KALYA SINGH

I'.

GENDA LAL AND OTHERS

Fehmary 28, 1975

78 3

[A. ALAGIRJSWAMJ AND N. L. UNTWALIA, JJ.]

Represc111a1io11 of the People Ac!, I 95 I, S. I 23(1) (A) (b )-Pa\"/11e111 of money lo a person lo rerire from co'i11es1-WhC1/1er a111011n1., lo cor1:11p1 prar:- flce.

Section 123(1)(A)(b) of the Representation of the People Act. 1951define> .bribery as 'any .gift. offer or promise by a c-andidate or his ;1gent or by any other person with the consent of "' candidate or his election agent ?f any gr;1ti1!cation, to any person. whomsoever. with the Jbject. directly~ or md1rectly of mducmg an elector to vote .or refrain from voting at an election.

Respondent No. 1 hied an election petition challenging the election of the appellant that he had committed corrupt practice under s. 123 (I) (A) ( b) of the Act.

The High Court declared the election void on the ground that the appellant. by pying a big sum in cash and promising paymnt of a similar sum by execution of a promissory note, made Respondent No. 3 to retire from

the contest and publish a pamphlet that the electors should vote for the appellant and not for himself.

Allowing the appeal to this Court.

HELD: I (a) It is not possible to ''"lain the judgment of the High Court holding the appellant guiltv of corrupt pract'ces within the meaning of s. I 23 (I) (A) (b) of the Act.

[790B]

(b) Mere payment of any gratification to a third person for securing or procuring some votes in favour of a particular candidate. without the es\ablishment of any nexus b-ctween the money and the inducement to the Yoter, will not be sufficient to prove !hat the voter is indirectlv inducd on account oi the payment of gratification to the third person.

The gratification must have some connection or reflection, diiect or indirect. in persuading the. voter to vote or refrain from voting at an election. If th.e inducement to the voter is not caused by the payment of the gratification to a third person but by the persuasion or influence or such third person it will not be possible to say that ·, he gratification had any indirect inducement to the vster. :n7F-l 1 J

(c) Payment of any gratification to any person to work or canvass at an elc.:tion is vutside the ambit of the definition.

[787H]

(d) If the inducement to the voter is fre from the shade or colour of the gratification paid to the third person it will not be bribery. lf. howner, tbe inducement in a given case is coloured or shaded by the payment of the gratification to a third person it would be an indirect inducement to the voter himself within the frame of the definition.

In othl'>r words it is the fact of , payment to the third person that must induce the voter.

It is not enough that the third person induces the voter.

The frame of any d7nition more often than not is capable of being made flexible.

But the prec1SIO!J and certainty in Jaw requires that it should not be made loose and kept fight as far as possible.

[788A-B]

G/w, fii Ram v. Dal Singh and others [1968] 3 S.C.R. 102 and Om Pmbha ]<1in , .. Abnash Chand & anr. [1968] 3 S.C.R. 111, folfowed.

Abdul H11.1.·:ain Mir v. Sha111s11/ Huda & Anr. [1975] 3 &.C.R. 106 referred to.

Jn the instant case money was not paid to the respondent as consideration for votes promised or as a bargain for getting votes but it was money paid tv him to retire from the contest and to do propaganda and persuade the voters to vote fer the appellant. In spite of the propaganda and the appeal of the respondent no. 3 'ihc voters were left free not to respond to his persuatio:J.

J790A]

CIVIL APPELLAH JuR1so1cnoN : Civil Appeal No .. 16(NCE) of 1973.

From the Judgment a.1d order dated the 11th December, 1972 of the Madhya Pradesh High Court in Election Petition No. 22 of 1972.

G. L Sangh! and D. N. Misra, for the appellant.

S. S. Khanduja, for Respondent No. 1.

S. f(. Gambhir, for Respondent No. 2.

The Judgment of the Col!rt was delivered by

UNTWALIA, J. There were three candidates to contest the election to the Legislative Assembly of Madhya Pradesh from the Bhainsdeshr Assembly (Reserved) Constitumcy in the last general elections.

The appellant in this appeal under section ll 6A of the Representation of the People Act; 1951-hcrcinafter referred to as the Act, was declared elected to the seat defeating the other two ca'°didates who are respondents 2 and 3. Respondent No. 1 filed an Election Petition in the Madhya Pradesh High Court challenging the election of the appellant on serveral grounds.

The election of the appellant has been declared void by a learned single Judge of the High Court m one ground only.

It has been held that he . indulged in corrupt practice within the meariing of Section 123 ( 1 J (A) (b) of the Act. We shall confine the statement of facts in this case to the only ground on which the appell-· ant's election has beea set aside.

Respondent No. 1 stated in paragraph 6 of his election petition

"(iv) That after the date of withdrawal the respondent no.l himself and through his aforesaid agents and workers with his consent was vehemently trying to induce the respondent no.3 to support the candidature of the respondent no. 1, and declare that the electors, should not vote for the respondent no.3, but should vote for the respondent 1110.1.

(v) That the respondent no.I, and his aforesaid agents and workers having failed in their attempt in inducing the respondent no.3 from either standing withdrawing or declaring to support the candidature of the respondent no.1, and the respondent no. 3, having started his election campaign in full swing. The respondent no.1 apprehended that if respondent no.3, remains in contest then, he had no chance of success.

Therefore he made determined efforts, to see that the respondent no.3 makes an appeal to the electors of the constituency to the effect that the electors should

X:At.YA SINGH v. GBNDA LAL (Untwalia, /.) 785

vote for the respondent no.1 and should refntln from voting in favour of the respondent No. 3, and withdraws frpm the contest ......... .

(vii) That on 22.2.1972 at Paratwara respondent no.1 himself in the company of his agents and workers Shri N. K. P. Salve, Shive Bux Singh and Baboolal Pathak induced the respondent no.3 to support the candidature of the respondent no.1 and offered to pay compensation to respondent no.3 The. respondent no.3 agreed to support the candidature of the respondent no.l, and to publish a pamphlet to the effect that the electors should vote for the respondent no.1 and should refrain from voting the respondent no.3. The respondent no.1 offered a sum of Rs. 8000/- to the respondent no.3 as compensation, which he had incurred in his election campaign.

On appreciation of evidence adduced before the High Court, on the relevant issues it recorded the following findings :

"ISSUE N0.1 (a) The respondent no.1 (Kalya Singh) asked respondent no.3 (Patiram) on the night intervening 22nd and 23rd February 1972 at Paratw'dra to withdraw from the contest and to support respondent no.1. Respondet no.1 also offered to pay Rs. S,0001as compensation to respondent no. 3 for the election expeQSes till then incurred by him.

ISSUE N0.1 {b) The respondent no.3 agreed to support respondent no. I and to issue a pamphlet requesting the voters to vote for respondent no.1.

ISSUE NO. 1 (c) A sum of Rs. 4,000/- was paid in c'8Sh on 23rd February, 1972 by respondent no.1 to respondent no.3.

A pronote for Rs. 4,000/- (Ex. P-3) executed by respondent No. 1 in favour of Shiv Darshan Singh was also handed over by respondent no. 1 to respondent no. 3. It was also agreed that in case the balance amount of Rs. 4,000/- was not paid by respondent no. 1, respondent no. 3 will hand over the pronote to Shiv Darshan Singh who will recover the amount from Respondent no. 1 and pay to respondent no. 3.

ISSUE NO.l(d)

In the meeting held at Bhainsdeshi on 23rd February, 1972 it was announced by respondent no. 3 that he now supports the Congress.

The said meeting was also addressed by respondent no.I, Shivbux Singh and Kawadkar.

They H also announced the withdrawal from the contest of respondent no.3, and asked the electors to vote for respondent no.1

ISSUE N0.1 (e) ' 4-LS64SCl/7S

The pamphlet (Ex. P-11) was distributed in the meeting of 23rd February, 1972.''

Mr. G. L. Sanghi, learned counsel for the appellant in the firsi: instance submitted that on the face of the peladings in the Election

Petition as also on the findings of fact recorded by the High Court it has gone wrong in law in holding that the appellant was guilty of having indulged in corrupt practice within the meaning of section 123( l) (a)

(b) of the Act.

He reserved his right to assail the findings by taking us through the evidence in case his contention in law were not found to be sound.

Mr. S. S. Khanduja combated the argument put forward on behalf of the appellant <rad reEcd upon a decision of this Court in Abdul Hussain Mir v. Shamsul Huda & Anr.( 1) decided on 20th

December 1974 to which one of us (A. Alagiriswami, J) was party.

Mr. S. K. Ghambir appearing for respondent no.3 asked us, in the event of the appellant's success in the appeal to exonerate the said respondent of the charge of having indulged in a corrupt practice within the meaning of section J 23 (1 )(B )(b) of the Act as found by the High Court.

Since the point of law urged on behalf of the appellant was found to be sound, we did not proceed to examine the evidence in the case.

We may state in condensed form the findings recorded by the High Court against the appellant in the b-ackground of what was pleaded in the Election Petition. The appellant by paying a sum of Rs. 4,000/- in cash and promising payment of another sum of Rs. 4,000/- by execution of a promissory note made respondent no. 3 to retire from the contest, support the candidature of the appellant 11nd publish a pamphlet to the effect that the electors should vote for him and not for respondent no.3 Accordingly a pamphlet to that effect was published and distributed in a meeting held on 23rd February, 1972 at Bhainsdeshi in which meeting the withdrawal from contest of respondent no. 3 was announced and the voters were asked to vote for respondent no. 1.

