I '

• '. 284

STATE OF GUJARAT & ANR . ..

v. .. ·. PATEL CHATURBHAl NARSIBHAI & ORS.

Jamiar)' 21, 1975

 R C J H R KHANNA AND P. K. OoswAMr, JJ.]

[A. N.

AY, • • , • • . . , .

A mrmlrd bv Lm!tl AcqulsiltOII (Gujarat Um{icario" B Land Acqmsft1on ct, as3a t>ctions '39, 40 ami 41 and Land Acquisition o11d .Amc~1dmem) Ac!l9f~1;1 1.! 4-Acqtdsitloll of la11d for a company-£11quiry (Con.lpmw:s) .Rctlt>s, 196·1 pp/i erioll by compma• ro Golemment for acquisition by Collector m uspccl 0 a t b 1 d. . of land-Land owtze-r, if tmitfctl to " lear • . . .

1 1960 there was a r.; qucst by the responJ-.:nt }aroda Industrial- De:•elopmcnt

ralio~ (the compnny) ro the State for ncqumng Jan~ _f9r expansaon of th~ Corp I c t r the romp"'nv Tht: Special Lnnd AcqUJsltton Officer, Baroda, JndusltJa .r.:.stn c o '-' " 1 • h 1 d d l C ex ressed the opinion that th~: acquiition w; tS ncce~ .. ary ns t e an .was a JO nmg

p . . d 1 d r the Cump•tn\' :mJ th It \\'US the only lund nvntlable. There the occuple . aynbyotiJ~ Stat' (j;, crn1 .. nt mdcr Rule 4 of the Lnnd Acqui-; ition wa5 an enqu1r 40 • • ~; • h 'fi t' ·•"t d 4 (Companies) Rules. The c:nquiry \\Wi h::1d pnor to t e nou ca ton u .. e .March, 1961.

There was an asret:ment between the State Govrnment and the Company.

Tbi5 ugrcement was aher the Swre Go\'crnment had g1ven consent to the ocqui, i

lion. lhe notifiication under s. 4 ws. however, cnncellcd on 28 September, 19$6.

D On 29 5-ptembcr, J)l56, thc:re was n fresh notification under s. 4 of the Act.

Subsequent to t1tat nolltic::aion there was nn enqt1iry under s. S~A of the Act. The

respondent, \iz.. the ownc:r of th.: lunJ Jiled oh)tctinn~. There wn.s n report on J l Decemb.!r, 1968 on that enquir~· liiHkr ~. 5-A of the Act thut the land sought to b: acquired was sit4b:(' tu: th~ comp; wy and w::e<J not in excess o( its require men~ •

On January lit ! %9 there Wil"i ~~ nolifkution unJer ~. 6 of the t\cl. Along ?tith the notifle1tion unJt:r s. 6 ot :he Act an asrcement dated 13 January. 1969 E. . f?etween the cornplny anJ the Sto.t~ n~ conlemplatc:J in s. 41 of th: Act wa~ putr

}shed on 18 Junuary, l')fj~ .

Tit.: ,·<!sp.:mt.lcnt land owner challenB!!d the notifications undur ss. 4 :tnd 6 a( the Ac~. The Hih Courr ullowed 1he petition.

Thi~ appe:tl has b;:en prdencJ by c;:rtJ{kate {!ra n!d by the High Court.

On behalf of the Sl;.!e it wa~ co t , j •.I 11 h holding that the notHkMico ud~!r •n e6n cf :1t t e i1gh Colt; l wns wrong in

- The enquiry under r. 4 ;~ n 1 : . _ . 0 t , Act '"M bad for th~e reason,. not t'tl d b h . . n lh sll.llllHithe enqutry nd the owner of rh .. l'lnJ is F en 1 e lo : l!ard m th 't •nqir\' s, d h . . " • Act is subjecthe und h t'orm~, f "0 th · h , co~ I! sarnf<•C!!on u ndcr ~. 4 of he coorJuctl!d Ulllcr r 4 rhiru th n

c. l\t~ 0 th•!. rcpun puruant to an enqmry of the Comj):my. u'nd: lht"rcfoe. : enqth•rr un.:1c.r r. 4 is to dtcrmine thl! bonnlide& fleard. Fourth. ofh:r the rnc 11

1r;·:'c eq rr~ the o~ nr ot the lund need not be not inue n notifkation under ~ ~! r. . 1o; m:tJ.i! th: Govrnmt:nt mJy or may person concerned , jz. th~ 0 , n~ f Flflh. If o ~Ot1ficul1on under s. 4 i~ isued the of le ,.t.ct to mal>e bjcctio~~. r Fi ~f .JuhJ Will l!:t Hn Oflf'or!Un!tr unJc~ S: 5-A c:nquuy.fn uerci-, c or execu!ive ow fli.l > • t. c enqt.ury. undc, or r. 4 .t'i a preflmm:uy !Ill opmron for or :!i<airnc, t the i .. u; n er. f TtJsli~'1Q !-IIrv ''for c<JIII!ctm: datn to form G mg d:ua the que1tion of \'iol;, tin" iJ g 0 . 'Lott ~~.af10n. In uh cnqurry for collccl• • ny riG•th of th-: land owner doe' not arise.

Rl!jecting the cont.:nlion• und di. n ; .· • a.

HEJ 0 Th ' 1 '"tng t, e llflf'ltul ; • : e enquiry ll!''ll..lcr r 4 h • iu~~:t; 1~;~0~·:'crs t~; r 't.! Co; nna~ .. ,?h'~~ ~~ ... ~}~~

1fo11ctor h ro ubn1ir a rrort . price nod tuh k 0"1 y,.h ' .t 1; . per'lon~ inh:r~~~~d ~.;• •fi!roson:Jbl~ C!fTort1 to Bet :>uch ot the land h' h o_r OJ\C: .ule:J. Th"' per'lon er~ 0 on rnrmnt of ra'ionablc: h:111 to how h 'f 11 a• rroo\ed lo b: u.~:quirc-d. , ThleCtcrJ th.:rein ttr~ the ow'1r!l II ow f b le c:omn; ny made neoti&t' eompnny n~ .such nn enamry orrs 0 t e lnd are .. therdort. tOiitltd 10 10" .. ' wirh the owners ot the Jand. The P P se of protnt or d•rro\'ing the rcanub? .. heard ur such an enquiry tor the

e effort'S of the company to get such

land by neaotiation. The contention on behalf of the Stale that the owners of the land wil aet an opportunity when an enquiry is made under s. 5-A of the Act is equally unsound. S. 17 of the Act provides that the appropriate Government may direct that the provjsions'of s. 5-A shall not apply, and if it does so direct a declaration may be made under s. 6 at any time after the publication of the notification under s. 4 of the Act. Therefore the enquiry under s. 5-A may not be held.

[287 H-288] · ·

The nature of objections under rules framed in pursuance of the power~ conferred by s. 55 of the Act shows that the matters which are to be enquired into under r. 4, and in particular, that the Company made all efforts to get such land by negotiation with the persons interested thereon on payment of price and such efforts failed is not one of the objections which can be preferred in an enquiry ·

under s. 5-A. It is true that in the present case there was an enquiry under s. S-A of the Act but the enquiry was also before the agreement between the State and the Company under s. 41 of th~ Act and without any enquiry under s. 40 of the Act to enable the Government to give its consent. In view of the Gujarat Amendment Act, 1963, deleting the words "either of the report of the Collector under s.

S-A of sub-s. (2) or" in sections 40 and 41 of the Act, the enquiry under s. 5-A is not an enquiry within the meaning of s. 40 of the Act. [288 E-Gt 28!> B-F]

R. L. Arora v. State of U.P. [1962] 2 Supp. S.C.R. 149, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1508 of 1971.

From the Judgment and Order dated the 30th March 1971, of the Gujarat High Court in Spl. C. Appln. No. 622 of 1969.

R. H. Dhebar and M. N. Shroff, fr the appellants.

(. N. Shroff, for respondent Nos. 1R3.

M. C. Bhandare and Urmila Sirur, for respondent no. 4.

The Judgment of the Court was delivered by

R~Y, C.J. This appeal by certificate raises the question whether the notifications dated 29 September. 1965 and 18 January, 196? issued under sections 4 and 6 respectively of the Land Acquisition Act hereinafter referred to as the Act are lawful.

In 1960 there was a request by the respondent Baroda Indtrial ' Development Corporation hereinafter referred to as the Company to the State for acquiring land for expansion of the Industrial Estate of the Company. The Special Land Acquisition Officer, Baroda e:t pressed the opinion that the acquisition \Yas necessary as the land was

adjoining the occupied land of the Company and that was the only land available.

On 4 MarchJ 1961 there was a notification under section 4 of the Act. On 22 August, 1961 there was an agreement between the State Government and the Company in accordance with the provisions contained in section 41 of the Act.

It may be stated here that the decision of this Court in R. L .

Arora v. State of U.P.(li) was that in case of acquisition for a Com pany, the Government could give its C9nsent if the acquisition was

nee<Jed for the construction of some work which was likely to prove useful to the public.

(1) [1962] 2 Supp. S.C.R. 149.

