiced. In the decision of the Judicial Committee in B. Surinder Singh Kanda v. Government of the Federation of Malaya(') noticed in Suresh v. Kera/a University (Supra) a report ma.de by the Board, which held the preliminary inquiry, which was highly prejudicial to Kanda had been placed in the hands of the officer who held the formal enquiry was not made available to Kanda.

That report was likely to have prejudiced the Inquiry' Officer and the Judicial Committee held that the enquiry was not fair. There is no question in this case of the Treasury Officer's report having prejudiced the punishing officer, Mr. D. D. Sharma. The application of the principles of natural justice is not a question of observance of a formula or a mere technicality. In essence it is meant to assure that the party concerned has an opportunity of being heard, the principle of audl alteram partam. Whether in any parti cular case it has been violated will depend on the facts and circumstances of that case. It is not to be considered that unless all the procedure of the courts are observed it would mean failure to observe the principles of natural justice. We are of the opinion that no principles of natural justice have been violated in this case.

We' think it useful in the circumstances of this case to refer to the observations made by this Court in Suresh's case to the effect :

'There seems to be an erroneous impression in cer. tain quarters evidently influenced by the provisions in An. 311 of the Constitution particularly as Ibey stood

(I) [1962] A.C. 332.

before the amendment of that article that every disciplinary proceeding must consist of two inquiries, one before issuing the show cause notice to be followed by another inquiry thereafter. Such is not the requirement of the principles of natural justice. Law may or may not prescribe such a course. Even if a show cause notice is provided by law from that it does not follow that a copy of the report on the basis of which the show cause notice is issued should be made available to the person proceeded against or that another inquiry should be held thereafter."

In the result this appeal is dismissed.

s.c.

Appeal dismissed

SHADI LAL GUPTA

STATE OF PUNJAB

March 7, l 973

A. ALAGIRISWAMI

I. D. DUA

Ludhiana

G. L. Sanghi

V. C. Mahajan

R. N. Sachthey

ALAGIRJSWAMI

High Court of Punjab and Haryana

Sirhind

Shadi, Lal Gupta

Shadi Lal Gupta

Patiala

Patiala

Banwari Lal

Yash Pa} Kaura

Article 3

Article 309

Malvinderjit Singh

Kalyan Singh

Rawal

Harman

Kanda

D. D. Sharma

Suresh

Ibey


STATE OF U.P. v.

DYER MEAKIN BREWERIES LTD.

March 8, 1973

[K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANNA, JJ.]

C•ntral Sales Tax Act, 1956, Section 10-A-A&<es.ree registeied ar d•ar<r in Gaziabad-Penalty proceedings lnitiat<d against asseme-Sub- S<qu•nt/y, assessee's registration transferred to Luck111)w-Sales Tax Officer had jurisdiction to impose penalty on assessee even after transfer of regis. tration.

The assessee was registered as a dealer under the Central Sales Tax Act, 1956. at Ghaziabad. For the relevant asses•"K!'lt years, he was .Ssessed by the Tax Officer at Ghaz.iabad. The Saleo Tax Officer, Ghaziabad, sub5equently came to know that the assessee had misuse<! some of the 'C' Forms and, therefore, issued a penalty notice u/s 10-A of the Act on January 8, 1960.

Durin11 the pendency of the penalty proceedings, the assessee transferred his registration to Lucknow.

The Sales Tax Officer, Ghaziabad imposed the penalty on the aasessee for the Disuse of Form 'C'. At the instance of the assessee. the Revisional Authority uoder the Statute referred three questions of law to High Court under section

11 (I) di the U.P. Sales Tax Act, the principal question being whether the Sales Tax Officer, Ghaziabad, had jurisdiction to impose penalty when the registration was transferred to Lucknow.

The High Court answered the question against the State.

On appeals by special leave, allowing the appeals,

HELD: Prima facie, the Sales Tax Officer, Ghaziabad was competent to levy the penalty on the assessee.