The: question for consideration is whether the findings aforesaid fit in the frame of definition of "Bribery" in section 123 ( 1) (A) (b) of the Act. The High Court has rightlv pointed out that the case was not covered by sub-clause (a) of Clause (A) as respondent no. 3 was not made to withdraw from being a candidate at the election.

This view of the High Court is now squarely supported by the decision of this 0)urt in Shri Urned v. Raj Singh and others( 2) which had over-turned a contrary view taken in the case of Mohd. Yunus

Salum v. Shit'kumar Shastri and others(8). We now proceed to read in full section 123 ( 1) (A) of the Act.

( 1) 'Bribery', that is to say-

( A) any gift, offer or promise by a candidate or his agent or by any other person with the consent of 11 candidate or his elec.tion agent of any gratification, to any person whomsoever, with the object, directly or indirectly of inducing-

(2) A.T.R. 1975 S.C. 43.

(3) A.T.R. 1975 S.C. 1218.

KALYA SINGH \I, GENOA LAL ( Untwalia, J.)

(a) a person to stand or not to stand as, or to withdraw or not to withdraw from being a candidate at an election, or

(b) an elector to vote or refrain from voting at an election or us a reward to-

( i) a person for having so stood or not stood, or for having withdrawn or not having withdrawn his

rnaddaturc; or

<ii) an elector for having voted or refraind from voting:"

We shall discuss the relevant law shorn o!' the addenda and the qualitying words in the above extract.

Payment of any gratification by a candidate lo any person net necessariiy a person mcnti0;1cd in sub-clause (a) or an ckctor mentioned in sub-clause (b) with the object of directly or indirectly ir.ducing the person 0r an elector mentioned in those sub-clauses will make it a bcibry within the meaning of the said word. ltis significant to note from sub-.;:lauscs (i) ; rncl (ii) of clause (A) that post-facto payment of any gratification as a reward will be bribery only if it is paid to the person or the elector mentioned in the&e sub-clauses. But does it lead to the conclusion that payment of any gratification to any person other than an elector in al! circumstances would be deemed to be with the object of indirctly inducing an elector to vote or refrain from voting at an election ? If money is paid to an elector to vote for a particular candidate undoubtedly it is a direct inducement to him to vote at an election. If money is paid to a third person in which payment of money an elector c has got any direct or indirect interest and which induces 'him to vote at an election in favour of a particular candidate then also the inducement is brought about as a result of the payment of the gratification.

But the point of difficulty may W"ise where any gratification is paid by or on behalf of a candidate to a third person for procuring. some votes of some electors who may be under his (third person's) influence.

Whether in such a case the payment has got any indirect inducement to an elector to vote at an election ? We are incline<l to think that mere payment of any gratification to a third person for securing or procuring some votes i'n favour of a particular candiaate without the establishment of any nexus between the money and the inducement to the voter will not be sufficient to prove that the voter is indirectly induced on account of the payment of gratificati0'.1 to the third person.

The dictionary meaning of the word "induce" is to "prevail on, persuade." The gratification must have some connection or reflection, direct or indirect, in persuading the voter to vote or refrain from voting at an elei:tio•a. If the inducement to the voter is nGt caused by the

pavment of the gratification to a third person but by the persuasion or influence (not undue influence) of such third person it will not be possible to say that the gratification had any indirect inducement to the voter.

Payment of a•ay gratification to any person to work or canvass at an election is outside the ambit of the dfinitbn. It will make little differcn<'c if the worker or the canvassor on payment of gratification promises or indulges in tall-talk of securing or procuring some

votes for a particular candidate. If the inducement to the voter 1s free from the shade or colour of the gratification paid to the third person, then it will not be bribery. If, however, the inducement in a given case is coloured or shaded by the payment of the gratificatkm. t<J

a third person then it would be an indirect mducement to the voter himself within the frame of the definition. In o4hi!r words it i>: the fact of payment to the third person that must indu:e the voter. It is not cncugh that the third person induces the voter. The frame of arty definition, more often than not, is capable of being made flexible. But the precision and certainty in law requires that it should not be made lno'.; c. and kept tight a~ far as possible.

On the facts found in this case respondent no. 3 after having retired from the contest merti} canvassed to the voter:> some of wlwm may be his so callt:d voters, to \0t.e for the appeltJnJ Di):!riburi.nn of the pamphlet and announcement in the meeting held on the 23rd February, 1972 to that and did not transgress the limit and made the act an indirect inducement to the voters to cast vote for the appellant on account of payme:nt of tlie gratification by him to the third respondent.

In Ghasi Reim v. Dal Stngh 1.uul others(!) followed in Om Pmbha .Tain v. Abnash Chand & Anr.(2)-another decision in the same volume at page 111, it was pointed out by Hidayatullah J., as he then was, at page 110 "The money was not distributed among the voters directly but was given to Panchayats and the public at large. It was to be used for the good of those for and those against the candidate.

No doubt they had the effect of pushing forward his claims but that was inevitable 'even if no money was spent, but good administration changed the people's condition. We cannot, therefore, hold that there was any corrupt practice. If there was good evidence that the Minister bargained directly or indirectly for votes, the result might have been different but there was no such evidence.'' It would thus be noticed that there must be a bargain for votes eithr directly with the voters or indirectly through some-one else. The voter may not be a direct party in the bargain but must be shown to have an indirect interest, in it.

In Abdul Hussain Mir v. Shamsul Huda &: Anr.( 3 ) Krishna Iyer J. in his judgment delivered on his and on behalf of Sarkatia J. did not find the fact proved in that case to bring it within the ambit of section 123(1)(A)(b). The third learned Judge (A. Alagirisami J.) did not record any finding to the contrary. Even so while interpreting the scope and ambit of section 123 (1) of the Act certain observations were made in the majority judgment which were prese<l into service by respondent No. 1 while the others were relied on by the appellant.

Accepting the argument of Mr. Garg (vide page 1995 of the cyclostyled copy issued by the Supreme Court Bar Association) it was said "what the: law aims at is a blow on the purchase of the franchise by direct or indirect methods. You may buy influence of important persons which is bad in morality but not yet in law." Another passage (vide page 1996 of the cyclostyled copy) which

(I) [1968] (3) S.C.R. 102.

(2) [1968}(3) S.C.R. 111.

(3) [ 1975] :> S.C.R. 106.

Ji'

KALYA SINGH v. GENDA LAL (Untwalia, J.) 78 9

A occurs in that judgment runs thus : "The crucial point is the . nexus between the gratification and the voters, one being the consideration for the other, direct or indirect." The two passages extracted above squarely supported the contention of the appellant. While a few others which are being quoted below were pressed into service by

8 .. learned counsel for respondent No. 1.

The said passages at page 1995 are:

"If the candidate pays mtmey to a V.l.P. of the locality to use his good offices and canvass votes for him, it is a borderline case, but if the money is paid as consideration for votes promised to be secured by him using bis sway, it is bribery even though indirectly exercied.

If the Mulla had been paid the money striking a bargain for getting the votes-in bis ambit of influence, it is electoral corruption.

On the other hand, if it is money received_ for the purpose of organising effec~ tively the election campaign by hiring workers, going round the places In car, meeting people and persuading them to vote for the candidate, it is proper election expense.

In between these two extremes Ji~ the case of a man who just receives a large sum of money, pockets it himself and promises to use his good offices to secure votes. This is a gray area.

We are not called upon to pronounce on it in this case .................. The touchstone in all these C'aSes of payment of gratification is to find out whether the money is paid in reasonable measure for work to be done or services to be rendered. Secondly, whether the services as offered amount to a bargain for getting votes or merely to do propaganda or to persuade voters to vote for the candidate, it being left to the voters not to respond to the suasion. It is a plain case if a voter is paid for his vote. It i.~ direct. It is equally plain if the payment is made to a close relation as inducement for the vote.

The same is the case if it is paid to local chief on the under· standing that he will get plead the votes in his pocket borough, in consideration for the payment." The third learned Judge in his separate note did not join in the views expressed in the passages just extracted above from the majority decision and , aid "I consider it, therefore, unnecessary to discuss whether if money is paid or offered as considera- . tion for votes promised to be secured by a person using his intluenc~

it is bribery or not. It .is a good policy not to discuss in a Judgment questions which do nut arise out of the facts of the case." The obser

vations of Krishna Iyer J.. which were relied on behalf of respondent No. 1 may occasid.tl a debate or dispute if in a given ce the facts so warrant. But it will be a futile exercise to do so in this case as the findings recorded against the appellant by the High Court iare clearly outside the observations relied on by respondent No. 1. It was not a case where money was paid to respondent No. 3 as consideration for

SUPREME COURT REPORTS 119751 3 s.C.Fl.

votes promised or as a bargain for getting votes. It was . a mot1ey paid to him to retire from the contest and to do propaganda and p 1ersuade the voters to vote for the appellant. In spite of the propagaaida and the appeal <>f respondent No. 3 the voters. were left free not to respond to bis persuasion. In no view of the matter, therefore, it is possible to sustain the judgment of the High Court holding the appellant guilty of corrupt practice within the meaning of section 123

(1) (A) (b) of the Act. That being so, it is plain that respondent No. 3 also must be exonerated of the charge levelled and found against him of bribery within the meaning of section 123 ( 1 )(B )(b) .