4-423SCI!75

SUPREME COURT R.EI'O.RTS [1975] 3 s.c.l.

In 1962 Section 40 of the Act was amended to the effect tlai the Government could not give consent to the acquisition of land for a company unless the Government was satisfied by holding au enquiry

as fully mentioned in the section.

In the context of the decision of this' Court in Arora's case (supra) the Central Government in 1963 in exercise of powers conferred by section 55 of the Act made rules for the guidance of the State Governments known as the Land Acquisition (Companies) Rules, 1963 hereinafter referr~ to as the Companies Acquisition Rules.

Rule 4 of the Companies Acquisition Rules provids that wheJtJ.ever a Company makes an application to the appropriate Government for acquisition of any land, that Goverent shall .direct the Collector to submit a report on the matters mentioned therem. Those matters are ( 1) that the Q:>mpany has made its best endeavour to find out lands in the locality suitable for the purpose of the acquisition; (2) that the company has made all reasonable efforts to get such lands by negotiation with the persons interested therein on payment of reasonable price and such efforts have failed; (3) that the land proposed to be acquired is suitable for the purpose; ( 4) that the area of land, pro, posed to be acquired is not excessive; ( 5) that the Company is in a position to utilise the land expeditiously; and ( 6) where the land proposed to be acquired is good agricultural land, that no alternative suitable site can be found so as to avoid acquisition of that land.

Sub-rule (2) of Rule 4 aforesaid further provides that the Collector shall, after giving the Company a reasonable opportunity to make any representation in this behalf, bold an enquiry into the matters referred to above. The Collector under sub-rule (3) of Rule 4 aforesaid shall submit a nport to the appropriate Government. Sub-rule ( 4) of Rule 4 aforesaid provides that no declaration shall be made by the appropriate Government under section 6 of the Act unless ( i) the appropriate Government has consulted the committee and has considered the report under this Rule and the report, if any, submitted under Section 5A of the Act; and (li) the agreement under section 41 of the Act has been executed by the Company.

. Gujarat Act 20 of 1965 came into effect on 9 July, 1965. By section 18 of the Gujarat Act called the Land Acquisition (Gujarat Uni- 1kation and Amendment) Act, section 39 of the Act was amended.

he result o~ the amenGmnt of. section 39 of the Act is that the provisiOns of sect10n.s 4 to 3 7 mcluslVe of the Act cannot be put into force unless the pr1~VIous consent of .the appropriate Government is obtained :.md unless tbe Company has executed an agreement mentioned in sec tions foll0wing section 39 of the Act.

In the presnt case there was an enquiry by the State Government

uner Rule 4 of .the Land Acquisition (Companies) Rules. The enq.mry was held prror to the notification dated 4 March, 1961 under'sectlon 4 of the Act. On 22 August, 1961 there was an agreement between the State Government and the Company. This agreement was after the State Government had given consent to the acquisition.

4 November, 1961. the notification under section 4 of the Act was corrected with regard. to the survey numbers. The notification under section 4 of the Act dated 4 March/4 November, 1961 was however cancelled on 28 September, 1965.

On 29 September, 1965 there was a fresh notification under sec-· tion 4 of the Act. Subsequent to that notification there was an enquiry under section 5-A of the Act. The respondent, viz., the owner of the land filed objections. There was a report on 11 December, 1968 on that enquiry under section 5-A of the Act that the land sought to be

acquird was suitable for the company and was nor in excess of the mquirements.

On 18 January, 1969 there was a notification under section 6 of the Act. Along with the notification under section 6 of the Act an agreement dated 13 January 1969 between the company and the State as contemplated in section 41 of the Act was published on 18 J nnu:-ry

1969. .

The respondent land owner challenged the notification dated 29 September, 1965 under section 4 of the Act as well as 1he notification under section 6 of the Act dated 18 January, 1969. The High Court accepted the contention of the re.spondet that the enquiry cotemplat cd under rule 4 of the Land Acquisition (Companies) Rules had not

been held lawfully, and, therefore, the notification under section 6 of the Act was illegal. The reason given by the High Court was that the enquiry under rule 4 contemplated giving opportunity to the owner of the land to make effective representation against the proposed acquisition. The High Court held that the enquiry under rule 4 was bad because no opportunity had been given to the owners of the land.

On behalf of the State it was contended that the High Court was wrong in holding that the notification under section 6 of the Act was bad br these reasons. The enquiry under rule 4 is an administrative enquiry and the owner of the land is not entitled to be heard in that enquiry. Second, the satisfaction under section 4 of the Act is subjective and is formed on the basis of the report pursuant to an enquiry conducted under rule 4. Third, the enquiry under rule 4 is to deter- . mine the bonafides of the Company, and, therefore, in such enquiry the owner of the land need not be heard. Fourth, after the report under rule 4 is made the Government may or may not issue a notification under section 4. Fifth, if a notification under section 4 is issued the person concerned viz, the owner of the land will get an opportunity under section 5-A of the Act to make objection. Finally, the enquiry under Rule 4 is a preliminary enquiry in exercise of executive power.

This enquiry is for collecting data to form an opinion for or against the issuing of notification. In such enquiry for collecting data the qtrcstion of violating any rights of the land owner does not arise.

The contention of the State that the enquiry under rule 4 is administrative and that the owner of the land is not entitled to be given an opportunity to be heard at the enquiry cannot be accepted for these reasons. The enquiry under rule 4 shows that the Collector is to submit a rctport among other matters that the Company bas made all

SUPREME COURT REPORTS [1975.1 3 s.c.R.

reasonable efforts to get such lands by negotiation with the persons interested therein on payment of reasonable price and such efforts have failed. The persons iterested therein are the owners of the lap.d which is proposed to be acquired. The Company at such an enquiry has to show that the company made negotiations with the owners of the land. The ow11ers of the land are, therefore, entitled to be heard at such an enquiry for the purpose of proving or disproving the reasonable efforts of the company to get suc4 land by negotiation. The contention on behalf of the State that the owners of the land will get an opportunity when an <mquiry is mde under section S~A of the Act is equally unsound. Section 17 of the Act provides that the appmpriate Government may direct that the provisions of section 5-A shall not apply, and if it does so direct a declaration may be made. under section 6 at any time after the publication of the notification under section 4 of the Act. Therefore, the enquiry under section 5~A may not he held.

There is another reason why the enquiry under rule 4 should be in the presence oi the. owners of the land, Reference may be made to

th~ Rules for the guidance of officers in dealing with objections under secjon 5-A of the Act. These rules are made in exe.rcise of the powers conferred by section 55 of the Act. Under these Rules it is stated that the objections _?re of the following nature : (i) the notified purpose is not genuinely or properly a public purpose; (ii) the land notified is not suitable for the purpose for which it is notified; (iii) the Jand is not so well suited as other land; (iv) the area proposed :is excessive; (v) the objectors' land has been selected maliciously or vexatiou:; ly; (vi) the acquisition will destroy or impair the amenity of historical or artistic monuments and places of public resort; will tke away imponant public right of way or other convenieoes. or will desecrate religious buildings, graveyard and the like. The nature of objections under these rules shows that the matters which are to be enquired into under rule 4, and in particular, that the Company made all efforts to get such land by negotiation with the persons interested thereon on payment of price and such efforts failed is not one of the objections which can be preferred in an enquiry under section 5-A. It is true that in the present case there was an enquiry under section S~A of the Act but the enquiry was also before the agreement between the State and the Company under section 41 of the Act and without any enquiry under section 40 of the Act to enable the Government to give its consent.

The respondent put in the forefront the contention that the agreement between the Company and the State under section 41 of the Act i u the present case, dated 13 January, 1969. a:1d t>ublishe.d on 1 S January 1969 was subsequent to the notification under sectiot1 4 of the Act, dated 29 September, "1965 and therefore the said notification wns in violation of the provisions contained in section 39 of the Act and therefore invalid.

The f; and Acquisition .(Gujarat Unification and Amendment) Act, 1963 w]uch amended section 39 of the Central Act enacted that the provisions of sections 4 to 37 inclusive of the Act shall not be put in

(?TJJARAT v. CHATURBHAI (Ray, C.J.) 289

force in order to acquire land for any Company, unless there is pre vious consent of the State Government or the Company shall have executed the agreement. On behalf of the State it was said that the agre~~ ment in the year 1961 would suffice. This is only to be stated to be rejected because the notification under section 4 o'f. the Act was cancelled by the State on 28 September, 1965. Thereafter fresh proceedings started. FUrther, the agreement in the year 1961 did not survive, because a fresh agreement was made on 18 January, 1969, which was pubHshed on 18 J anl)ary 1969.

The provisions contained in sections 38 to 41 of the Act indicate that the provisions of sections 4 to 3 7 of th_e Act cannot be applied to acquire land for any company unless the State Government gives previous consent threto and the oompany executes n agreement with the State as mentioned in section 41 of the Act. .Second1 section 40 of the Act indicates that the. State Government cannot give consent unless there is an enquiry as provided in that section. It is IWticeable that

any enquiry under section 5-A of the Act is not an enquiry within the meaning of section 40 of the Act. The reason is that the Gujarat.

Amendment Act 1963 being Gujarat Act No. 20 of 1965 deleted the words "either on the report of the Collector under section 5-A subsection (2) or" from section 40 of the principal Act.