Section 10-A definitely says that the authority who granted the certificate of registration to an assessee ii one of the authorities competent to levy penalty. Undoubtedly the Sales Tax Officer, Ghaziaba<l, was the authority who granted the certificate of registration to the assessee and that certificate was in force during the relevant assessment years.

Even though after 28-3-1960, 'the date of transfer of registration, he ceased to be the authority competent to grant certificate of registration to the assessee he still had the competence to levy penalty on the assessee in view of the fact, that it was he who had granted certificate of registration to the asaessee.

The levy of penalty is one of levying tax.

If the Sales-tax Officer was competent to levy salestax on the assessee in re.•pect of the relevant assessment years, he was equally competent to levy penalty on the asscssee in reapect of the offences committed during these years. [653 DJ

CIVIL APPELLATE JURISDICTJON : Civil Appeals Nos. 1655 and 1656 of 1970.

Appeals bv special leave from !he judgmem: and order dated l st January 1970 of the Allahabad High Court in Sales Tax Reference Nos. 15 and 16 of 1968.

H N. D. Karkhanis and 0. P. Rana, for the appellant.

D. P. Singh, S. C. Agarwal, V. J. Francis and R. P. Singlt, for the respondent.

The Judgment of the Court was delivered by HEGDE, J. These are appeals by Special Leave. They related to penalty proceeding. 1'.he assessee, M/s. Dyer Meakin Bes Ltd., .is canying on busmess of mantifacture and sale of wmes, bear and fruit juices, etc. at Ghaziabad.

The assessee was registered as a dealer under The Central Sales Tax Act, 1956 (hereinafter referred to as the Act) a_t Ghaziabad. During the assessment years 1958-59 and 1959-60, the assessee submitted its sales tax returns to the Sales Tax Officer at Ghaziabad and he was assessed by that Officer.

Subsequently, the Sales Tax Officer, Ghaziabad, came to know that the assessee had misused some ot the 'C' forms issued to it. According to his information, the assessee, by misusing the 'C' form, had purchased goods worth Rs. 11,754.62 P. in thi; assessment year 1958-59 and goods worth Rs. 2,68,242.38 P. in the assessment year 1959-60. Hence, the Sales Tax Officer, Ghaziabad, issued to the assessee a notice on January 8, 1960 calling upon him to show cause why he should not impose penalty on him under Section 10-A of the Act. The assessee did not give any explanation. Some time thereafter, the assessee made an aP.Plication praying for condonation of his default, alleging that the defaults were committed due to ignorance of law. The Sales Tax Officer did not accept that explanation.

The Sales Tax Officer, Ghaziabad again issued a notice to the assessee on October 31, 1960 requiring it to show cause why it should not be prosecuted under Section IO (b) of the Act. Thereupon, the assessee submitted an application offering to compound the offence for a sum of Rs. 7,000/-. That offer was not accepted .. Subsequently, on January 23, 1961, the Sales Tax Officer again called upon the assessee to show cause why penalty should not be imposed on him under Section 10-A. After examining the representation made by the assessee, the Sales Tax Officer imposed on the assessee a penalty of Rs. 1,000/- in respect of the u.nlawful purchases made by him during assessment year 1958-59 and a sum of Rs. 23,000/- in respect of the unlawful purchases made by him during the assessment year 1959-60. On appeal, the Assistant Commissioner (Judicial) reduced the penalty in respect of the assessment year 1958-59 to Rs. 750/- and in respect of the sment year 1959-60 to Rs. 17,000/-.

Thereafter, the assessee took up the matter in revision. The Revisional Authority dismissed the asses5ee's appeal in respect of the assessmept year 1958-59, but reduced the penalty fr0m Rs. 17;000/- to Rs. 15,000/- in respect of the assessment year 1959-60. Thereafter. at the instance of the assessee, the Revisional Authority submitted the following questions to the High Court under Section 11 ( 1 ) of the U.P. Sales Tax Act :-

"!. Whether on the facts and circumstances of the case the Sales Tax Officer, Ghaziabad being not seized

U.P. STATB v. DYBR MBAKIN (Hegde, /.) 651

of the matter at the tin).e of making the penalty order the jurisdictl?n havin' n tramf~ ~~ I:ucknow circle, was nght and iust. m la'Y 'in m1tialing tlle

penalty pr<>eeMing.o and 1U1posmg the fine ?