. In the result the appeal is allowed with costs payable by respondent No. 1 and the judgment and order of the High Court are set C aside.

P.B.R.

Appeal allowed.

KALYA SINGH

GENDA LAL AND OTHERS

N. L. UNTWALIA, JJ.

Section 123(1)(A)(b)

Representation of the People Act

s. 123

[1968] 3 S.C.R. 102

Om Pmbha

[1968] 3 S.C.R. 111

CIVIL APPELLAH

G. L Sangh

D. N. Misra

S. S. Khanduja

S. f(. Gambhir

UNTWALIA

Representation of the People Act

Madhya Pradesh High Court

Section 123

N. K. P. Salve

Shive Bux Singh

Baboolal Pathak

Kalya Singh

Patiram

23rd February, 1972

Shiv Darshan Singh

Shiv Darshan Singh

Bhainsdeshi

Shivbux Singh

Kawadkar

L. Sanghi

section 123( l)

S. S. Khanduja

20th

December 1974

A. Alagiriswami

S. K. Ghambir

section 123

section 123

A.T.R. 1975 S.C. 43

KALYA SINGH

GENOA LAL

Hidayatullah

Krishna Iyer

Sarkatia

section 123(1)(A)(b)

A. Alagirisami

section 123

Garg

Supreme Court Bar Association

section 123

section 123


JAGIR SINGH & ANR.

JASDEV SINGH & ORS.

February 28, 1975 ·

79:1

LM. H. BEG, A. ALAGIRISWAMI AND N. L. UNTWALIA, JJ.]

Representa_tion of the People Act (43 of 1951) Section 123(3) and (3A)- Corrupt practice-Proof o{.

'I_be appellants, who were the voters of the constituency, challenged the election f e first respondent who was a nominee of the Akali Dal, to tire State Legislative Assembly, on the ground that he was guilty of corrupt prac• tice under s. 123(3) and (3A) of the Representation of the People Act, 1951.

The second respondent, who was a nominee of the Congress and the third respondent, who was an independent candidate, were unsuccessful in the election. The charge of corrupt practice against the first respondent was based <_>n the. publication of a poster. The High Court held, (i) that the poster was printed from a document produced by the appellant's witness; (ii) that the signature on that document was that of the first respondent; (iii) the document produced by the court witness as the one from which the poster was printed was manufactured for the purpose of election petition, and that its production as well as the production of a tape-recorded conversation between the ls. respondent and the husband of the 2nd respondent, showed an anxiety on tho part of the first respondent to steer clear of his signature on the document pr<>: duced by the appellant's witness; and (iv) that such anxiety of the first respondent could only arise because he had, in fact, signed the document produced by the appellant's witness, as it was not his case that he ever signed any blank paper. The High Court, however, dismissed the petition holding that it was not sure of the existence of the offending posrer before the poll.

Allowing the appeal to this Court,

HELD : ( 1} The conclusion of the High Court that the poster was not printed before the pol! is completely non-sequitur, in view of the other findings of the High Court which are borne out by the evidence on. record. The evi dence establishes that the printing of the poster was before the poll and that it was the first respondent who got it printed.

[793C-D; 795A]

(a) The absence of a complaint by the second respondent does not lead to the conclusion that the poster was not printed before the appeal. (793-D] .

, (b) The tape-recorded conversation is absolutely imhelpful to the first respondent's case and it does not establish that the first respondent was urp)ised and bewildered at the fact that the document produced by the appellants witness bore hi~ signature. [795D-E]

Ci) The evidence also established that the 'poster was distJ:ibuted in vari<_>US villages at the insnce of the first . respondent. The reasop given by th~ High Court for disbelieving the oral telil1mony of one of the witnesses gardmg the distribution name1y, 'that he was an Akali and that his testimony . could not be accepted and he would be the last person to support the congress candidate'

ii; the very reason that the evidence of that witness should have been accepted against the first respondent. [796A-D]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 737 of 1973.

From the judgment and order (lated February 16, 1973 of the Pun- H jab & Haryana High Court in Election Petition No. 38 of 1972.

G. B. Pai, S. K. Bagga, l. K. Mehta, S. Bagga and Yash Bagga, for the appellant.

SUPREME COURT REPORTS

lrapil Sibal Jasdev Singh and Hardev Sinfh, for respondent no. 1.

Bhagwant Singh, B. D. Sharma, M. P. Varma and S. R. Sriva3tQVa, fo1 respondent no. 2.

The Judgment of the Court was delivered by

ALAGIRISWAMI, J.

The appellant.s are two voters of the Dakala B constituency who challenged the election of the 1st respondent to the Punjab Legislative Assembly on many grounds out of which only the charge of corrupt practice under section 123(3) and 123(3A) of the Representation of the People Act now survives for consideration. Retpondents 2 and 3 are the ULsuccessful candidates. The chargeof corrupt practice is based on the publication of a pamphlet, about th• nature of which there is no dispute and the contents of which are thert- C fore unnecessary to be set out. It is admitted that if the publication of the pamphlet either by the successful candidate or his election asent or anyone else at the instance of either of them is proved the election has to be set aside.

The publication was sought to be proved by the evidence of C.W.1, the proprietor of the printing press where it was printed, C.W. 2 in D whose name it was printed as well as of P.W.l. The evidence of :R.W. 5 was relied upon to prove that the pamphlet was sent to the Sub- Divisional Magistrate as required under section 127A of the Representation of the People Act and received by her on the 12th March.

Ext. P.W.1/4 was put forward by the appellants as the manru; cript whY.:h was usr-d for printing the pamphlet.

This is purported t.o be signed by the successful candidate as well as C.W. 2, Jathedar Ram E Singh, in whose name the pamphlet is published and P.W.1, Bcdi Raghbir Singh.

On the other hand the printer, C.W. 1 produced another manuscriu~ Ext. C.W.1/1 as the one from which the pamphlet was printed. 111ere is also a tape-recorded conversation between the 1st respondent and Bhagwant Singh, the husband of the 2nd respondent, who was also her counsel in the election petition, from which the

1st respondent tried to make out that he was wholly unaware of and F surprised at his signature in Ext. P.W.1/4. His main argument before this Court was that the whole thing has been brought bout by collusion . between the 2.nd respondent, Bedi Raghbir Singh P.W. 1, Nichhatar Singh C.W. 1 and Jathedar Ram Singh C.W. 2. The learned JudJl; c held:

(1) that he had no doubt that the pamphlet was printed from Ext. P.W. 11/4; G

(2) that Ext. C.W. 1/1 had been manufactured for the purpose of this petition;

(3) that the figures "20 x 30=5000" on Ext. P.W. 1/4

4 are in the handwriting of Nicbbatar Singh; H

( 4) that the signature of the successful candidate on Ext. P.W. 1/4 appears to be his;

JAGJR SINGH v. J, ASDEV SINGH (Alagiriswami, !.) 793

(5) that the production of Ext. C.W.1/1 by , Nichhatar Singh and the tape-recorded conversation show an anxiety on the part of l st respondent to steer clear of his signature on Ext. P.W.J/4;

( 6) that this anxiety could be because he had in fact signed such a poster as it was not his case t.hat he ever signed :my blank paper; and

(7) that he was not, however, sure of the existence of the poster.

We are of opinion that conclusions 1 to 6 of the learned Jildge set out above are borne out by the evidence on record and do not therefore consider it necessary to set out at length the evidence to support those conclusions. Conclusion No. 7 is rather curious in view of his earlier conclusions and his observation that from what he had stated earlier i.e. conclusion 1 to _6, he was clear in his mind that the poster was not printed before the poll is completely non sequitur. The learned Jud11c

then goes on to say that the strongest reason for this conclusion is the absence of any complaint by respondent No. 2. and that the evidence as to the distribution of the poster is oral and untrustworthy. That is how he has disposed of the whole question regarding the printing of the poster. We are unable to agree that absence of complaint by respondent No. 2 necessarily leads to that conclusion.

We are of opinion that the conclusion arrived at by the learned Judge is wholly unsustainable especially in view of his categorical findings recorded earlier.

The 1st respondent's case was one of complete denial of the a!Jea tions in the petition regarding the printing of the poster. He did not plead that the manuscript which was used for printing the poster, Ext.

P.W.1/4, was manufactured on a blank paper bearing his signature.

He did not even plead .that the pamphlet must or might have been

brought into e:xistenet by the petitioners or the 2nd respondent after the date of the poll for the purpose of the election petition. There is very satisfactory evidence that the poster should have been printed on the 1st of March, 1972. Ext. C.W.1/1, which, as the learned Judge himself holds, has been brought into existence for the purpose of this petition bears that date.

After carefully going through the evidence of C.W.1. Nichhatar Singh we are satisfied that he is a witness who is anxious to help the 1st respondent and has brought Bxt. C.W.1/1 into existence for the purpose of helping him.

Answers fav0urable to the petitioners had to be extracted out of his unwilling mouth by cross examination. Even he has put the date on Ext. C.W. 1/1 as 1st of March and his evidence is that it was printed on the 1st of March though he mentions only the niqne of C.W.2, Ram Singh. He also says that he had sent a letter, Et. R.W.5/1, to the Sub-Divisional Magistrate.

Whether that letter was sent on the 1st of March, as is spoken to by him, or on the 5th of Mari:h, the date which it bears, doe5 not affect the substance of the question.