Similarly, in section 41 of the Act as a result of the Gujarat Amendment Act the words "either on the reP<>rt of the Collector under section 5-A subsection (2) or'' were 'deleted. The effect of th~ deletion of those words by the Gujarat Amendment Act is that the enquiry under section 5-A is not an enquiry within the meaning of section 40 ()f the Act.

In the present case, the enquiry under rule 4 of the Land Acquisi~ tion (Companies) Rules was held before the notifications under sections 4 and 6 of the Act were issued in the year 1965. The enquiry pursuant to the notifications in the year 1961 and previous to the fresh notifications in '1965 is of no effect in law for two principal reasons.

First, the 1961 notification was cancelled, and, therefore, all steps taken thereunder became ineffective.

Second, the enquiry under rule 4 in 1961 was held without giving opportunity to the land owner rcspon~ dent, and, therefore, the enquiry is invalid in law.

The affidavit evidence on behalf of the Government was thnr an enquiry was held under section 40 of the Act in the month of July, 1965 and there was a report on 25 August, 1965. The nquiry under section 40 of the Act is equally of no avail for similar r.:::.bous why the enquiry Under Rule 4 in 1961 is of no effect in law.

290 ltUPREME COURT REPORTS [1975] ~~ s.c.R.

For tht-:se reason~, wr, hold that the aisition proceedings are vitiated. There was no. compliance with the provisions of se!; tion 39 of the Act. There was no prior agreement between the State and the Company before provisions contained in sections 4 to 37 were put into force. The. enquiry under section SA of the Act in the pr~ent case~ does not satisfy the provisions contained in_ rule 4 of the Companies Acquisition Rules. The owners of the land are entitled to opportunity of being heard in an enquiry under rule 4 and enquky under section 40 of the Act. No such. opportunity was given to the owners.

The appeal, therefore, fails and is dismissd. The State will pay costs to Respondents No. 1, 2 and 3.

V.M.K. Appeal dismissed.

284

STATE OF GUJARAT & ANR

PATEL CHATURBHAl NARSIBHAI & ORS

H R KHANNA

s. 4

s. 4

s. 6

s. 41

ss. 4

s. 4

s. 5

S. 17

s. 5

s. 6

s. 4

s. 5

s. 55

s. 5

s. 41

s. 40

view of the Gujarat Amendment Act, 1963

sections 40 and 41

s. 5

s. 40

Gujarat High Court

R. H. Dhebar

N. Shroff

M. C. Bhandare

Urmila Sirur

sections 4 and 6

Baroda

4 MarchJ 1961

section 4

22 August, 1961

section 41

SUPREME COURT R.EI'O.RTS [1975]

Section 40

Arora

Central Government

section 55

Goverent

section 6

Section 5A

section 41

9 July, 1965

section 18

section 39

section 39

s 4 to 3

section 39

section 4

section 4

4 March/4 November, 1961

28 September, 1965

29 September, 1965

section 5

11 December, 1968

section 5

18 January, 1969

section 6

section 6

section 41

18 J nnu:-ry

1969

section 4

section 6

section 6

section 6

section 4

section 4

section 4

section 5

Section 17

section 5

section 6

section 4

section 5

section 55

section 5

section 41

section 40

section 41

1 S January 1969

section 39

section 39

sections 4 to 37

section 4

18 J anl)ary 1969

sections 38 to 41

sections 4 to 3

section 41

section 40

section 5

section 40

Amendment Act 1963

section 5

section 40

section 41

section 5

section 5

section 40

sections 4 and 6

section 40

25 August, 1965

section 40

sections 4 to 37

section 40


SADHU ROY

THE STATE OF WEST BENGAL January 22, 1975

[V. R. KRISHNA IYER AND R. S. SARKARIA, JJ.]

Mai11tena11ce of Internal Security A.ct (26 of 1971) S. 3.-Preventive detention after discharge by Crlmi11al Court for offences which are grounds of detention-When valid.

The petitioner was detained under s. 3 of the Maintenance of Internal Security Act, 1971. The grounds of detention were that twice on the same day he and his associates, rmed with dangerous weapo!lq, committed thefts of overhead copper.wire, the first time in broad day light and then at about mid night. On

both oecasions they were challenged by public servants, memben of the para pol ice force, attached to the railway administration but the petitioner a:nd his assciCiates escaped after attacking the members of the Railway Police Force. The petitioner waa arrested in connection with the two incidents. His name was not m the F.I.R. ilut was gathered in the course of investigation. The police, howe1•er reported that the petitioner being a dangerous person. witnesses were afraid

to depose against him in open court and so he was discharged. He was, however, tai:en into custody the same day of discharge pursuant to the detention order.

Allowing the petitiort :hallenging the detention, - HELD : 1 (a) The discharge or acquittal by a criminal court is not necessarily a. bar to preventive detention on the same facts for 'security' purposes. But if such discharge or acquittal proceeds on the footing that the ch.arge is baseless or false, preventive detention on the same condemned facts may be vulnerable oo. the ground that the power of detention has been exercised in a ma/a fid~ or colourable manner.

(b) The executive authority may act on ubjective satisfaction and fa immunised from judicial dissection of the sufficiency of the material. But the executive conclusion regarding futuristic prejndicial activities of the detenu and its nexus with his past conduct though acceptable is not invulnerable.

(c) The satisfaction, though aUenuated by 'subjectivity' must be real and rational, must flow from an advertence to relevant factors, and not be a mockery or mechanical chant of statutorily sanctified phrases. The subjective satisfaction must be actual satisfaction.

(d) One test to check upon the colourable nature or mindless mood of the alleged satisfaction of the authority is to see if the articulated 'grounds' are too groundless to induce credence in any reasonable man or too frivolous to be brushed aside as fictitious by a responsible instrumentality.

( e) If witnesses are frightened off by a desperate criminal, the court may discharge for deficient evidence but on being convinced (on police or other materials coming withiQ his ken) that witnesses had been scared of test'fying, the District Magistrate may still invoke his preventive power to protect society.

(f) But if on a rational or fair consideration of the police version or probative circumstances he should have rejected it the routinisation of the satisfaction, couched in correct diction. cannot carry conviction about its reality and on. a

charge of mala fides or misuse of power being made, the court can examine the circumstances. [297 D-298 CJ

(2) Merely to allege that witnesses were panicked away from testifying to truth cannot be swallowed gullibly when the witnesses are members of the Railway Protection Force and the offences against public property were of grave character. [299 B-C]

( 3) In a case Like the present, where the circumstanCC6 of the nonprosecu tion strongly militate against the reality of the petitioner's involveme11t in the occurrence, the subjective satisfaction of the District Maistrate must be nPoleD1 to by him. While the detainer's on oath is not always insISted on as the price for sustaining thi: order, subjective atifaclion, being a mental fact or sta1e is best established by 1he author's affidavit and not that of a stranger in the s1cretariat familiar with the papers. But in the present case, the District Magistrate's affidavit is not available and the reason given for his not filing his affidavit is not convincing. If the Di~; trict Magistrate had sworn an affidavit that the identity of the petitioner as participant in the two incidents was not lnown to the Railway Protection Force and that other villagers made them out as the gang was decamping with the booty, th1: detention might have been upheld. But there is no such averment and the bare ipse dixit of the Deputy Secretary in the Homci Department that witnesses were afraid to depose is too implausible and tenuous to be acceptable rn:n for subjective satisfaction. [298 B-F; 299 A-B, C..EJ

[Where a grievous crime against the community has been committed the culprit must be subjected to condign punishment so that the penal law may strike a stern blow where it should. Detention is a softer treatment. Further, if the man is innocent, the proces5 of the law should give him a fair chance and that should not be scuttle,<! by indiscriminate reS().rt to easy but unreal orders of detention unbound by precise tim1:.]. [300 C-E)

Sri/al Shaw v. The State of West Bengal Writ Petiiion No. 453 of 1974. dtci .. deli on 4-12-74 and Jaganath's case [1966) '.l S.C.R. 134 and 138, followed.

Rameshwar Shaw [1964) 4 S.C.R. 921 926. Hodrchand'! case A.l.R. i974 S.C. 2120; Go/am Hussain v. Commi!siOni'r of Police (1974) 4 S.C.C. '30, '34 and Dula/ Roy v. The District MagiJtrate, Burdwan [1975) 3 S.C.R. 186 referred to.

ORIG<NAL JURISDICTION: Writ Petition No. 429 of 1974. Uuder E Art. 32 of the Constitution of India.

Shiv Pujan Singh, for the petitioner.

G. S. Chatterjee, for the respondent.

1he Judgment of the Court was delivered by

KRISHNA IYER, J.-Shri S. P. Singh, appearing as amicus curia£, has urged a few points in support of his submission that the ~:titioner detenu, very poor and not fallen into criminal company, is entitled to be ret free, the order being illegal.