2. Whether on the facts and circumstances of the c11Se

the additional Revising Authority, Sales Tax, Meerut Range was justified in holding that the appli cants made the representations with a guilty mind fraudulently and falsely; with the full knowledge that the objected goods purchased were not covered by the registration certificate ?

3. If the answer to question No. 2 is in the negatiye,

whether the imposition of penalty under section lO(b) of the Central Sales Tax Act was justified an<l right in law ?" The High Court answered the first question in favour of the assessee.

It came to the conclusion that the Sales Tax Officer, Ghaziabad, had no jurisdiction to initiate penalty proceedings against the assessee as by the time he made his order, the jurisdiction over the assessee had been transferred to the Sales T8.ll.

Officer, Lucknow. Having answered the first question in favour of the assessee, the High Court thought it unnecessarv to answer the remaining two questions.

The only question that we have to decide is whether the High Court was justified in. coming to the conclusion that the Sales Tax Officer, Ghaziabad, had no' jurisdiction to impose penalty on the assessee.

As mentioned earlier, the assessee was registered as a dealer before the Sales Tax Officer, Ghaziabad. The assessee had submitted his sales tax returns for tile assessment years 1958-59 and 1959-60 to the Sales Tax Officer, Ghaziabad. It is that Offi cer who had assessed the assessee. in respect of those assessment years. The validity of those assessments have not been questioned at any stage. The registration of the assessee was transferred from Ghaziabad to Lucknow only on 28-3-1960. Till that dare, the assessee continued to be registered as a dealer in the office of the Sales Tax Officer, Ghaziabad. The penalty proceedings had bee.n ini?-ated on Janary 8, 1960, i.e. IQng before the assessee's registration was transferred from the Sales Tax Officer, Ghaziabad to the ales Tax Officer, Lucknow. The High Court came to the conclus10n tl!at when the penalty was actually imposed on the assessee, the Sales Tax Officer, Ghaziabad, had no jurisdiction over the assess:e and hence the l!)vy made was invalid. We shall

prent!y c:xanune th~ correctness of that conclusion. But before doing so, 1t would be convenient to dispose off a new contention

avanced by Mr. Singh, the learned counsel for tl!e assessee. Mr.

Smgh contended that the registration of the assessee as a dler

652 SUPP.EME COUl\T P.BPOP.TS [1973] 3 s.c.a.

before the Sales Tax Officer, Ghaziabad was an invalid registration as the U.P. Sales Tax Act as well as the Central Sall:s Tax Act did not permit double registration of the same assessee.

According to him the assessee's head office was at all time at Lucknow. . This is an entirely new contention. No such conten- . ti0n appears. to have been taken either before the authorities under the Act or before the High Court. On the basis of the material on record it is not possible to come to a firm conclusion that the same assessee had been registered at two places. Further there is no material befor~ us to show that during the relevant assessment years the assessee's head o.flice was at Lucknow. These are essentially questions of fact.

We cannot go into tlibse questions at this stage. Hence:, we do not propose to go into the contention that the assessee's registration at Ghaziabad was invalid. We have to proceed on the basis that the assessee was properly registered as a dealer at Ghaziabad. If that was not so, the assessee would not have applied to the Sales Tax Officer, Ghaziabad, for registration; nor would it have submitted its sales tax returns to that officer. As mentioned earlier, the sales tax assessments for the years 1958-59 and 1959-60 were not challenged as being unauthorised.

This takes us to the question whether under Section 10-A of the Aot, the Sales Tax Officer, Ghazibad, bad competence to levy penalty on the asaessee.