This letter has been received by the Sub-Divisional Magistrate, Miss Deol on 12th March. The learned Judge himself finds that it was received on 12th March. We "we care-

794 SUP!lEME COURT REPORTS (19751 3 s.c.R.

fully scrutinized it il.lld are satisfied that it has been signed by the Sub-

Divisional Magistrate on the 12th of March. That has been entered in the office diaiy on the 16th of March. Though it is .true that f.he date 6th has been struck out and 16th has been put in, the 6th seems

to have been put in due to a mistake. Looking into the entries in the diary on the previous pages as well as subsequent pages we have no doubt that the l 13th is the correct date. The entries on this date contain a number of documents received from various Government offkes

which bear the date 6th March.

We have no reason at all to doubt

th1~ genuineness of the entries in this diary. If Ext. R.W.5/1 was signed by the Sub-Divisional Magistrate on the 12th and entered in the diary on the 16th they probabilise the receipt of that document at least some days befote .the 12th. At no stage, except during the arguments before this Court, were the entries in this diary sought to be impugnl~... C Indeed efore tW, High Court it seems to have been urged on behalf of the ht respondent that it was a diary maintained in the usual cow:se of business. Taking therefore even Ext. C.W.1/1 as well as the evidence of C.W.l, Nichhatar Singh, into consideration we are satisfied that this pamphlet should have come into existence on the 1st of March.

W1~ have also compared the signature of the 1st respondent in Ext.

P.W.1/4 witl1 many of his admitted signatures and are satisfied that that signature is his and that is confirmed by the expert evidence of Mr. Puri. There being no satisfactory epcplanation on the part of the 1st: respondent regarding the presence of his signature on Ext. P.W.1/4 it is to be concluded on the evidence of Nichhatar Singh and Jathedar Ram Singh taken together that the 1st respondent had come to C.W.ll's prnss and given Ext. P.W.1/4 for printing. Conclusion No. 3 of tile learned Judge also supports this finding. We are not quite sure about the presence of Bedi Raghbir Singh at that point of time. But we can see: no cogent reason for disbelieving the evidence of C.W. 1 whose deposition clearly sbows that he was anxious to help the 1st respondent.

But in order to deny that Ext. P.W.1/4 was the manuscript which was used for printing the poster he also had to manufacture Ext. C.W.l/ I.

That evidence even taken 1lt its -face value establishes that the printing of the pamphlet was on the 1st-of March. If so it could have beJ::n done only at the instance of the 1st respondent. It was not even put to C.W.1 that it was done after the poll. Why Ram Singh should have printed it if not a.t the instance of respondent No. 1 was never sought to be explained.

Nor could respondent No. 2 have printed it.

We have bestowed our anxious consideration on how the 1st res- G pondent came to sign. Ext. P.W. 1/4. Though Jathedar Ram Singh

trie:d to say that he did not know Nichhalar Singh C.W. 1 and therefore Nichhatar Singh wanted the 1st respondent to undertake the respoin sibility of paying for the printing of the poster, it is clear that Nichhatar Singh bad known Jathedar Ram Singh for some time and there was no paiticular reason why even if the 1st respondent undertook to pay for

the printing he should sign it. It is said that it was because the 1st H respondent asked Nichhatar Singh to pfoouce that paper in his offic:e and get the paymc:nt. This .eason does not seem. to be a. good enough one for the 1st rr, spondent signing Ext. P.W.1/4. Be that as it m!LY

JAGIR SINGH v, J'ASDllV .SINGH (Alagiriswami, l.) 795

we have. no. doubt that. Ext. P.W.1/4 bears 1st respondent's signature and the whole evidence establishes beyond doubt that the 1st respondent got the pamphlet printed. He probably did not expect that the . manuscript would reach the hands of the 2nd respondent.

It is in this coBI1ection that it is necessary to refer to the tape-recorded conversation. The 1st respondent had stated before the High Court that the transcript of the tape-recorded conversation can be taken as correct in so far as what he had spoken was concerned. The other person concerned in the tape-recorded conversation was Bhagwant Singh, the husband of the 2nd respondent, who was also her advocate before the High Court. Though he admitted his part in the conversation it would not be admissible in evidence because he was not examined as . a witness. What he has stated there cannot be taken as an admission on behalf of the 2nd respondent. Such admission can only relate to matters in issue before the Court, admissions prejudicial to the case of the 2nd respondent.

Leaving such questions aside for the moment one thing that is obvious is that Ext. P.W.1/4 had reached the hands of the 2nd respondent during--the course of the trial and the evidence of Bedi Raghbir Singh that Nichhatar Singh gave it t<? him to be produced in the Court is not true.. This conversation was relied upon by the learned advocate appearing on behalf of the 1st respondent as esta\).; lishing that the 1st respondent was surprised and bewildered at the fact that Ext. P.W.1/4 bore his signature. We can see no such indication.

It is to be n:membered that when this conversation was being taperecorded Bhagwant Singh was not aware of it and therefore was talking freely what was in his mind whereas the 1st respondent was quite conscious of what was going. on and that he was merely laying a trap in order to trap Bhagwant Singh into saying something in his (1st res pondent's) favour without being aware of it. t:rhe tape-recorded conver_sation is absolutely unhelpful to the 1st respondent's case.

Though there are certain suspicious Jeatures in this case which the learned advocate for the 1st respondent tried to magnify and blow out of all proportion so as to obscure the real picture, .we are satisfied that the central point in the case as to the responsibility of the 1st respondent in getting the offending poster printed has been established beyond

alt, i:eafonable doubt. Once that is done the question of distribution falls into its proper place.

According to the petitioners the posters were distributed in the villages Lalauchhi, Bakshiwala, Jhiil, Dhanauri, Kutabanpur, Bluma Kheri, Saidipur, Rajla, 'Khuda Dadpur, Bathoi Kalan and Chhitera.

The distribution in Lalauchhi is spoken to by P.W. 2, an advocate, Mr. Balwant Singh., His evidence is attacked on behalf of the 1st respondent by -5aying that he was the junior under the 2nd respondent's husband but it is seen that that was some time ago and he had even appeared against the husband of the 2nd r.espondent in a personal case.

So his evidence cannot be attacked on this basis. The 1st respondent examined two advocates to prove that on the particular day when he was said to have distributed the poster in Lalauchhi he was in Patiala.

Their evidence has been rightly disbelieved by the learned Judge. The learned Judge has stated that both these advocates have merely lent

7 96

SUPREME COURT REPORTS ll 9751 3 S.C.Fl.

th1emselves to prove a false plea of alibi.

The only criticism which the learned Judge has made of the evidence of Mr. Balwant Singh is that he is an Akali and his testimony cannot be accepted at its face va:luc as he would be the last person to support the Congress candidate. We are of opinion that this is the very reason why Mr. Balwant Singh's .evidence should be accepted and not the contrary. We.are therefore satisfied on evidence that the conclusion of the learned Judge on th~ point coulp not be accepted and the distribution in village Lalauchhi must be held to have been proved.

As regards the distribution in village Bakshiwala, it is spoken to by P.W. 3, an employee of the C.I.D. Punjab. His father owns land irn that village. The 1st respondent produced R.W. 19 to show that Sucha Singh, P.W. 3, did not come to him and in support of this he 'produced his register. Ext. R. W. 19/L The learned Judge's comment on this register is "The less said about this register the better". R.W. 19 also admitted that there was a scuffie in the village and Sucha Singh was injured. The learned Judge has held that R.W. 19's eviden~~ is such that much reliance cannot be placed on him. R.W. 21 also adniits about the injury to Sucha Singh. In this state of evidence the learned Judge has not recorded any finding about the distribution. of the poster in village Bakshiwala. We are of opinion that the distribution has been satisfactorily established.

We do not therefore fed it necessary to deal with the question of distribution in the other villages.

The 2nd respondent is a Hindu lady married to a Sikh gentleman.

Such marriages between Hindus and Sikhs have been very common.

Indeed it appears that till recent times the first son of most Hindu families in Punjab became a Sikh.

Still politics has driven a wedge between brothers. It has led to unfortunate situations like the one in th1' case where because the 2nd respondent happens to be a Hindu lady it was sought to be taken advantage of by the 1st respondent for his election purposes. even though he and the 2nd respondent's husband would seem to have been good friends.

The appeal is allowed and the election of the 1st respondent is :held void. The appellants will get their costs from the 1st respondent..

V.P.S.

Appeal allowed.

JAGIR SINGH & ANR

JASDEV SINGH & ORS

February 28, 1975

LM. H. BEG

A. ALAGIRISWAMI

N. L. UNTWALIA, JJ.

Section 123(3)

s. 123(3)

Representation of the People Act, 1951

CIVIL APPELLATE JURISDICTION

G. B. Pai

S. K. Bagga

K. Mehta

S. Bagga

Yash Bagga

lrapil Sibal Jasdev Singh

Hardev Sinfh

Bhagwant Singh

B. D. Sharma

M. P. Varma

S. R. Sriva3tQVa

ALAGIRISWAMI

section 123(3) and 123(3A)

Representation of the People Act

section 127A

Representation of the People Act

Jathedar Ram E Singh

Bcdi Raghbir Singh

Bhagwant Singh

Bedi Raghbir Singh

Nichhatar Singh

Jathedar Ram Singh

Nicbbatar Singh

1st of March, 1972

Ram Singh

5th of Mari:h

Deol

1st of March

Puri

C.W.ll

Ram Singh

Jathedar Ram Singh

Nichhalar Singh

Nichhatar Singh

Bhagwant Singh

Lalauchhi

Bakshiwala

Jhiil

Dhanauri

Kutabanpur

Bluma Kheri

Saidipur

Rajla

Bathoi Kalan

Chhitera

Balwant Singh

Patiala

Balwant Singh

C.I.D. Punjab

Sucha Singh

Sucha Singh

Punjab


OIL INDIA LTD.