The obnoxious acts, with futuristic import, relating to the deten- G tion, have been set out in the grounds annexed to the order and are repeated in the affidavit of the Deputy Secretary, Home (Special) Department, Government of West Bengal, based on the records available in the Secretariat. The District Magistrate of Purulia., nearly three long years ago, passed the order of detention against the petitioner on February 2, 1972 on receipt of materhl.ls regardiilg the prejudicial activities of the detenu and on being subjectively satisfied of H the need for the detention under s. 3 of the Maintenance of Internal Security Act, 1971 (Act XXVI of 1971) (hereinafter called the MISA, for short).

SADHU ROY v. WEST BENGAL (Krishna Iyer, /.) . 2 93

The two criminal adventures of the petitioner which persuaded the District Magistrate to prognosticate about his prejudicial activities were allegedly indulged in on September 3, 197L The grounds of detention are that on that date, in two separate dramatic sallies, the detenu and his associates went armed with hacksaws, lathis etc., and what not, committed theft of overhead copper catenary wires and certain other items from a place between Anaka and Bagalia railway stations. On tbe first occasion, which was during broad daylight, the miscreants were challenged 'by the R. S. Mem!>ers' but were scared away by the petitioner and his gang repeated the theft of traction wire etc.,' at stone throw. On the second occasion, which was at about mid-night, about the same spot. 'When resisted by the duty RPF Rakshaks with the help of villagers', ballasts were pelted at them by the violent intruders who made good their escape with the gains of robbery. Based on these two frightful episodes, the detaining authority came to the requisite conclusion about danger to the community, which is recited in the order.

The question . is whether, in the facts and circumstances of the case, the order can be impugned as colourable or callous exercise of power based on illusory or extraneous circumstances and therefore void. An examination of the surrowiding set of facts, serving as backdrop or basis, becomes necessary to appreciate the argument that the subjeative satisfaction of the authority did not stem from any reQ/ application of his mind but as a ritualistic recital in a routine manner.

It is admitted in paragraph 6 of the counter affidavit that the two incidents were investigated ; is GRPS Case No. 1 and No .2. The petitioner was arrested in connection with the said cases on September 9, 1971 and the police submitted a final report in both the cases on January 6, 1972 and February 9, 1972 respectively, 'not because there was no evidence against the petitioner but because the detenu-petitioncr being a dangerous person, witnesses were afraid to depose against him in open Court'. It may be mentioned here that the petitioner's name was not in the FIR but is alleged to have been gathered fa, the course of the investigation.

However, .he was discharged from the two cases on February 9, 1972 but was taken into custody the same day pursuant to the detention order.

Thereafter the prescribed formalities were followed and there is .no quarrel about noncompliance in this statutory sequence.

The crucial submission that deserves close study turns on the colourable nature or mindless manner of the impugned order.

What arc the facts germane to this issue '? It is seen that the petitioer's name is not in the first information statements. Had a court occasion to adjudge the guilt of an accused person charged with serious crime committed in the presence of quasi-police officers and his name is not seen in the earliest report to the police, that would have 1eceived adverse notice unless explained.

Likewise, the circumstance that the final police report to the Court terminated the. criminal pr0eeedings

may, unless other reasons are given, militate against the implication of the petitioner since s. 169 Cr.P.C. refers to two situations one of which at least nullifies possible inference of incrimination i.e., that

there is no 'reasonable ground of suspicion to justify the forwarding of the accused to a magistrate'. It behoves the detaining authority to tell this Court how he reached his mental result in the face of a 'release report' by the police. For, the legal label th'lt the satisfaction of the executive authority a bout potential prejudicial activity is 'subjective' does not mean that it can be irrational to the point of unreality. Subjective satisfaction is actual satisfaction, nevertheless.

The objective standards which courts apply may not be applied, the subject being more sensitive; but a sham satisfaction is no satisfaction and will fail in court when challenged under Art. 32 of the Constitution. If material factors are slurred over, the formula of 'subjective satisfaction' cannot salvage the deprivatory order. Statutory immunology hardly saves such invalidity. After all, the jurisprudence of detention without trial is not the vanishing point of judicial review.

The area and depth ot lhc probe, of course, is conditioned by the particular law, its purpose and language.

But 01.!r freedoms are not wholly free unless the judiciary have a minimal look at their executive deprivation, even though under exceptional situations.

We may here refer to what a bench of five Judges of this Court observed in the vintage: ruling Ramesh war Shaw( 1) :

"It is however neessary to emphasise in this connection that though the satisfaction of the detaining authority contemplated by s. 3 (1 )(a) is the subjective satsfaction of the said authority, cases may arise where the d.etenu may challenge the validity of his detention on the grolmd of malafides and in support of the said plea urge that along with other which show, malafides, tli.e Court my als~ consider his grievance that cie grounds served on him cannot possibly or rationally support the conclusion drawn against him by the detaining authority. It is only in this incidental manner and in support o~ the plea of malafides that this question can become justiciable; otherwise the reaonableness or propriety of the said satisfaction contemplated by s. 3(1) (a) cannot be questioned before the Courts."

Back to the: facts.

Of course, the mere circumstance that the na1i11e of the petitioner was gathered in the course of the invsetigal!ion is neither here nor there and cannot help him in the tall contention that for that reason the order of detention is a make-believe. The conspectus of circumstances placed before the authority and his rational response, having regard to the duty to immobilise dangerous delinqueuts from molesting the community-these arc pertinent factors to decode the responsible r.eality of the satisfaction, although not 1•he

plnary rightness of the detention order.

There are a fe~ vital facts which loom large in this context. One

1s that th:~ court discharged the accused, the reason alleged in the counter being that -- ---·--·-··---

[1964J 4 S.C.R. 921, 9'26.

SADHU ROY v. WEST BENGAL (Krishna Iyer, J.) 295'

"The police submitted final report in those cases on 6-1-72_ and 9-2-72 respectively not because there was no facts which show malafides, the Court may also. consider his evidence against the petitioner but because the detenu petitioner being a dangerous person witnesses were afraid to depose against him in open court." What is the impact of a discharge of the accused by the criminal court based on police reports on the validity of the detention order against the same person based on the same c iarge in the context of a contention of a non-application of the authority's mind ? . The two jurisdictions are different, the two jurisprudential prindples diverge, the objects of enquiry and nature of mental search and satisfaction in the . two processes vary.

The argument that detention without trial, for C long spells as in this instance, is undemocratic has its limitations in modem times when criminal individuals hold the community to ransom, although vigilant check of executive abuse becomes a paramount judicial necessity.

We, as judges and citizens, must remember that, in law as in life, the dogmas of the quiet past are not adequate to the demands of the stormy present and the philosophy and strategy of

D preventive detention has come to stay. We may merely observe that we are not legaliy impressed with counsel's persistent point that solely or mainly because the petitioner has been discharged in the two criminal cases he is entitled to be enlarged from preventive captivity.

Even so, it does not follow that the extreme view propounded by the counsel for the State that the termination of the proceeding.s in a criminal case on identical facts is of no consequence is sound.

In this E . connection, we may draw attention to a few decisions of this Court cited at the bar. Chandrachud J., speaking for thei Court, recently observed in; Sri/al Shaw v. The State of West Bengal('), dealing with a situation somewhat like the one in this case, thus:

"This strikes us as a typical case in which for no appa- 1 rent reason a person who could easily be prosecuted under the punitive laws is being preventively detained. The Rail- F way Property (Unlawful Possessio11) Act, 29 of 1966, confers extensive P<>Wers to bring to, book persons who are found in unlawful possession of railway property. The first offence is punishable with :l sentence of five years and in the absence of special and adequate reasons to be mentioned in the judgment the imprisonment shall not be less than one year. When a person is arrested for an offence punishable G under that Act, officers of the Railway Protection Force have the power to investigate into the alleged offence and the statements recorded by them during the course of investigation do not attract the provisions of section 162, Criminal Procedure Code. (See Criminal Appeal No. 156 of 1972 decided on 23-8-1974). If the facts stated in the ground are true, this was an easy case to take to a success- H ful termination. We find it impossible ot accept that the prosecution could not be proceeded with as the witnesses

(1) Writ Petition No, 453of1974, decided on 4-12-74,

were afraid to depos~ in the public against the petition<:r.

The Sub-inspector of Police who made the Panchnama, Wt! hope, could certainly not be afraid of giving evidence against the pemioner. He had made the Panchnama of seizure openly and to the knowledge of the petitioner. Besides, if the petitioner's statement was recorded during the course of investigation under the Act of 1966, that itself could be relied upon by the prosecution in order to establish the charge that the petitioner was in unlawful possession of Railway prope1ty." (emphasis ours)

Again, in Noorchand:S case(~) Gupta J., delivering judgment for the 'Court, held:

"We do not think it can be said that the fact that the petitioner was discharged from the criminal cases is entirely irrelevant and of no significance; it is a circumstance whkh

the detaining authority cannot altogether disregard. In the case of Bhut Nath Mate v. State of West Bengal (AIR 1974 SC 806) this Court observed:

" ... detention power cannot be quietly used to subvert, supplant or to substitute the punitive law of the Penal Code. The immune expedient of throwing into a prison ctill one whom the ordinary law would take care of, merely because it' is irksome to undertake the inconvenience of proving guilt -in court is unfair abuse." -

If as the petitioner ha~ asserted, he was df schargecj be- . cause there was no material against him and not because

witnesses were afraid to give evidence against him, there would be apparently no rational basis for the subjective satisfaction of the detaining authority. It is for the detaining authority to say that in spite of the discharge he was satisfied, on some valid material, about the petitioner's complicity in the criminal acts which constitute the basis of the detention order. But, as stated already, the District Magistrate Maida, who passed the order in this case, has not affirmed the affidavit that has been filed on behalf of the State."