We shall first read Section 10 of the Act to the extent it is material for our present purpose. That E

ection says :-

"10. Ii any person-

(a)

(b)

(c) (d)

(e)

(f)

....... •'• ........ .

being a regisl4!£ed dealer, falsely represents when purchasing any class ol goods that , goods of such class are by his certificate of registration; or

he shall be punishable with simple imprisonment which may extend to six months, or with fine, or with both; and when the offence is a continuing offence, with a daily fine which may extend to fifty rupees for every day during which the offence continues".

U.P. STATE v. DYER MEAKIN (Hegde, J.) 653

Secition 10-A(I) says :-

"If any person purchasing goods is guilty of an offence under clause (b) or.clause (c) .or clause (d) of section

10, the authority who granted to him or, cu the case ma, v be is competent to grant to him a certificate of registration under this Act may, after giving him a reasonable opportunity of being heard, by order in writing, impose upon him by way of penalty a sum not exceeding one and a half times the tax which would have been levied under this Act in respect of the sale to him of the goods if the offence had not bieen committed:

Provided that no prosecution for an offence under seotion 10 shall be instituted in respect of the same facts on which a penalty has been imposed under this section. " (emphasis supplied) .

There is no dispute that the authority who granted the certi- D ficate of registration was the Sales Tax Officer, Ghaziabad. Therefore, prima facie, he was competent to levy penalty on the assesscc.

But it was contended on behalf of the assessee that on 28.3.1960,

the registra!tion before the Sales Tax Officer, Ghaziabad, stood cancelled and thereafter the assessee was registered before the Sa)es Tax Officer, Lucknow, that being so, the Sales Tax Officer, E Ghaziabad, had no jurisdiction to levy penalty on the assessee.

This contention overlooks the language of Section 10-A. That section definitely says that the authority who gra.nted the certificate of registration to an assessce is one of the authorities competent to levy penalty.

Undoubtedly, the Sales Tax Officer, Ghaziabad, was the authority who granted the certificate of registration to the assessee and that certificate was iu force durin11: the F assessment years 1958-59 and 1959-60.

Even though after 28.3.1960 he ceased to be the authority competent to grant certificate of registration to the assessee he still had the competence to levy penalty on the assessee in view of the fact that it was he who had granted certificate of registration to the assessee.

In this case, we are dealing with the penalty relating to offences G committed during the assessment years 1958-58 and 1959-60.

In fact the levy of penalty is .one form of levying tax. If the Sales Tax Officer was competent to levy sales tax on the assessee in respect of those assessment years, he was equally competent to levy penalty on the assessee in respect of the offences committed during those years. In our opinion, the High Court did not H properly appreciate the legal position in this case.

The High Court was wrong in thinkjng that the proceedings initiated on January 9, 1960 stood tem1inated as a result of the subsequent notices issued by the Sales Tax Officer.

The notices issued 1>y

him are not statutory notices.

Under Section 10-A of the Act tho Sales Tax Officer was only required to give reasonable opportunity to the assessee to show cause why penalty should not be imposed on him.

In the result, we allow these appeals, set aside the order of the High Court and remand the case to the High Court for answering the remaining questions.

Costs of these appeals will be costs in the cause.

S.B.W.

Appeals allowed.

STATE OF U

DYER MEAKIN BREWERIES LTD

March 8, 1973

K. S. HEGDE

P. JAGANMOHAN REDDY

H. R. KHANNA, JJ.

Sales Tax Act, 1956

Section 10

Ghaz.iabad

Ghaziabad

s 10

January 8, 1960

Lucknow

section

11

Sales Tax Act

Section 10

CIVIL APPELLATE JURISDICTJON

Allahabad High Court

H N. D. Karkhanis

. P. Rana

D. P. Singh

S. C. Agarwal

V. J. Francis

R. P. Singlt

HEGDE

Dyer Meakin Bes Ltd.