THE SUPERINTENDENT OF TAXES & OTHERS March 3, 1975

(K. K. MATHEW AND P. K. GOSWAMI, JJ.]

Central Sales Tax Act-Sect1°on 3-lnterstate Sale.:..-Sale in the course of tnterstatc trade-If movement of goods as a result of covenant or an incident of the contract of sale-Must sale precede the movement of goods.

By an agreement entered into betwC'Cn the petitioner, the Government' of India, Burma Oil Company Limited and Assam Oil Company Limited, it was agreed that all crude oil produced by the petitioner (except Assam Oil Com pany's entitlement) be sold to and purchased by the Government of Jndia.

Tho exact clause reads as under : ,

 "All crude oil produced by Oil India excluding Assam Oil Com pany's entitlement in respect of Oil India's existing areas under clause

20 of tho Promotion Agreement wilI (subject as hereinafter provided) bo sold to and purchased by tho Government of India PROVIDED that after meeting as a first call on such oil the joint annual requirements upto 2t million tons of Indian Refineries Limited'li Barauni and Nunmati Refineries Assam Oil Companys Digboi refinery shall have the next call thereon up to a maximum of 435,000 tons per annum to the extent that it cannot be economically met from Assam Oil Company's le11Sed areas." -

The petitioner pursuant to the provisions of the said clause 7 upplied crude oil to Banmni Refinery of Indian Oil Corporation situated in Bihar through pipeline constructed and owned by the petitioner Company. At Barauni Refinery the crude oil which flows through tho pipes from the oil fields of Assam is pumped into tho Indian Oil Corporation's tanks and thereafter it is measured.

After the measurement is agreed upon, the Indian Oil Corporation takes delivery on behalf of the Government of India. The petitioner Company bas been filing Jegular sales tax returns uncher the Bihar Sales Tax Act and was being ed under that Act for the supply of crude oil to tbo Refinery at Barauni treating the supply as intra-State 11ales.

Thereafter. the Sale11 Tax Authority in Assam issued notice to the petitioner on the ground that the C'.cntral sales tax was payable under the Oentral Sales Tax Act on the supply of crude oil to the Refinery at Barauni as the •ales were in the course of inter-State trade. The Assessing Authority held that the supply of crude oil to tho Refinery at Barauni by tho petitioner attracted Central Sales Tax. In tho present petition, tho petitioner seeks a writ of mandamus direeting the Assam Sales Tax Authorities not to levy tho sales tax under tho Central Sale• Tax Act on the supply of crude oil to tht' refinery at Barauni. In the alternative, tbe petitioner prayed for a direction to the Bihar Tax Authorities to refund the taxes collected.

HELD : Under Section 3 of the Central Sal~ Tax Act a sale or purchase of goods shall be deemed to have taken place ia the course of inter-State trade or commerce if the sale or purchase occasions moment of goods from one State to another. This Court has held in a number of cases that if the movement of goods from one State to another is the result of a covenant or an incident of the contract of sale then the sale is an inter-State •ale. In thi• case tho crude oil was carrieC: from Assam through pipeline to Barauni in

Biha~. Clause 12 of the agreement proves that the petitioner shall _ arrange for the construction of pipe-line or such other related facilitiea &9 the Company shall consider necessary for . tm, transport of crude oil to be prodnced by it to the refinery at Baraui:ii. This would idicate that the construction of . the pipeline was underaken by the petitioner m pursuance of t~ agreement

SUPREME COURT REPORTS [19751 3 s.c.n.

:and that was for the specific puipo5e of transporting crude oil to Barauni from A

Assam. This can only_ point to the conclusion that the parties contemplated that there should be movement of good11 from the State of Assam to the State cf Bihar in pursuance to the contract 6f sale. It is immaterial as to in wbi'ch

state the property in the goods' passes. It is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement. The sales were, .therefore, in the course of inter State trade and the Bihar Government bad no jurisdiction to tax, the sales under the Sales Tax Laws of the State. The Bihar Sales Tax Authorities wcre directed not to impose sales tax . under the provisions of Bihar Sales Tax Act and were directed to refund the sales tax already collected. [800D-G; 801AC]

ORIGINAL APPELLATE JURISDICTlON : Writ Petitions Nos. 641- 642 of 1970.

Petition Under Article 32 of the Constitution.

L. N. Sinha, Solicitor General of India, K. K. Jain, Bishamber Lal and S. K. Gupta, for the Petitioner.

D. Mukherjee and S. N. Choudhury, for the Respondems 1-3.

L. M. Singhvi and U. P. Singh, for Respondents No. 4-6.

The Judgment of the Court was delivered by

MATHEW, J. An agreement dated 14-1-1958 was executed by and between the Government of India, the Burmah Oil Company Ltd.

and the Assam Oil Company Ltd. for the promotion of a new company inter alia with the object of obtaining mining lease for the p; oduction of petroleum and crude oil.

The promotion agreement was later on modified by a supplemental agreement dated 15-2-1959. The pell- E tioner company was incorporated in accordance with the promotion agreement as modified by the aforesaid supplemental agreement.

By an adoption agretment dated 14-3-1959, the petitioner adopted the promotion agreement of 1958 as modified by tbe said supplemental agreement.

The petitioner has its head office in the State of Assa11n and is engaged in the business of prospecting petroleum and also prodm:ing and transporting crude oil. from the State of Assam pursuant F to the prospecting licence and mining lease granted by the State of '

Ass11m.

By a second supplemental agreement dated 27-7-1961 executed between the Government of India, Burmah Oil Company Ltd. and Assam Oil Company Ltd. and the petitioner, certain provisions of the promotion agreement dated 14-1-1958 were modified. Clause 7 of the second supplemental agreement reads as follows :

"7. All crude oil produced by Oil India excluding Assam Oil Company's entitlement in respect of Oil India's existing areas under clause 2u of the Promotion Agreement 'VIil (subject as hereinafter provided) be sold to and purchased by-the Government of India PROVIDBD that after meeting as a first call on such oil the joint annual requirements upto 2i million tons of Indian Refineries Limited's Barauni and Nunmati Refineries Assam Oil Company'.s Digboi Refinery shall have the next call thereon up to a maximum of 435,000 tons per

OIL INDIA LTD. V. SUI'DT. OF TAxES (Mathew,!,) 799

annum to the extent that it cannot be economically met from Assam Oil Company's leased areas."

The petitioner in pursuance to the provisions of clause 7 supplied crude oil to Barauni and Nunmati Refineries of Indian Oil Corporation (previously Indian Oil Refineries Ltd.) and to Digboi Refinery of Assam Oil Company Ltd. through pipe-lines constructed and owned by the petitioner company.

The Barauni Refinery .is situated m , Bihar while the other two refineries are situated in the State of Assam.

At Barauni Refinery the crude oil which flows through the pipes from the oil fields of Assam is pumped into the Indian Oil Corporation's tanks and thereafter it is measured.

After the measp.rements are agreed to by both the parties, namely, the petitioner and the Indian Oil Corporation, the crude oil is taken delivery of by the Indian Oil Corporation on behalf of the Government of India.

The petitioner company has been filing regular sales tax returns before the Bihar Sales-tax authorities under the Bihar Sales Tax Act and was being assessed under that Act for the supply of crude oil to the refinery at Barauni treating the supply as intra-state sales.

For the period ending 31 September 1964, the petitioner company sold crude oil worth Rs. 49,26,813.06 to the refinery at Barauni and the same wa~ subjected to sales tax under the Bihar Sales Tax Act.

In the year 1966, sales tax authorities in Assam issued notice to the petitioner stating that

Sales Tax was payable on the supply of crude oil to the refinery at Barauni under the Central Sales Tax Act as according to them the sales were in the course of inter-state trade.

The petitioner contended that sales were intra-State and not subject to tax under the Central Sales Tax Act.

By the assessment order dated 31-3-1966, respondent No. 1 negatived the contention raised by the petitioner and held that by supplying crude oil to the refinery at Barauni the petitioner effected sales of oil to the Indian Oil Company and that they were sales in the course of inter-State trade and assessed the petitioner-company to pay a tax of Rs. 4,47,892.10 (Annexure J). By another order dated 31-3-1966, the petitioner was assessed to sales tax under Central Sales Tax Act to Rs. 12,23,072.90 by r-espondent No. 1 (Annexure K).

; f n these writ petitions the petitioner prays for quashing Annexures J-and K and for a mandamus directing respondents 1 to 3 not to levy

sales , tax under the Central Sales Tax Act on the sale of crude oH suppJied/by the petitioner to the refinery at Barauni.

Jn the alternati\e, the. petitioner prays for :

l . the issue of a writ, order or direction in the nature of . mandamus directing respondents 4, 5 and 6 not to levy tax under the Bihar Sales Tax Act on . the sales of crude oil made by the petitioner to the refinery at Barauni;

2. A writ, order or direction in the nature of certiorari quashing the various assessment orders passed by respondent No. 4 on the sales of crude oil made by the petitioner-company to the refinery at Barauni; and ·

SUPREMB COURT REPORTS ll975J 3 s.c.R.