There was reference at the bar to the ruling reported as Galam Hussain v. Commissioner of Police(2) where the Court clarified that there was no bar to a ddention order being made after the order of di!- charge by the criminal court, but emphasized the need to scan the order to prevent executive abuse in the following words :

"Of course, we can visualise extreme cases where a Court has held a criminal case to be false and a detaining authority with that. judicial pronouncement before him may not reasonably claim to be satisfied about prospective prejudicial activities based on what a Court has found to be baseless."

(1) A.I.R. 1974 S.C. 2120.

(2) (1974 4[ s.c.c. 530.

SADHU ROY v. WEST llENGAL (Krishna Iyer,!.) 297

A Maybe, we may as well refer to the vintage ruling in Jagannath's care( 1) where Wanchoo J., (as he thn was} spoko for a unanimous Court:

"Furthel' the proceedings ip. the matter of detention and the order of detention should show that it had acted with aU

due care and caution and with the sense of responsibility necessary when a citiztn is deprived his liberty without trial.

We have therefore to see whether in the present case the authority concerned has acted in this manner or not. If it has not so acted and if it appears that it did not. apply its mind properly before making the order of detention the order in question would not be an order under the Rules and the person detained would he entitled to release."

The precedential backdrop help crystallize the jurisprudence of

pr<:vcn:iv~ detention, an odd but inevitable juridicai phenomenon, in a succinct manner and to the extent relevant to the case. Although the circumstances of each case will ultimately demarcate the callomi or colourable exercise of pow-r from the activist or alert application of the executive's mind in making the impugned order, some clear guidelines, though overlapping, help application of the law:

( 1) The discharge or acqJ!ittal by a criminal court is not necessarily a bar to preventive detention on the same facts for 'security' purposes. But if such discharge or acquittal procec; ds on the footing that the charge is false or baseless, preventive detention on the same condemned facts may be vulnerable on the ground that the power under the MJSA has been exercised in a malafide ot colourable manner.

(2) The executive authority may act on subjective satisfaction and is immunised from judicial dissection of the sufficiency 0f the material.

(3) The satisfaction, though attenuated by 'subjectivity' must be real and rational, not random divination, must flow from an advertence to relevant factors, not be a mock recital or mechanical chant of statutorily sanctified phrases.

( 4) The executive conclusion regarding futuristic prejudicial activities of the detem; and its nexus with his pas_t conduct is acceptable but not invulnerable.

The court can lift the verbal veil to discover the true face.

(5) One test to check upon the colourable nature or mindless mood of the alleged satisfaction of the authority is to see if the articulate 'grounds' are too groundless to induce credence in any reasonable man or to frivolous to be brushed aside as fictitious by a

-(il--!1966]-3-s.c.R:~134. 138.

responsible instrumentality.

The court must sf:e through mere sleights of mind played by the detaining authority.

(6) More concretaly, if witnesses are frighteHed off by a desperatie criminal, the court may discharge for delicient evi:dence but on being convinced (on police or other materials coming within his ken) that witnesses had been scared of testifying, the District Magistrate may still invoke his preventive power to proteit society.

(7) But i:f 011 a rational or fair consideration of the poli<c

vcrinn or probative circumstances he would or should necessarily have rejected it, the routinisatic1n of the sati:; factipn, couched in correct diction, cannot carry conviction about its reality or fidelity, as

agniust factitious terminological conformity.

And no a charge of malafides or misuse of lower being made, the court can go behind the faca e and reac:h at the factum.

So viewed, how does the petitioner's case stand?

The petitioner's identity and involvement must, in some manner, b:: brought home, sufficient for the subjective satisfaction of a icsponsible officer not merely for his hunch or intuition. Let us assume in favour of the officer that such material was present before him when he passed the order of detention. This should be revealed to the court hearing the habea~ corpus motion, in a pre.per return in the shape of an affidavit While we agree that the detainer's own oath is not always insisted on as the price for sustaining the order, subjective satisfaction, being a mental fact or state is best established by the author's affidavit, not a .; tranger in the Secretariat familiar with papers, but the mind of the man who realised the imperativeness of the detention. This is not a formality when the ubject-matter is personal liberty and the more 'subjective' the executive's operarion th1~ more sensitive is procedural insistence.

Here the Dist:iict Magistrate's affidavit is 1mavailable.

Another obstacle in the way of the State, which has to be surmounted, consists in the circumstances that both the criminal occurrences took place in the presence of public servants, members of the para-police forces attached to the railway administration. Indeed, the case is that some o:f these officials were terrroized and OV(:r-awed before the stolen articles were removed. Naturally, one would expect

a serious crime like railway property being removed by show of violence bei, ng. the suject-matter of the prosecution. In the present case, the Distnct MagJstrate does not swear an affidavit himsdf and what i& seated is that he is now posted in Sik\:im :md is not 'presently available for affirming .the affidavit'. In a case where a personal explanation i~ necessary, S!kkim is .not too distant and so we have to see whether the District Magistrate has, in the i!lstant case, to show why,

SADHU ROY \I, WEST BENGAL (Krishnw Iyer,!.) 299

when the cases were discharged by the trying magistrate, he thought

there was enough material for preventive detention. True, the Home Department official, informed by the records, has sworn that the police report for non-prosecution was 'not because there was no offence against the petitioner but because the detenu petitioner being a dangerous person witnesses were afraid to depose .against him in open cuort'. Maybe this is true, but the subjective satisfaction of the District Magistrate must be spoken to by him, particularly in a situa- . tion where the circumstances of the non-prosecution strongly militate against the reality of the petitioner's involvement in the occurrence.

After aJJ, merely to allege that witnesses were panicked away from testifying to truth cannot be swallowed gullibly when the witnesses themselves arc members ot a railway protection force and the offences against public f:ropcrty are of a grave character. The observations of Chandrachud . in Sri/al Shaw, quoted earlier, are in point. .

.In the case of non-officials, maybe they are afraid to give evidence against dangerous characters fo~ fear of their life but such an excuse or alibi is ordinarily unavailable where the witnesses are para-police public se.rvants. If the District Magistrate had sworn an affidavit that the identity of the petitioner, as participant in the crime, was not known . to the railway protection force and that other villagers made thl.!m out as th.e gang was decamping with the booty, something may be said for th.I.! plea. There is no such averment in the counter-affidavit ar.d thei bare ipse dixit of the Deputy Secretary in the Home Department that witnesses were afraid to depose is too implausible and tenuous to be acceptable even for subjective satisfaction. After all, freedom is not bubble to be blown away by executive whif or whim. For, as pointed out by Gajendragadkar J. (as he then was) in Rameshwar Shaw (supra) at p. 930:

"At the point of time when an order of detention is going to be served on a person, it must be patent that the said person would act prejudicially if he is not detained and that is a consideration which would be absent when the, authority is dealing with a person already in detention."

Had the statement been of the detaining authority, bad the deponent furnished some fact which would or c::>uld make any reasonable ma.'1 believe that the witnesses were likely to shy away from the court for fear of the petitioner, had the affidavit thrown some light on the dark hint behind the non-prosecution in court due to non-disclosure of evidence or to indicate that the final report of investigation was not on account of the absence of any reasonble suspicion but because of the deficiency of evidence (s. 169 Cr.P.C. contemplates both types of situations and the copy of the report was easy to produce), we might have upheld the detention. In Du/al Roy v. The District Maistrate Burdwan(I) this question has been dealt with in some detail. The flaw in the order flows from non-explanation of how the District Magistrate

hru; made his infe.rence in the circumstances indicated.

(I) [1975] 3 S.C .R. 186.

SUPREME CO!JRT REPORTS {1975] 3 s.c.R.

Without more, we are inclined to the view that the Qbservations of A Wao.choo J. (as he than was) in Jagannath (supra), at p. 138, appli1::s:

"This casualness also shows that lite mind of the authority concerned was really not applied to the question of detention of the peti.tioner in the present case. In this view of the matter we are of opinion tha.t the petitioner is entitled to release as the order by which he was detained is no order B under the Rules for it was passed without the application of the mind of the authority concerned."

In the present 1:ase, on account_of the special reasons set out abC1ve, we are far from satisfied that the detention order is not a cloak to avoid the irksome procedure of a trial in Court.

There are two social implications of dropping prosecutions and resorting to substitutive detentions which .deserve to be remembered.

Where a grievous crimt~ against the community has been committed, the culprit must be subjected to condign punishment so that the penal law may strike a stern blow where it should. Detention is a saf.ter treatment than stringent sentenee and there is no reason why a dangercriminal should get away with it by enjoying an unfree but unpaid holiday.

Secondly, if the man is innocent, the process of :he law should give him. a fa:lr cham;:e and that should not be scuttled by indiscriminate resort to easy but unreal orders of detention unbound by precise tim~. That is a negation of the correctional humanism of our system and bre, eds bitterness, alienation and hostility within the cage.