Section 10

October 31, 1960

January 23, 1961

Section 10

Section 11

Sales Tax Act

Central Sales Tax Act

Sales Tax Officer, Ghaziabad

Janary 8, 1960

Singh

Smgh

Sales Tax Act

Section 10

Section 10

section

10

Section 10

January 9, 1960

Section 10


C.I.T., ANDHRA PRADESH

M/S. VADDE PALLAIAH & CO.

March 8, 1973

(K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANNA, JJ.J

Income-tax Act (11 of 1922) s. 34(3), Second Proviso-Scope of.

Upto the assessment year 1953-54 a business was being carried on by P as an individual.

In March 1953, he entered into a partnership consisting of himself and others. For the assessment years 1954-55, 1955-56, and 1956-57 the firm filed returns of income aad applied for registration under s. 26A of the Income-tax Act 1922. The income-tax officer rejected the application holding that there was no genuine firm.

He accordingly assessed P as an individual in respect di the income earned in that business. As against that order the firm as well as P appealed to the Appellate Assistant Oimmissioner who allowed both the appeals.

The Appellate Assistant Commissioner held that the business was that of the firm and' not of P. When the Income-tax Officer proceeded to assess the firm for the assessment years 1954-55, 1955-56 and 1956-57, the firm resisted it taking the plea that the proceedings were barred by limitation under s. 34(3) of the Act. On the question whether the assessment for each of the assessment years was valid the High Court, on reference, held that the assessments were barred by time and were not saved by the second proviso to s. 34(3) of the Act.

Allowing the appeals to this Court.

HELD : Under the proviso the limitation of time would not apply to, an assessment or reassessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under s. 31, 33, 33A and 33B, 66 or 66A.

A finding which can be considered as relevant under the proviso must bt> one which was necessary for deciding the appeal before the authority; and the expression 'any person' refers to one who would be liable to be assessed for the whole or part of the income that went into the assessment of the year under appeal or revision. The person should be intimately connected

with the proceedings in which the finding was given. (658 CD; 660 A-B; E-Fl

In the present case, the order df the Appellate Assistant Commissioner was made under s. 31.

Though he hac! not given any direction. the order made by the Incometax Officer was in consequence of the finding given by the Appellate Assistant Commissioner.

The finding given by the Appellate Assistant Commissioner that the business was that of the firm was absolutely necessary for deciding both the appeals before him.

P, v; ho was the dominant partner of the firm was not only interested in his own assessment but was also interested in the assessment of the firm.

The partners and the firm were intimately connected with him and hence, they are 'persons' coming within the scope of the proviso. [658 E-F 660 C

F-GJ . ' '

Income-tax Officer; A-Ward, Sitapur v. Murlidhar Bhagwan Das, 52 I.T.R. 335; 344. N.KT. Sivalingam Chettiar v. Commi,<sioner of lncometax, Madras, 66 J.T.R. 586 and Daffadar Bhagat Singh and Sons v. Jncometa.t Offecer, A-Ward Ferozepore, 11 I.T.R. 417, followed.

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1682 to 1684 of 1970.

Appeals by special leave from the ·.iudgment and order dated October 3, 1969 of the Andhra Pradesh High Court in R.C. No. 4 of 1966.

S. T. Desai, B. D. Sharma, S. P. Nayar, and R. N. Sachthey, :for the appellant.

D. Karf(hanis, and K.

Ra; endra Chowdhary, for the respondent.

The JudgmeJllt of the Court was delivered by

llEGDE, J.-These are appeals by Special Leave. They arise from a common judgment of the Andhra Pradesh High Court in a reference under section 66(i) of the Indian Income Tax Act, 1922, to be hereinafter referred to as the "Act". The reference i.n question relates to the assessment of the assessee tor the assessment years 1954-55, 1955-56 and 19,6-57. 'I'he question of law referred by the Tribunal is "Whether on the facts and the circumstances of the case, the assessm.ent Dll\(le on <the firms,. for each of the assessment years 1954-55, 1955-56 and 1956-57, are valid in law ?"