3. A writ, order or direction in the nature of a mandamus

directing the respondents 4 to 6 to refund the various amounts collected as sales tax from the petitioner company.

The question for consideration in these writ petitions is whether the sales made by the petitioner m pursuance to clause 7 of the second supplemental agreement to Government of India through the agency of fndian Oil Corporation were sales in the course of inter-state trade and were therefore liable to sales tax under the Central Sales Tax Act.

Section 3 of the Central Sales Tax Act provides :

"3. A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase--

( a) occasions the movement of goods from one State to another; or

(b) is effected by a transfer of documents of title to the

goods during their movement from one State to D another."

This Court has held in a number of cases that if the movement of goods from one State to another is the result of a covenant or an incident of the Contract of Sale, then the sale is an inter-state sale.

Ste Tata Iron & Steel Co. Ltd. v. S. R. Sarkar( 1) and The State of Jarnmu & Kashmir & Ors. v. Caltex (India) Ltd.(2). Here, the crude otl w:'IS E carried from Assam through the pipelines specially constructed by the petitioner to the refinery at Barauni in Bihar and there the oil was pumped and delivered to the Indian Oil Corporation. Clause 12 of the agreement dated 14-1-1958 provides that the petitioner shall arranie for the construction of pipeline Or such other related facilities as tl1e company shall consider necessary for the transport . of crude oil to be produced by it to the refinery at Barauni. This would indicate that tile F construction of pipeline was under-taken by the petitioner in pursuance of the agreement and that that was for the specific purpose of transporting crude oil to Barauni from Assam. This can only point to the conclusion that the parties contemplated that there should be movement of goods.from the State of Assam to the State of Bihar in pursUAnce to tbe contract of sale.

Clause 7 of the 1961 agreement must needs be read with its pn~ cursory clause 12 of the 1958 agreement since all the contracting parties were well aware of their respective obligations in the transactions arismg out of the several agreements-not one of which can be left out of consideration.

Even though clause 7 of the supplemental agreement does not H etpressly provide for movement of the goods, it is clear that the parties

nvisaged the movement of crude oil in ptrrsu?:ice to the contract from

(I) [1961] I S.C.R. 379 at 391.

(2) 17 S.T.C. 61 ~

OIL INDIA LTD. v. SUPDT. OF TAXES (Mathew, J.) 801

llie State of Assam to rhe State of Bihar.

In other words, the movement of crude oil from the State of Assam to the State of Bihar was an incident of the contract of sale. No matter in which State tbc property m the goods passes, a sale which occasions "movement of goods from om: State to another is a sale in the course or inter-state trade".

The inkr-Statc mov:'!ment must be the result of a cownant express or implied in the contract of sale or an incident of the contract. It is nm ne.::cssary that the sale must precede the inter-State movement in order ll1at the sale mav be deemed to have occasioned such movement.

It is dlSv not ne, essa.ry for a sale to be deemed to have taken place in the

rnurs~ of inter-State trade or commerce, that the covenant regarding

iina-tate movement must he specified in the contract itself. [t would be enough if the movcmi::nt was m purs11ance of and incidental to rhc rnntrnc1 of sale.

See State Trading Corporation v. State of Mysore( 1).

Therefore, we think that the sales in question were sales in the course of inter State trade and that the Bihar Government had no jurisdiction to tax the sales under the Sales Tax Jaw of the State.

The petitiOner is, therefore, entitled to the alternative reliefs prayed for in the writ petit1on5. namely, that respondents 4 to 6 in each of the petitions should be enjoined not to impose saks tax under the provi>ions of the Bihar Sales Tax Act in respect of sales made in pursuance of clause 7 and that they s11ould be directed to refund to the petitioner the sales tax collected from the petitioner hy way of sales tax as the various assessment orders made by respondent Np. 4 stand quashed.

The writ petitions are allowed to the extent indicated and they are dismissed in other respcts. In the 1:in:umstances. we make no order as to costs.

P.H.P.

(IJ 14 S.T.C. 188. 5-5t4SCl/75

Petitions allowed in part.

OIL INDIA LTD

THE SUPERINTENDENT OF TAXES & OTHERS

March 3, 1975

K. K. MATHEW

P. K. GOSWAMI, JJ.

Central Sales Tax Act

Government' of India

Burma Oil Company Limited

Assam Oil Company Limited

Assam Oil Com pany

Government of Jndia

India

clause

20

Government of India

Indian Refineries Limited'li Barauni

Assam Oil Company

clause 7

Bihar

Assam

Indian Oil Corporation

Barauni

Section 3

Clause 12

Baraui

Bihar Government

Bihar Sales Tax Authorities

Bihar Sales Tax Act

Article 32

L. N. Sinha

K. K. Jain

Bishamber Lal

S. K. Gupta

D. Mukherjee

S. N. Choudhury

L. M. Singhvi

U. P. Singh

MATHEW

Burmah Oil Company Ltd.

Assam Oil Company Ltd.

Clause 7

clause 2

Indian Refineries Limited

clause 7

Barauni Refinery

31 September 1964

Central Sales Tax Act

Central Sales Tax Act

Indian Oil Company

Central Sales Tax Act

Central Sales Tax Act

clause 7

Central Sales Tax Act

Section 3

Central Sales Tax Act

Clause 12

Clause 7

clause 12

clause 7

clause 7


80 2

SUPERINTENDENT AND REMEMBRANCER OF LEGAL

. AFFAIRS, WEST BENGAL v.

GIRISH KUMAR NA V ALAKHA & ORS.

March 3, 1975

[A. N. RAY, CJ .. K. K. MATHEW, v. R. KRISHNA IYER AND

A. C. GUPTA, JJ.]

Constitution oi India, 1950, Art. 14-Purpose of dzaUenged classification in doubt-Concept of 'purpose' and 'similar situations', when can be resorted to-Legislature if can be given benefit of doubt abo'ut its purpose.

Constitution of India, 1950, Art. 14-Under-inclusive classification. meaning C of-Under-inclusive classification, when permissible.

' Foreign Exchang.~ Regulation Act, 1947, Section 23-Two difjer!'llf prvcedures for dealing with persons cdntra1•eni11g the Act-Benefit of inquiry by Director of Enforcement not available to persons dealt with under s. 23 (I A)-- Classification, if unreasonable. .

The respondents were tried for having committed offences under s. 4 ( 3), 20(3) and 22 of the Foreign Exchange Regulation Act, 1947 read with s. 120-11

of 1he Indian Penal Code and s. 23 of the Act. The Court discharged th1~ respondents in view of the decision of the H:gh Court of Calcutta in M, I s Serlljuddin & Co. and Ors. v. Union of India and Ors. Civil Rules Nos. 2183 (W) of 1966 and cases Nos. 1998 and 1999 of 1963 decided on 16-9-1971, holding that s. 23(Al) was violative of Art. 14 of the Constitution. The appellaii.t filed :a revision pet.ition against the order, before the High Court. The High Court conc; urred with the decision of the trial Court and dismissed the revision. This appc:al, by special Jeave, is against that order dismissing the revision,

It was contended for the respondents that s. 23 pro¥ides for two different procedures for deali11g with contravention of the provisions of the Act. That is tc> say, irersons who have contravened the provisions specified in s. 23 (I) (a) and are found guilty by the Director of Enforcement need not face prosecution in a criminal court if the Director is of opinion that the penalty he is empowered to impose would be adquate punishment, whereas, the peraons aJleged to contravene the other provisions of the Act have necessarily to face prose cution in criminal court without being given the benefit of an inquiry by the Din:ctor of Enforcement and the opportunity to the delinquents to convince him that imposition of penalty by him would be adequate punishment even if they are found guilty. The classification made in s. 23 (1) is under-inclusive and is, therefore, unreasonable.

Allowing 1he appeal,

HELD : (i) When th1~ purpose of a challenged classification is in doubt,

the courts attribute to the classification the purpose thought to be most pro- G hable. Instead of asking what purpose or purposes the statute and other materials reflect, the court may ask what constitutionally permissible objective this statute and other rele1<ant materials could plauibly be construed to reflect.

The latter approach is the proper on~ in economic regulation cases. The decisions dealing with economic regulation indicate that courts have used the concept of 'purpose' and 'similar situations' in a manner which give consider abte kway to the legislature. This approach of judicial restraint and presumption of constitutionality requires that the legislature is given the benefit H of doubt about its pupose. [805H-806C]

(ii) Often times the courts hold that unc1er0inclusion does not deny the equal protection of Jaws under Article 14. In str1.ct theory, this involves an

abandonment of the principle that classification must include all who are similarly situated with respect to the purpose'. This under-inC!usion is often explained by sa}'ing thav the legislature, is free to remedy parts of a mischief or to recognize degrees of evil ana strike at the harm where it thinks it most acute. There are two main considerations to justify an under-inclusive classification. First, administrative necessity.

Second, the legislature might not be fully convinced that the particular policy which it adopts will be fully succesf'ul or wise. Thus to demand application of the policy to all whom it

might logically encompass would restrict the opportunity of a state to make experiment. These techniques would shew that some sacrifice of absolute equality may be required in order that the legal system may preserve the flcxib'..lity to evolve new solutions to social and economic problems. [806E; H-

807B]

Missouri K. and T. Rly. v. May, (1903) 194 U.S. 267 at p. 269and Gujarat v. Ambicao Mills A.I.R. 1974 S.C. 1~00 referred to.