We accordingly allow me writ petition, make the rule absolute and direct tLat the petitioner set free.

V.P.S.

Petition aliowed.

ROY

THE STATE OF WEST BENGAL

January 22, 1975

V. R. KRISHNA IYER

R. S. SARKARIA, JJ.

S. 3

s. 3

[1964) 4 S.C.R. 921

[1975) 3 S.C.R. 186

Art. 32

Constitution of India

Shiv Pujan Singh

G. S. Chatterjee

KRISHNA IYER

S. P. Singh

West Bengal

District Magistrate of Purulia

February 2, 1972

s. 3

Krishna Iyer

September 3, 197L

Anaka

Bagalia

September 9, 1971

January 6, 1972

February 9, 1972

s. 169

Cr.P.C

Art. 32

Ramesh war Shaw

s. 3

s. 3(1)

Chandrachud

section 162

Criminal Procedure Code

Noorchand

Gupta

AIR 1974 SC 806

Penal Code

Jagannath

Wanchoo

Krishnw Iyer

Chandrachud

al Shaw

Gajendragadkar

Rameshwar Shaw

s. 169

Cr.P.C

SUPREME CO!JRT REPORTS {1975] 3 s.c.R.

A Wao.choo J.


CENTRAL INLAND WATER TRANSPORT

A .

CORPORATION LTD.

THEIR WORKMEN

May 2, 1975

[P. N. BHAGWATI AND P. K. GOSWAMI, JJ.J

Pay111e11t of Bonus Act, 1965--Sect'ion 16-newly set up establishnientlnduJJrial Disputes Act-Section 25FF and 25FFF.

The River Steam Nagivation Co. Ltd. carried passengers and cargo in lnland Waters. It also owned a dock called Rajabagan Dockyard, where C it carried out fepairs to its own vessels.

Majority of the shares of the Com parry were purchased by the Government of lnclia and considerable financial

istance was also given by the Government. n the year 1966,. th~ financial position of the company became so precanous. that a_n apl?hcation or winding up of the company was made by one of its creditors 1n the Ji1gh , Court of Calcutta.

The Government of India put forward a scheme of arrangement and compromise, and made an application to the High Court in the \\-inding up petition for sanction of the scheme. The appellant Cor~ D :poration was incorporated and all the properties and assets of the Company

-st.ooa' transferred to and vested in the Corporation.

As far as the liabilities .are concerned, only some of them were transferred to the Corpor.ation and

the rest had to be discharged by the company.

It was also provided in the scheme that the Corporation should take as many of the existing employees .as possible.

The scheme also provided that those employees who could not be taken over by the Corporation v.'ould be pai<i' all legitimate and legal compensation by the Company.

The Company was to stand closed. 8000 E .employees were working in the Company, out of when 5173 employees were given fresh appointments by the Corporation on new terms and conditions.

The workmen working in Rajabagan Dockyard demanded payment of bonus for the years 1967-68 and 1968-69 under the Payment of Bonus Act, 1965. 'rhe' appellant raised a preliminary objection that the establishment of the Curporation in which the Viorkmen \Vere en1ployed \\'aS a newly set up F establishment since 5-6-1967 anCL' the workmen were by reason of section 16 'Of the Payment of Bonus Act, not entitled to payment of bonus for the year 1967-68 and 1968-~9, since the Corporation incurred losses during both these years.

The Industrial Tribunal held that the workmen were entitled to bonus on the ground that the appellant \\'as the successor in interest of the com- ]lany in respect of the business carried on in the establishment of Rajabagan Dockyard. {;

On appeal by special leave by the appe!lant, it was held :-

The question which arises for determination is whether the Rajabagan Dockyard in the hanOS of the Corporation could be said to be an establishment newly set up since 5-6-1967.

The Industrial Tribunal erred in addressing itself to a wholly different question namely whether the Corporation was the successor in interest of the company.

That was not a relevant question.

(448 F-G]

HELD FURT1-IER-The establishment of Rajabagan Dockyard V.'as not a new establishment in the hands of the Corooration. lt was the same estab- Jishment, the san1e manufacturing apparatus; \Vhich was operated by the company prior to its taking over by the Corporation. The name of the establish~ ment also continued to be the same.

Its address remains the same anu' the registration number of the establishment under the Factories Act also rcmaintained the same.

[451-HJ

HELD-The \VOrkmen were entitled to be paid bonus for the two years, as the Rajabagan Dockyard was not a new establishmei; it. Observe~ further -The workmen who were taken over by the Corporation were given frcs~ avpointments after 5-6-1967 with differe!lt scles of. pay and O:ifIrent conditions of service and there was a break 1n their continuity of service.

If certainty of service was to be decided to these \Vorkers, they should have ben paid. closure compensation under section 25FFF or at any rate compensation under section 25FF of the Industrial Dispute. [452-D-451-Etl

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 179-180 of 1973.

Appeal by special leave from the Award dated the 28th July, 1972 of the Fourth Industrial Tribunal, West Bengal in case No.

C VIII-51 of 1972 ordered to be published in the Gazette by Notice dated the 10th August, 1972.

Jagdish Swamp, A.G. Meneses and K.J. John, for the appellant.

P.S. Khera, for respondent no. 1-

S. C. Agarwala, V. J. Francis and R. K. Garg, fpr respondent D no. 2.

The Judgment of the Court was delivered by

BHAGWATI, J., These two appeals, by special leave, arise out of an industrial dispnte between the Central Inland Water Transport Corporation Ltd. (hereinafter referred to as the Corporation) and E its workmen in regard to the payment of bonus for the years 1967-6~

and 1968-69 under the Payment of Bonus Act, 1965.

The industrial dispute was referred to the Industrial Tribunal for adjudication under s. 10 of the Industrial Disputes Act, 194 7.

The Corporation raised three preliminary objections, one of which was-and that is the only preliminary objection with which we are concerned in the F present appeals--that the establishment of the Corporation in which the workman were employed was newly set np since 5th June, 1967 and the workman were, therefore, by reason of s. 16 of the Payment of Bonus Act, 1964, not entitled to payment of bonus for the years 1967-68 and 1968-69.

The Industrial Tribunal by an award dated 2nd March, 1971 rejected these preliminary objections and held inter alia that the Corporation was not entitled to claim immunity from G payment of bonus under s. 16 and directed that the hearing of. the reference should proceed on merits.

The reference was then heard on the question of quantification of the amount of bonus and by an award dated 28th July, 1972, the Industrial Tribunal held that each workman was entitled to bonus at the rate of 4 per cent of the wage earned by him during each year or Rs. 40/- whichever is higher.

This second and final award is challenged in appeal No. 179 of 1973. while the first preliminary award is challenged in appeal No. 180 of H 1973. It is not disputed on behalf of the Corporation that if its liability to pay bonus is established and its claim to immunity is negatived, the quantum of bonus payable to the workman would be what has been awarded by the Industrial Tribunal.

The only question which, therefore, arises for consideration in these two appeals is as to the liability of the Corporation to pay bonus under the Payment

of Bonus Act, 1964. The Corporation claims to be free from liabi- A lity to pay bonus by virtue of the provisions of s. 16.

Is this claim well founded ? To answer this question it is necessary to set out a few facts.

The River Steam Navigation Co. Ltd. (hereinafter referred to as the Company) was a limited liability company incorporated m England in 1914. It owned a fleet of vessels which it plied in inland waters for carrying passengers and cargo from Calcutta to dif!erent places in Assam and vice versa along rivers flowing through what was then East Pakistan. It afao owried a dock caJled Rajabagan Dockyard at 42, Garden Reach, Calcutta where it carried out repairs to its own vessels.

A majority of shares of the Company were purchased by the Government of India and considerable financial assistance was given by the Government of India from time to time in view of the great strategic importance of keeping the river routes to Assam open, but even so, the Company incurred losses in , carrying on its operations.

The climax came with the armed conflict between India and Pakistan towards the end of 1965 wh.en river transport service had to be closed because the river routes passed through what was then East Pakistan and in fact, forty vessels belonging to the Company were seized by the Pakistan Government.

This brought about total cessation of the principal business activity of the Company and in consequence, its financial position becan1e so precarious that on 21st June, 1966 an application for winding up of the Company was made by one of its creditors in the High Court of Calcutta. It was realised by the Government of India that it was impossible to save the Company as its total liabilities amounted to over Rs. 8 crores, the main creditors being the Government of India in the sum of about Rs. 6.19 crores, the State Bank of India in the sum of Rs. 1.50 crores and the Cbartered Bank in the sum of Rs. 1.60 crores.

The Government of India, therefore, put forward a scheme of Arrangement and Compromise under ss. 391 and 394 of the Companies Act, 1956 and made an application to the High Court in the winding up petition for sanction of snch scheme.

In anticipation of sanction, the Government of India incorporated, on 22nd February, 1967, the Corporation-a company whoJly owned by it-for effectuating the Scheme of Arrangement and Compromise (hereinafter referred to as the Scheme) .