Now we shall set out the material facts as could be gathered from the case stated by the Triqunal. Up to and including the assessment year 1953-54 business with which we are concerned in this case, was carried on by V adde Pallaiah. He was assessed as an 'individual'. On March 20c3-1953 he entered into a partnership consisting of himself and three others. That partnership was known as "M/s. Vadde Pulliah & Co." In that partnership Pulliah had 8 as. share and out of the remaining three partners two had 3 as. share each and one had 2 as. share. For the assessment years 1954-55, 1955-56 and 1956-57, this firm filed return> of income as a firm. It also applied for registration under section

26A.

The Income-tax Officer rejected that aPPlication holding that there was no genuine firm.

He came to the conclusion that the business was exclusive that of Pulliah. He accordingly assessed Pulliah as an 'individual' in resoect of the income earned in that business.

As against that order both the firm as well as Pulliah went up in appeal to the Appellate Assistant Commissioner. Before the Appellate Assistant Commissioner, the -question for consideration was whether the firm in question was a genuine firm.

If the firm was a genuine firm, it necessarily followed that Pulliah was wrongly assessed. If, on the other hand, the firm was not a genuine firm, Pul!iah was rightly assessed. Therefore, the sole question that arose for decision in the appeals filed by the firm .as well as Pulliah was as to the genuineness of the firm in question. The Appellate Assistant Commissioner after examining the material be.fore him came to the conclmion that the finn in question was -a genuine firm.

Consequently, he allowed the

A. appeal of the firm as well as that of Pulliah. In tho firm's appeals.

he directed the Income-true Officer to register that firm and in Pulliah's appeal he set aside the assessment .made on him. In the operative portion of his order he stated thus :

"The Income-tax Officer is directed to adopt the correct share of income of ihe appellant from this firm."

But in the body of his order he specifically held that the business; in question was carried on by the firm and not l:zy Pulliah.

After this order was made, the Income-true Officer proceeded to assess the firm in respeot of the income earned by that firm. during the assessment years 1954-55, 1955-56 and 1956:57, When the Income-true Officer initiated proceedings against the firm for the purpose oi. assessment, the firm resisted the same taking

the plea that the proceedings in question is barred by limitation under section 34(3) of the Act. He rejected that contention.

Aggrieved by that order the firm went up in appeal to the Appellate Assistant Commissioner. The Appellate Assistant Coinmissi0nr.r upheld the contention of the assessee and set a.•ide the order of the Income-tax. Officer.

As against that order the Income-tall!

Officer went up in appeal to the Income-Tax Appellate TnbunaL The Tribunal partly accepted the appeal of the Income-tax Officer.

It came to the conclusion that the assessment in respect of assess-. ment years 1955-56 and 1956-57 are not barred in viewof the

Second Proviso to section 34(3) of the Act. Bur it opined that the asse•sment in respect of the assessment year I 954-55 was. barred by limitation.

Aggrieved by the decision of the Tribunal both the Commissioner of. Income-tax as well as the assessee moved the Tribunal

under section 66(i) of the Act to refer certain questions of law to the High Court of Artdhra Pradesh. The Tribunal submitkd the question set out earlier to the High Court. The High Court has answered that question in favour of the assessee. It came to the conclusion that the .impugned assessments were barred by time and they are not saved by the Second Proviso to sub-section ( 3) of section 34 of the Ac!. It is as against that decision these appeals G have been brought by the Commissioner of Income-tax.

In order. to deciile the controversy before us it is necessary to rel.er to the material portions of section 34. That section deals with income escaping assessment.

We are now concerned with sub-section (3) of section 34 and the Second Proviso thereto.

Sub-section (3) of section 34 reads :

"No order of assessment or reassessment, othor than an order of assessment u'nder section 23 to which clause

( c) of sub-section ( 1) of section 28 applies or an order

of assessment or reassessment in cases falling within clause (.i) of sub-section (1) or sub-section '(lA) of this section shall be made afier the expiry of four years from the end of the year in which the income, profits or gains were first assessable."· The First Proviso is not relevant for our present pnrposes. Hence we shall _proceed to quate the Second Proviso to sub-section ( 3 ) CJf section 34. That Proviso s.iys :

"Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or re-assessment may be made, sh.ill apply to a re-asse8sment made under section 27 or to an assessment or re-assessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A."