(iii) The experience of the Government was that persons contravening .the provisions of the Act specified in s. 23 (1) (a) invariably escaped without punishment : firstly because, successful prosecution of these offences in many Cases was not possible for want of legal evidence; secondly because, the criminal courts were not equipped with the training, expertize and experience necessary to deal with the intricate .and ingenious methods adop•ted by the persons contravening them. The Government, therefore, thought that imposi_tion of penalty by deparlml!ntal adjudication would prove a more effective means of checking \hese types of foreign-exchange offences as against the previous system of prosecution of all offences on the basis of the strict standard of proof required for criminal prosecution-which proof was, by and large, so much within the special knowledge of the offender and so much out of the reach of th~ department. [808D-FJ

The basis of classification was that in cases where there was likelihood of

gtting sufficientfy unimpeachable evidence as, for instance. in cases involving contravention of sections 14, 13(2), 15, 18 etc., where the Reserve Bank of Jndia as a specialized agency comes into the picture and be in possession of relevant materials, those cases were left to be dealt with under s. 23(1:\) by criminal courts. The classification made in s. 23(1A) is, therefore, not discriminatory. [808H;-809£.]

CRIMIN.AL APPELLATE JURISDICTION : Criminal Appeal No. 203 of 1973.

A'Ppeal by special leave from the Judgment and Order 'dated the 14th March, 1973 of the Calcutta High Court in Criminal Revision No .. 613 of 1972.

L. N. Sinha, Solicitor-General, G. L. Sanghi and Girish Chandra for the Appellant.

A. K. Sen, Mrs. Liela Seth and U. K. Khaitan for the Respondents. 1he Judgment of the Court was delivered by ·

MATHEW, J.

The respondents were tried before the Presidency Magistrate, 11th Court for' having committed offences un(ier sections 4(3), 20(3) and 22 of the Foreign Exchange Regulation Act, 1947

(he<einafter called 'the A.ct') read with s. 120-B of the Indian Penal Code and s. 23 of the Act. The Court discharged the respondents in view of the decision of the High Court of Calcutta in M/s. Serajuddin

& Co. and Others v. Union of India and Others(1) holding that s.

.{I) Civil Rules Nos. 2183 (W), 2184 (W) of 1966 and cases Nos. 1998 and 1999 of 1963 decided on 16-9-1971.

23 (1 A) was violative of Article 14 of the Constitution. The appeHant filed a revision petition against the order, before the High. Co.urt. The Court concurred with the decision of the trial Court and d1sm1ssed the

reviion. This appeal, by special leave, is against that order.

The question fo1 consideration is whether s. 23 (lA) of the Act violates Article 14 of the Constitution.

Section 23 ( l) as it originally stood in the Act provided that whocwr conLravenes any of the provisions of the Act or of any rule, direction or order ma<l2 thereunder shaU be punishable with imp1iwnm.;11t for a term which may extend to two years or with fine or with both, and any Court trying any such contravention may, if it thinks fit and in addition to any senteece which it may impose for such contravention, direct that any currency, security, gold or silver or goods or other property in respect of which the contravention has taken place shall b~ confiscated. Section 23 was amended in 1950 and 1952. We an! not concerned with those amendments.

In 1957, the section was further amentied by the Foreign Exchange Regulation (Amendment) Act, 1957 (Act No. 39 of 1957).

This amendment provided for depart-· mental adjudication in respect of contravention of certain provisions of the Act.

The section as amended read as under :

"23 (1) If any person contravenes the provisions of s. 4, s. 5, s. 9 or sub-section (2) of s. 12 or of any rule, direction or order made thereunder, he shall-

( a) be liable to such penalty not excec'ding three times the value of the foreign exchange in respect of which the contravention has taken place, or five thousand rupees, whichever is more, as may be adjudged by the Director of Enforcement in the manner hereinafter provided or,

(b) upon conviction by a Court, be punishable with imprisonment for a term which may extend to two years, or with fine or with 'both, (lA) Whoever contravenes-

(a)

(b)

any of the provisions of this Act or of any ruk direction. or order made thereunder, other than thos~ referred to in sub-section (1) of this section ands. 19 shall, upon conviction by a ceurt, be punishable with imprisonment for a term which may extend to two years, or with fine or with both.

any ir.ection or order made under s. 19 shall, upon conv1ct1on by a Court, be punishable with fine which may extend to two thou.sand rupees."

By s. 23D it was provided that the Director of Enforcement shall for the purpose of adjudicating under clause (a) of sub-section (1) of s. 23

hold an inquiry after notice to the person proceeded against and impo; c a penalty, but if at any stage of the. inquiry he is of opinion that having regard to the circumstances of the case, the penalty he is empowered Ill impose would not be adequate, he shall, instead of imposing a iJenalty. file a complaint in writing to the Court. ·

The argument of the respondents was that s. 23 provides for twu different procedures for dealing with contravention of the proviiuns of the Act; that while persons contravening the provisions of th<) Act specllied in s. 23 (l) (a) have to be dealt with by the Director of Enforcement in the first inst':lnce and need face trial in criminal court only if he is of opin.ion that having regard to circumstanes of the case the penalty he is empowered to impose would not be adequate, the persons contravening the other provisions of the Act are liable to be prosecuted in the first instance in criminal court without an injury by the D:rcLt.1r of Fnforcemcnt which would give them the possibility to cscap~ prosecution in a criminal court.

In other words the argument was that p.?rsons who have contravened the provisions specified in s. 23 (1 )(a) and arc tound guilty by the Director of Enforcement need not face prosccutkm in a criminal court if the Director is of opinion that the penalty he i; empowered to impose would be adequate punishment, whereas, the persuns alleged to contravene the other provisions of the Act have necessarily to face prosecutioQ in criminal court without being given the benefit of an inquiry by the Director of Enforcement and the opportumty to the delinque.nts to convince him that imposition of penalty by him would be adequate punishment even if they are found guilty.

The question, therefore, is whether persons contravening the provisions specified in s. 23 (I) (a) are similarly situated with persons con-

Lravenin~ the other provisions of the Act with respei; t to the purpose or object of the Act or whether by reason of the nature of the offences resulting from the contravention of the provisions pecified in s. 23 (1 )-

(a) the persons contravening them form a class by themselves distinct from the persons contravening the other provisions of the Acf and therefore the legislative judgment to deal with them under a different procedurr was justified with reference to the ultimate purp9se of the Ad .

l'he preamble provides the key to the general purpose of the Act.

That purpose is the regulation of certain payments, dealings in foreign exchange and securities and the import and export of currency and bullion in the economic and financial interest of India.

The general purpose or ob, iect of the Act given in the preamble may not show the specific purpose of the classification made ins. 23(1) (a) ands. 23(1A).

The Court has therefore to ascribe a purpose to the statutory classifica" tion and coordinate the purpose with the more general purpose of the A.t and with other relevant Acts and public policies.

For achieving this the Court may not only consider the language of s. 23 but also other public knowlede abQut the evil sought to be remedied, the prior law, the statement of the purpose of the change in the prior law and the interna 1 legislative history. When the purpose of a challenged classifi- \.1ltion is in doubt, the courts attribute to the classification the purpose

thought to be most probable. Instead of asking what purpose, or purposes the statute and other materials reflect, the court may a~:k what 1:onstitutionally permissible objective this statute and other . relevant materials i.:ould plausibly be construed to reflect.

The latter aipp-roach is the proper one in economic regulation cases.

The decisions dealing with economic regulation indicate that courts have used the concept of purpose' and 'similar situations' in a manner which give considerable leeway to the legislature.

This approach of juicial restraint and presumption of constitutionality requires that the legislature is given the benefit of doubt about its purpose. How far a court will go in attribut-· ing a purpose which though perhaps not the most probable is at least concdvable and which would allow the classification to stand depends to a certain extent upon its imag!nanve power and its devotion to the theory of judicial restramt.

At this stage, it is necessary to sharpen the focus to understand the real grievance of the respondents.

As already indicated, their submission is that since they are similarly situated with persons contravening the provisions of the Act specified in s. 23, (1) (a), they should have been included in that class and dealt with by the Director Enforcement in the first instance so that they might also have the benefit of inquiry by him with the possible advantage of escaping with penalty even if they are found guilty of the offences. Their grievance therefore is that the classification made in s. 23 (1) is under-inclusive and is, therefore, unreasonable.

Often times the courts hold that under-inclusion does not de111iy the equal protection of laws under Article 14. In strict theory, this jnvolves an abandonment of the principle that classification must include: all who are similarly situated with respect to the purpose. . This; under inclusion is .often explained by saying that the legislature is free to remedy parts of a mischief or to recognize degrees of evil and strike at the harm where it thinks it m0st acute.

The Courts have recognised the very real difficulties under which legislatures operate-difficulties arising out of both the nature of the legislative process and of the society 'which legislation attempts. perennially to re-shapeand they have refused to strike down indis- . criminately all legislation embodying classificatory inequality here

under consideratio•a .. _ Mr. Justice Holmes, in urging tolerance of under-inclusive classifications, stated that such legislation should not be disturbed by the Court unless it can clearly see that there is no fair reason for the law which would not require with equal forc:e its extension to those whom it leaves untouched.

See Missouri K. and T. Rly. v. May(1i).

What, then, are the fair reasons for non-extensi0n ? What should a court do when it is faced with a law making an under-inclusive classification in areas relating to economic and tax matters?