The Scheme was sanctioned with some modifications by a Single Judge .of the High Court by an order dated 3rd May, 1967. It may be pomted out that when the Scheme was before the learned Single Judge, the Inland Steam Navigation Workers Union appeared and made its submissions with a view to safeguarding the interests of the workers and it was after hearing the Union, that the learned Single H Judge made the order sanctioning the scheme with certain modifications.

The Union was aggrieved by the order sanctionina the Scheme and it j'f~erred an appeal before a Division Bench of th~ High Court The D1v1swn Bench, however, by an order dated 14th July, 1967, confirmed the order of the learned Single Judge sanctioning the Scheme.

A It is not necessary for the purpose of the present appeals to reproduce the provisions of the Scheme in extenso. Suffice it to state that the Scheme provided inter alia that all the properties and assets of the Company shall stand transferred to and vest in the Corporation, but so far as the liabilities were concerned, only some of them shall_ be transferred to and become the liabilities of the Corporation and B the rest sliall be discharged. by the Company in the manner set out in the Scheme out of funds provided by the Government of India.

It was also provided in the Scheme that the Corporation shall take as many of the existing employees as possible and as can be reasonably taken, over, but as to exactly how many can be employed was left entirely to the discretion of the Corporation.

The Scheme also C contained a provision that those employees who cannot be taken over by the Corporation shall be paid "all legitimate and legal compensations" by the Company and monies for the same shall be provided by the Government of India.

Lastly, it was stipulated that upon the approval of the Scheme, the Company shall be closed and on payment of all creditors, it shall stand dissolved without winding up.

D The Scheme, as already pointed out, was sanctioned by the order dated 3rd May, 1967 and pursuant to the Scheme, the Company issued a notice on the same day stating that the entire undertaking of the Company will be closed with immediate effect.

There were at that time about 8000 employees in the various establishments of the Company and out of them, about 5173 were given fresh apoint E ments by the Corporation on new terms and conditions from and after 5th June, 1967.

The Corporation did not carry on any business activity though it took over the assets of the Company from 3rd May, 1967 and it was only on 5th June, 1967 that it opened the Rajbagan Dockyard and started operating it with workers who were for- F merly employees of the Company but given fresh employment by the Corporation as aforestated.

When the Rajabagan Dockyard was owned by the Company, the main purpose for which it was used was maintenance and repairs of the large fleet of vessels belonging to the Company. It did very little work for outside parties.

The result was that when hostilities G broke out between India and Pakistan and it became impossible to run rivers transport service and in fact a part of the fleet was seized by Pakistan Government, the Rajabagan Dockyard was paralysed and it became an establishment without any work and in consequence a large number of workers working in the Rajabagan Dockyard had to be laid off. The operational result of the working of the Rajabagan Dockyard from and after the commencement of the hostilities showed H considerable loss, as the work was completely at stand-still.

On taking over the Rajabagan Dockyard, the Corporation, as pointed out above, started operating it again from 5th June, 1967, but the nature and volume of the activities were changed.

The Corporation embarked on ship building and ship repairs, general engineering works and deep sea ship repairs and more than 80 per cent of these activities were carried out by the Corporation for outside parties.

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was found that the machinery taken .over from the Company was largely obsolete and antiquated and much of it was not usable and the Corporation could put to use only a part of the machinery worth about Rs. 13 lacs. The nature of the work having changed and its volume increased, the Corporation found it difficult to cope with the work with the existing plant 'and machinery and soon felt the need of purchasing new plant and machinery both by way of replacement and addition.

In the meantime, a Development Committee was appointed by the Government. of India to examine various questions relating to development of Rajbagan Dockyard and this Committee submitted its report in June 1968 making various recommendations which involved an outlay of about Rs. 3 crores in constructing new sheds and purchasing and installing new plant and machinery. It seems that the recommendations of the Development Committee were accepted by the Government of India and the necessary funds were made available according to a phased programme.

The Corporation accordingly started construction of six industrial sheds in the premises of Raiabagan Dockyard and also purchased and installed new plant and machinry worth about Rs. 50 lacs. The Rajabagan Dockyard, however, continued to work at a loss and during the years 1967- 68 and 1968-69, these being the years with which we are concerned in the present appeals, the losses of the Corporation from the operation of the Rajabagan Dockyard continued to mount.

Vide the First and Second Annual Reports of the Corporation for the years 1967-68 and 1968-69.

We are concerned in the present appeals with the workers in the Rajabagan Dockyard.

They are represented by two Unioss, namely, Central Inland Water Transport Corporation Ltd. Mazdoor

Sabha and Egra and Rajabagan Dockyard Workers Union.

These two unions made a demand for payment of bonus for the years 1967- 68 and 1968-69 under the Payment of Bonus Act, 1965. The Corporation rejected the demand mainly on the ground that the establishment of Rajabagan Dockyard, as operated by it, was newly set up since 5th June, 1967 and no profit was derived by the Corporation from this establishment during the years 1967-68 and 1968-69 and therefore, the workers were not entitled to payment of bonus by reason of s. 16 of the Act.

This led to the making of a reference by the Government of West Bengal under s. 10 of the Indus-trial Dispntes Act, 1947.

The Industrial Tribunal, as already pointed out above, tried the issue as to the claim of the Corporation to exemption from payment of bonus under s. 16 of the Act, as a preliminary issue.

The Corporation examined three witnesses on its behalf, namely, Krishnaswami Srinivasan, Jovdev Basak and Girdharilal Makhija, while the workers examined only the Joint Secretary of one of the two unions, namely, Ashgar Hussain.

Some documentary evidence was also produced on behalf of the parties.

The Industrial Tribunal, on a consideration of the oral as well as documentary evidence, came to the conclusion that the Corporation was the snccessor-in-interest of the Company in regard to the business of Rajabagan Dockyard which was taken over by it as a going concern and the establishment of Rajabagan Dockyard could not, therefore,

A be said to be newly set up so as to attract the applicability of s. 16 of the Act. The Industrial Tribunal, on this view, rejected the contention of the Corporation and by its preliminary award dated 2nd March, 1971 held that the Corporation was liable to pay bonus to the workers.

This was followed by the final award dated 28th July, 1972 quantifying the amount of bonus.

The Corporation challenges B the correctness of tne view taken by the Industrial Tribunal and contends that, oon the facts and circumstances of the case, as appearing from the evidence, the establishment of Rajabagan Dockyard, as operated by it, is newly set up and it is accordingly not liable to pay bonus to the workers.

It would be convenient at this stage to refer to the provisions C of s. 16 of the Act in order to appreciate the true nature and scope of the inquiry before us.

Sub. section (I) of Section 16 which is the only material sub-section provides :-

"16. (1) Where an establishment is newly set up whether before or after the commencement of this Act, the employees of such establishment shaU be entitled to be paid bonus under this Act only-

( a) from the accounting year in which the employer derives profit from such establishments; or

(b) from the sixth accounting year following the accounting year in which the employer sells the goods produced or manufactured by him or renders services, as the case may be from such establishments, whichever is earlier."

Now it is obvious that if the establishment of Rajabagan Dockyard could be said to be newly set up from 5th June, 1967, the workers F would not be entitled to payment of bonus for tl; ie years 1967-68 and 1968-69, because the corporation admittedly did not derive any profit from such establishment till then.

The question which, therefore, arises for determination is whether the Rajabagan Dockyard in the hands of the Corporation could be said to be, an establishment newly set up since 5th June, 1967.

On looking at the award of the Industrial Tribunal, however, we find that the Industrial Tribu- G nal addresses itself to a wholly different question, namely, whether the Corporation took-over the business of Rajabagan Dockyard as a going concern from the Company and was a successor-in-interest of the company in respect of such business.

That was not a relevant question for the purpose of determining the applicability of section 16.

An establishment may not be newly set up, it may be an existing establishment of which merely the ownership has changed.

H But the new owner may not necessarily be the successor-in-interest of the old in respect of the business carried on in the establishment.

The two concepts are entirely different.

One may acquire the ownership of an establishment without taking-over the business as a going concern and becoming a successor-in-interest in respect of it.

The word 'establishment' is also found used iri section 3 and that section clearly indicates that an establishment may consist of different depart-

' ,

ments or undertakings and it is, ther!'fore, not sy!'onymous with A 'undertaking which has been defined, though in a different context, by this Court in Gymkhana Club Unpn v. Management(') to mean "any business or any work or any project which one engages in or attempts as an enterprise analogous to business or trade".

The dictionary meaning of 'establishment' as given in Webster's International Dictionary includes inter-alia "an institution or J?lace of business, B with its fixtures and organised staff; as, large establishment, a manufacturing establishment." 'Establishment' therefore means the whole trading, business or manufacturing apparatus with a separate identifiable existence. This apparatus which is used for the purpose of carrying on trade, business or undertaking may change hands and pass from one owner to another.

The workers operating this appa- C ratus and working in it may change; new workers may take the place of old or come as additional workers.

When the ownership of the establishment, which is nothing but another name for this apparatus, is transferred from one person to another the establishment remains the same: merely its ownership is changed and it cannot be said to be a new establishment in the hands of the transferee.

Now, though the transferee may become the owner of the establishment, he would D not necessarily be a successor-in-interest of the transferor in respect of the business carried on in the establishment.