The question before us is whether the assessee's case is covered D by the Second Proviso to section 34 ( 3) ? Befqre a case can be 'Said to be covered by the said Proviso certain requirements will have to be fulfilled. The first and foremost requirement is that the order made must be one either under section 31 or section 33 Qr section 33A or tion 33B or section 66 or section 66A. In the present case, admittedly, the order in question was made under <Section 31. The present case does not fall within the scope of section 27 about which there is no dispute.

The next requirement is that the order made by the Income- Tax Officer must be to give effect to any finding or direction

ven by the Appellate Authority. In this case the Appellate Assistant Commissioner had not given aliy directiOn to ·.issess the assessee. Therefore, all that we have to see is whether the order made by the Income-tax Officer was in consequence of a finding given by the Appellate Nsist.int Commissioner. The further <1uestion tb:at we have got to decide is whether the assessee can be considered as one of the pei; sons coming within the scope of the proviso in question. There has been. considerable controversy as to the meaning of the . word 'finding' in the Second '.Proviso to sec~ tion 34(3). This question came up before this Court for consideration in Income-Tax Officer, A-Ward, Sitapur v.

Murlidhar Phagwan Das.(') This is what this Court obServed in that case:

''The expression "finding or direction", the argument proceeds, is wide enough to take in at any rate a finding that is necessary to dispose of the appeal or direction which Appellate Assistant Commissioners have in

{I) 52 I.T.R. 335 ; 3"'4.

C.I.T, v. VADDB PALLAIAH "' co. (Hegde, /.) 659

practice been issuin1t in respect of assessments of the years other than those before them in appeal. What does the expression "finding" in proviso to sub-section ( 3) of section 34 of the Act mean ? "Finding" has not been defined in the Income-tax Act. Order XX, rule 5, of the Code of Civil Procedure reads :

"In suits in which issues have been framed, the court shall state its finding or decision, with the reasons therefor, upon each separate issue, unless the finding upon any one or more of the issues is sufficient for the decision of the suit."

Under this Order, a "finding" is, therefore, a decision on an issue framed in a suit. The seconil part of the rule shows that such a finding shall be one which by its own force or in combination with findings: on other issues should lead to the decision of the suit itself.. That is to say, the finding shall be one which is necessary for the disposal of the suit. The scope of the meaning of. expression "finding" is considered by a Division Bench of the Allahabad High Court in Pt. Hazarl Lal v. Income-

Tax Officer, Kanpur,('). There the learned judges pointed out :

"The word 'finding', interpreted in the sense indicated by us above, will only cover 1Il8'1erial quC1Stions which arise in a particular case for decision by the authority hearing the case or the appeal which, being necessary for passing the final order or giving the final decision in the appeal, has been the subject of controversy between the interested parties or on which the parties concerned have been given a hearing."

We agree with this contention of finding." The same view was taken by this Court in N .KT. Sivallngam Chettlar v. Commissioner

of Income-tax, Madras(').

Therein this Court ruled that a finding or direction by an appellate authority in an order relating to the assessment of one year does not warrant the avoidance of the bar of limitation under section 34 of the Indian Incometax Act, 1922, against initiation of proceedings for assessment for another year. A finding within the second proviso to section 34(3), must be a finding for giving relief in respect of the assessment for the year in question. A finding may only be that which was necessary for the disposal of an appeal in respect of an assessmene of a particular year.

(I) 39 J.T.R. 265.