'TI1ere are two main considerations to justify an under-inclusive

clssification. First, administrative necessity.

Serond, the legislature H might not be fully convinced tnat the particular policy which it adopts /

(I) (1903) 193 U.S. 267 at p. 269.

!.UPDT. LEGAL AFFAIRS v. GIRISH (Mathew,!.) 807

will be fully successful or wise.

Thus to demand application of the policy to all whom it might logically encompass would restrict the opportunity of a state to make experiment. These techniques would show that some sacrifice of absolute equality may be required in order that the legal system may preserve the flexibility to evolve new solutions to social and economic poblems. The gradual and piece-meal change is often regarded as desirable and legitimate th0ugh in principle it is achieved at the cost of some equality. It would seem that in fiscal and regulatory matters the court not only entertains a greater presumption of constitutionality but also places the burden on the party challenging its validity to show that it has nn reasonable basis for making the classification. This was the approach of this Court in State of Gujarat v. Ar.ibica- Mills('). The Court said:

"The piecemeal approach to a general problem permitted by under-inclusive classifications, appears justified when it is considered that legislative dealing with such prohlems is usually an experimental matter. It is impossible to tell how successful a particular appr0ach may be, what dislocations might occur, what evasions might develop, what new evils might be generated in the attempt. Administrative expedients must be forged and tested.

Legislators, recognizing these factors, may wish to proceed cautiously, and courts must allpw them to do so (37 California Rev. 341)."

The background of the amendment of s. 23 of the Act will be relevant for appreciating the reason for making the distinction between the two classes of contraventions.

From April, 1949 to DecenJber, 1952, the Rese.rve Bank was handling all cases including those relating to unauthorized import, e'xport of gold and silver.

The Bank had an enforcement section.

In 1952, the Central Government authorised the Customs and Central Excise officers to investigate and prosecute cases if import or export of gold and silver in contravention of the provisions relating to them. In May, 1956, the Central Government took over the work relating to enforcement, i.e., the residuary work done by tO.e Reserve Bank other than those entrusted to Customs Department. . A Directorate of Enforcement was set up in May, 1956 with the , idea that there should be a specialized agency to deal with specified categories of offences.

Between April, 1949 and April 1956, when the duty of enforcement was with the Reserve Bank, the Bank had completed investigation in about 200 cases but prosecutions could be launched in respect of 66 cases only and out of these 60 cases ended in convictions.

No prosecution could be launched in respect of other cases in view of the fact that evidence legally necessary to secure conviction in a court was not forthcoming.

When the work was transferred to the Enforcement Directorate of the Ministry

of Finance, its experience was also similar.

From May, 1956 till about 1957, the Directorate had handled 832 cases. But prosecutions could be launched only in respect of 32 cases. This w'as due to . the fact that legal evidence necessary for establishing the cases beyond

(I) A.LR. 1974 S.C. 1300.

SUPREME COURT R.EPOR7S [19751 3 s.c.tt

doubt in a court of law was not forthcoming partly because it was

iifficult to secure cooperation of the foreign collaborators in getting the incriminating documents against the suspects and partly bemuse the banks in fJreign countries were under no obligation to furnish statements of accounts niaintained by the suspects in them. .Faced with this diflicuhy, the Government had to consider other ways of enforcing the provisions of the Act more effectively. The Government, after considering the pros and cons decided t'J provide for departmental enquiry and adjudication of contravention or certain provisions of the Act by an authority specially constituted for that purpose.

In the statement of Objects and ReasJns to the Foreign ExchangG Regulation Bill, 1957, it was stated ;

" .... The most important of _these amendments is th-: one providing for departmental inquiry and adjudication of torc1gn ex.change offences by an authority constituted by Government on the Sea Customs Act."

In short, the reason for the amendments made in 1957 was the experience gained in the working of the Act till then. That experience was that persons contravening the provision of the Act specified in s. 23 (1) (a) invariably escaped without punishment : firstly because, successful pros•ecution of these 0ffences in many cases was not possibk for want of legal evidence; secondly because, the criminal cm1rts were not equipped with the training, expertize and experknce necessary to deal . with the intricate and ingenious methods adopt<:d by the persons contravenfog them. ..

The Government therefore thought that imposition of penalr'y by departmental adjudicati0n would prove a more effective means of checking these types of foreign-exchange offences as against the previous system of prosecution of all offences on the basis of the strict standard of pro'Jf required for criminal prosection-which proof was by and large, si::i much within the special knowledge of the offender and so much out of the reach of the department. It may be noted that after the amendment in 1957, further ljmendments of s. 23 were made in 1964 whereby sections 10, 17, I 8(A) and 18(B) were also brought within the purview of s. 23(l)(a). The introduction of these sc:ctions within s. 23(1)(a) was _the result of further experie'lce gained during the succeeding years. It was only on the basis of the experience gained by the working of the Act that a decision could be taken abot the classification of offences in respect c; which a ti •. J by a cJiurt

would be expedient and those in respect of which summary pro1; edure visualized bys. 23(1) (a) might be necessary.

Generally speaking, therefure, the basis of the classification was that in cases where there was likelihood of getting sufficiently unim peachable evidence as, for instance, in cases involving contravention of sections 14, 13(2), 15 18, etc., where the Reserve Bank of India as a specialized agency comes into the picture and be in possession of relevant materials, those cases were left to be dealt with und1:r s. 23(1A) by criminal courts.

SUPDT. LEGAL AFFAIRS v. '..JIRISH (Mathew, J.) 8 0 9

In paragraph 117 of the affidavit of Shri M. L. Sharma, Under Secretary, inistry of Finance, Department of Economic Affairs, filed with te permission of this Court, the reasons why the legislature :; cb:ted th~ contravention of certain provisions of the Act for being dc:.ilt with 'by thr criminal courts in the first instance have been fully stated.

According to that al1ldavit, broadly speaking, the classes of offences whicl1 iLvc been brought under sections 23(1) and 23A arc whfit may be tbrmccl as 'primary' offences and those brought under o. 'iJ (l A) may be termed as 'secondary' o!Iences.

Primary offences ale those which need detection and action at executive or field level by the concerned specialized agency. There is greater need f'iir taing deterrent. measures in rcspet of these offences. It is nota question of the scricmsness or gravity of the offences.

Both pr}-; nary and secondary oences may be grave or serious and involve large an'iounts.

Hut the difference is th'at primary offences are distin, guished bv the volume and areas of incidence and may need greater deterrence which sometimes may lie in large pecuniary penalty and sometimes in criminal punishment by w, ay of imprisonment. A delinquent who has become an insolvent may not feel any deterrent effect however large the p::cuniary penalty may be and such a cae may call for a sentence of inm; isonment.

In respect of secondary offences there are already built-in institutional checks laid down by the Reserve Bank Jr other Government agencies.

As indicated above, where contraventions <lo take place in regard toother sections, there would normally e adequate or reasonable documentary evidence, etc., and these will facilitate prosecution in courts of Jaw. -

We do not think that there is any mrit in the contention that.the classification made in s.23(1 A) is discriminatory.

Even according to the respondents, it is the classification made in s.23(1 )(a) which is under inclusive and is, therefore, unreasonable. If this Court were to declare tht the classification made in s. 23 (1) (a) is under inclusive and therefore unreasonable, the result would be that contraventions of the provisions specified ins. 23(l)(a) would also fall withins. 23(1A) and would have to be dealt with by the Criminal Court-a consummation which the respondents devotedly want to avoid.

We do not think that• the High Court was right in holdin; i that s. 23(1A) was bad. We set aide the order of the igh Comt and allow the appeal. ·

A;1iJt'ii! allowed.

V.M.K

.;.

SUPERINTENDENT AND REMEMBRANCER OF LEGAL AFFAIRS, WEST BENGAL

GIRISH KUMAR NA V ALAKHA & ORS

A. N. RAY, CJ

K. K. MATHEW

v. R. KRISHNA IYER

A. C. GUPTA, JJ.

Art. 14

Constitution of India

Art. 14

Regulation Act, 1947

Section 23

s. 23

s. 4

Foreign Exchange Regulation Act, 1947

s. 120

Indian Penal Code

s. 23

s. 23(Al)

Art. 14

s. 23

s. 23

s. 23

Article 14

S. 267

s. 23

sections 14, 13(2), 15, 18

Reserve Bank of Jndia

s. 23(1:\)

s. 23(1A)

CRIMIN.AL APPELLATE JURISDICTION

L. N. Sinha

G. L. Sanghi

Girish Chandra

A. K. Sen

Liela Seth

U. K. Khaitan

MATHEW

sections 4(3), 20(3) and 22

Foreign Exchange Regulation Act, 1947

s. 120

Indian Penal Code

s. 23

High Court of Calcutta

Article 14

s. 23

Article 14

Section 23

Section 23

s. 4

s. 5

s. 9

s. 12

s. 19

s. 23D

s. 23

s. 23

s. 23

s. 23

s. 23

s. 23

India

s. 23

s. 23

s. 23

Article 14

Holmes

S. 267

s. 23

Central Government

Reserve Bank

Government on the Sea Customs Act

s. 23

s. 23

sections 10, 17

s. 23(l)(a)

s. 23(1)(a)

sections 14, 13(2), 15

Reserve Bank of India

s. 23(1A)

M. L. Sharma

sections 23(1) and 23A

s.23(1 A)

s.23(1 )(a)

s. 23

s. 23(1A)