The question as to whether he can be held to be a successor-in-interest of the transferor would depend on consideration of several relevant facts. What should be the relevant facts to be taken into account in determining this question was explained by Gajcndragadkar, J. in the following E words : "Did the purchaser purchase the whole of the business ? Was

the business purchased a going concern at the time of the sale transaction ? Is the b>Jsiness purchased carried on at the same place as before ? Is the business carried on without a substantial break in time ?

Is . the business carried on by the purchaser the samc or similar to the business in the hands of the vendor ? If there has been a break in the continuity of the business, what is the nature of F the break and what were the reasons responsible for it ? What is the length of the break ? Has goodwill been purchased ?

Is the

purchse only of some parts ar.d 1he purchaser having purchased the said parts purchased some other new parts and starte.d a business of his own which is not the same 13 the old business but is similar to it ? These. and all other relevant factors have to be borne in mind G in deciding the question as to whether the purchaser can be said to be. sueesor-in-int.erest of the vendor for the purpose of industrial ad1uchcatton.

It 1s hardly necessary to emphasise in this connection that though illustrations are relevant, it would be unreasonable to exaggerate the importance of any one of these facts or to adopt the. i?flexible rule that the presence or absence of any of them is decmve of the matter one way or the other-The decision of the

H _ question must ultimately depend npon the evaluation of all the relevant factors. a?d it cannot e rech.ed by treating any one of them as of ?ver-nd1_ng or conclusive s1gmficance." Vide Anakapalla CooperaJive Agricultural and Industrial Society Ltd. v. Workmen.(•)

(t) [1968] (1) SCR 742.

(2) [1963] Supp. l SCR 730.

A Now in the present case the Industrial Tribunal concentrated only on the question as to whether the Corporation had become the sucessorin-interest of the company in respect of the business carried on in the establishment of Rajabagan Dockyard and answered this question in the affirmative.

We do not think that this was a correct line of enquiry pursued by the Industrial Tribunal.

The only limited question B before the Industrial Tribunal was whether the establishment of Rajabagan Dockyard in the hands of the Corporation was a new establishment or it was the some old establishment which was owned by the company prior to its taking over by the Corporation.

We shall presently turn to consider this question, but before we do so, we may point out that prima facie even in the view taken by it as regards the question whether the Corporation was the successor-inc interest of the Company, the Industrial Tribunal appears to have

missed some material aspects.

The Industrial Tribunal seems to have overlooked the following important am! relevant considerations.

The entire undertaking of the compnay including tl1e business carried on in the Rajabagan Dockyard had to be closed dowri owing to heavy loss. The Rajabagan Dockyard in fact became idle on the conm1ence- D ment of the hostilities between India and Pakistan and the workers

employed in the Rajabagan Dockyard had to be laid off. The notice of closure was put up by the company on 3rd May, 1967 pursuant to the order made by the High Court of Calcutta sanctioning the scheme.

There was, therefore, no business which was being carried on in the Rajabagan Dockyard as a going concern when the Rajabagan Dockyard E was taken over by the Corporation in terms of the scheme.

So far as the workers in the Rajabagan Dockyard were concerned. it was specifically provided in the Scheme after hearing the Union that the Corporation shall take as many of the existing employees as possible and as can be reasonably taken-over but as to exactly how many can be employed was left entirely to the discretion of the Corporation.

There was thus no obligation on the Corporation to take-over or F absorb all the workers who were previously working the Rajabagan.

Dockyard under the Company.

Though the Corporation took-over the Rajbagan Dockyard on 3rd May, 1967 under the Scheme, the Corporation did not start operating it until 5th June, 1967.

There was thus a fairly long break from the commencement of th~ hosti

lilies between India and Pakistan up to 5th June, 1967 before the Ra.!abagan Dockyard started functioning again.

Then again the busi- G ness which was started by the Corporation in the Rajabagan Dockyard was to a large extent different in character from that carried on by the company.

The pnnc1pal activny which the Company cnrrie<l on in the Rajabagan Dockyard was maintenance and repairs of its own fleet of vessels bnt the Corporation commenced not only ship build.

ing and ship repairing work but also general engineering work such as structural fabrication work, forging, casting and machining and also H deep sea ship repairing and general engineering work comprised more than 80 per cent of the total work as against only. a negligible fraction in the time of the Company and moreover a very substantial part of the work was done for outside parties. It was also provided in the Scheme that the workers who were not taken-over by the Corporation would be paid "all legitimate and legal compensation." The workers who were taken-over by the Corporation were given fresh

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appointments from and after 5th June, 1967 with different scales of pay and different conditions of service. and there was a break m their continuity of service.

The Industnal Tribunal observed that fresh letters of appointment were accepted by the workers under compulsion and duress arising on account of economic necessity but that is not the kind of compulsion or duress which deprives an action of its voluntary character and introduces an infirmity in it. It is indeed unfortunate that in our country there is so much poverty and there are so few job opportunities that the spectre of unemployment and economic :-vant haunts our underprivileged segments of society and corrodes their freedom and choice of action and reduces them to a position where they can be easily dominated and exploited.

But the remedy for this state of affairs is not in the hands of the Court, unless an industrial dispute is raised and the Court gets an opportunity of bringing about social justice through the machinery of indnstrial adjudication.

Here, as the matter stands, there can be no doubt that the workers who were taken-over by the Corporation were given fresh employment on different scales of pay and different terms and conditions than those enjoyed by them under the Company and they suffered a break of more than a month in their continuity of service.

One observation, however, we cannot fail to make and it is that, though the entire undertaking of the Company was closed on 3rd May, 1967, it is strange that no provision was made in the Scheme for payment of closure compensation to those workers who might subsequently be taken-over by the Corporation. If continuity of serVice was to be denied to these workers, then surely they should be entitled to c16sure compensation under section 25FFF or at any rate compensation under section 25FF of the Industrial Disputes Act,

1947. We hope and trust that, though no such provision is made in the Scheme, the Government of India will consider this aspect of payment of compensation under section 25FF or section 25FFF vis-a-vis those workers who were fortunate enough to be taken over by the Corporation but whose continuity of service was interrupted.

That apart, these were some of the important and relevant considerations which ought to have been taken into account by tbe Industrial Tribunal but which the Industrial' Tribunal apparently failed to do.

How far this would. vitiate the finding of the Industrial Tribunal on thi.s 9uestion !s a matter on which we do not wish to express any final cpmton a• it ts not necessary to do so for the purpose of the present

appeaJs.

We le_ave. the question open for adjudication as and when occasion may anse m future.

One th_ing is however clear that the establishment in Rajabagan Dockyard m the hands of the Corporation was not a new establishment.

It w~ the same establishment-the same manufacturin bpparatus-wh1c~ was oprated by the company prior to its taking-ave~ H . Y the Corporat10n. It 1s true that the Corporation purchased and

lnsall~ ne; wa11:t and achine!"Y in substitution as also in addition Rn ba o a de srx new mdustnal sheds within the premises of the a1a gan Dckyard but that does not mean that it became a newly set u~ estahltshment.

Te establishment went by the same name of Raiabagan Dockyard; its address remained the same and some of

the old plant and machinery also continued to be used by the Corporation. The Registration number of the establishment under the Factories Act also remained the same.

It is however not necessary to discuss this aspect of the case any further, as it was almost con-, ceded by Mr. Jagdish Swaroop, learned counsel appearing on bhalf

of the appellants, that Rajabagan Dockyard could not be said to be an establishment newly set up by the Corporation within the meaning of section 16.

His real grievance was against the finding of the Industrial Tribunal that the Corporation was the successor-in-interest of the company in respect of the business carried on in the Rajabagan Dockyard.

That finding however cannot stand because as already pointed out by us, it was wholly unnecessary for the decision of the present question and moreover it failed to take into account diverse important and relevant considerations.

So far as concerns the question which is directly before us for consideration, we take the view that the Rajabagan Dockyard was not an establishment newly set up by the Corporation from 5th June, 1967 as claimed by but was the same establishment as was owned by the Company prior to 3rd May, 1967.

Section 16, sub-s. (1) was, therefore, not attracted and the Corporation was not entitled to claim immunity from payment of bonus under that provision.

We, therefore, uphold the claim of the workers for payment of bonus for the years 1967-68 and 1968-69 as awarded by the Industrial Tribunal and dismiss the appeals with costs.

E P.H.P.

Appeals dismissed.

CENTRAL INLAND WATER TRANSPORT CORPORATION LTD

THEIR WORKMEN

P. N. BHAGWATI

P. K. GOSWAMI, JJ

Bonus Act, 1965

JJrial Disputes Act

Section 25F

Payment of Bonus Act, 1965

section 16

Payment of Bonus Act

Factories Act

section 25F

section 25F

Payment of Bonus Act, 1965

s. 10

Industrial Disputes Act

s. 16

Payment of Bonus Act, 1964

s. 16

of Bonus Act, 1964

s. 16

ss. 391 and 394

Companies Act, 1956

Payment of Bonus Act, 1965

s. 16

s. 10

Indus-trial Dispntes Act, 1947

s. 16

s. 16

s. 16

Section 16

section 16

section 3

section 25F

section 25F

Industrial Disputes Act

section 25F

section 25F

s 9

Factories Act

section 16

Section 16