(2) 66 I.T.R. 516,

The la'\\' on question was elaborately examined by this Court again in Daffadar Bhagat Singh and Son, g v. lncome•tax Officer, A Ward F erozepure ( 1) • Therein this Court reiterated that a finding which can be considered as relevant under the second proviso to section 34(3) must be one which was necessary for deciding the appeal before the authority. Having set ut the law, let us examine whether the finding given in this case is one that was necessary for the decision of the case before !he Appellate Assistant Commissioner. As mentioned earlier the question that the Appellate Assistant Commissioner .bad to decide in the two appeals before him, which he heard together, was whether the business in question was the business of. the firm or 1hat of Pulliah. He had only two alternatives before him: In order to decide the appeal of the firm as well as that of Pulliah, he had to decide whether the business was that of the firm or that of Pulliah. He cama to the conclusion that the business was that of the firm and not of Pulliah.

There is .no room for doubt that the finding given by the Appellate Assistant Commissioner was absolutely necessary for deciding both the appeals before him.

This takes us to the other branch of the second proviso . to section 34(3), namely, whether the firm can be considered as coming within the expression 'any person' in the proviso in question. In Murlidhar Bhagwan Das (Supra), this Court came to the concltlsion that the .expression 'any person' in the second proviso to section 34 ( 3) rel erred to one who would be fiable to be assessed for the whole or a part of the income that went into the assessment of the year under appeal or revision. Further, that person should be intimately connected with the proceedings in which the finding was given. The same view was taken in other cases refierred to earlier. In the instant case Pulliah was the dominant partner of the firm as found by the Tnbunal. He had 8 as. share in the firm. He was the original owner of the firm.

He was not only interested in his own assessment, he was also interested in the assessment of the firm. The partner of Pulliah were intimately connected with him.

Hence we were clearly c1'. the opinion that they are "persons" coming within the scope of the second proviso to section 34(3).

It may be noted that the Appellate Assistant Commissioner had to deal. with the cases of Pulliah as well as that ol. the firm.

In our opinion the High Court erred in coming to the conclusion that the finding given by the Appellate Assistant Commissioner, in the appeals filed by Pulliah as well as by the firm, that the business was carried on by the firm. was not a necessary finding for deciding the appeals before him.

That finding was

(1) 71 I.T.R. 417.

clearly necessary. But for that finding he could not have decided the appeals before him in the .way he decided. The High Coun was also wrong in its conclusion that the firm was a stranger to the assessment made on Pulliah. The firm was intimately connected with Pulliah and the assessment made on him.

8 For the reasons mentioned above we set aside the order of t.he High Court. We vacate the answer given by the High Court and answer the question referred to in the affirmative and in favour of the Revenue. The appellant will get his costs from the Respondent. One hearing fee.

V.P.S.

Appeal allowed.

10-L761Sup.C.l./73

C.I.T., ANDHRA PRADESH

M/S. VADDE PALLAIAH & CO

March 8, 1973

K. S. HEGDE

P. JAGANMOHAN REDDY

H. R. KHANNA, JJ

Income-tax Act

s. 34(3)

s. 26A

Income-tax Act 1922

s. 34(3)

s. 34(3)

s. 31, 33, 33A and 33B, 66

s. 31

CIVIL APPELLATE JURISDICTION

S. T. Desai

B. D. Sharma

S. P. Nayar

R. N. Sachthey

D. Karf(hanis

K.

Ra

endra Chowdhary

llEGDE

Andhra Pradesh High Court

section 66(i)

Indian Income Tax Act, 1922

V adde Pallaiah

March 20c3-1953

Vadde Pulliah & Co.

Pulliah

section

26A

Pul!iah

section 34(3)

section 34(3)

section 66(i)

section 34

section 34

section 34

section 34

section 23

section 28

section 34

section 27

section 31

section 33

section 33A

section 33B

section 66

section 66A

section 34

section 31

section 33

section 33A

section 66

section 66A

Section 31

section 27

Assistant Commissioner

section 34

Income-tax Act

the Code of Civil Procedure

Allahabad High Court

section 34

Indian Incometax Act, 1922

section 34(3)

section 34(3)

section 34(3)

Murlidhar Bhagwan Das

section 34

Tnbunal

section 34(3)