UNION OF INDIA v.

JARDINE HENDERSON Al'<D ORS.

(AND VICE VERSA)

March 16,' 1979

[N. L. UNTWALIA AND R. S. PATHAK, JJ.]

Bengal Public Demands Recovery Act, 1913, Sections 7 to 10 rea4 with Rule 46{2) under the Act, Scope of-Locus standi of the Purchaser of the

propc1ty of certificate debtor to prefer a claim objecting to the sale of property under the Act.

Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, Section 3(l)(a) & (b) read with sub.section (4) section 35 of the Income Tax Act, 1962-When a fresh notice of demand is necessary, explainied.

In Income Tax Officer, Kolar Circle and Anr. v. Seghu Buchiah Setty. 52 I.T.R. 538, this Court held that the recovery proceedings initiated against the assessee-respondent' on the basis of the original demand notice were bad as it was of tbc view that the amount of tax assessed when reduced as a result of the appellate orders a fresh demand notice had to be served on the respondent before he could be treated as a defaulter. To get over the difficulties in the collection of income tax and other direct taxes created by the decision in

Seghu Chctty's case, the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 was passed with retrospective effect by an express provision in. section 5. ,

The property belonging to two brothers, the certificate debtors in . C.A. 1575(NT) 71 and C.A. 1965 (NT) of 1963 respectively were purchased by M/s Jerdine Henderson (Ltd.) on September 20, 1954, i.e. after service of notices under section 7 of $e Bengal Public Demands Recovery Act, 1913.

The objections raised by the certificate debtors were rejected and the property came to be sold. In both cases the Company received a notice on August 6, 1956 fixing a date for settling the terms of the sale proclamation in respect of the respective one half share of each of the two Certificate-debtors. Imme .. diately thereafter the respondent-company made an application in each of the two cases that it had purchased the property being unaware of the pendency of any Ceritficate case against any of its vendors for realization of incometmc dues and that the Company was the owner of the property and it was not liable to be sold as that of the Certificate-dei>tor. The Certificate Officer

rejected the objection holding that the purchase having been' made after service of notice under section 7 of the Bengal Act on the Certificate-debtor, was void as against any claim enforceable in execution of the Certificate and hence the Company had no right to object to the sale. The Company went up in appeal before the Commissioner and succeeded in both the cases. Two revisions were filed before the Board of Revenue which were allowed. The respondent-company then moved the High Court under Article 227 of the Constitution. The petition giving rise to Civil Appeal No. 1575 was allowed .

The other petition giving rise to C.A. 1965 of 1971 was dismissed by the oame Bench.

A Two questions, namely (a) the locus standi of the purchaser-Company to prefer a claim objecting to the sale of the property and

(b) the effect o! section 3(1 )(a) and (b) of the Validation Act, 1964 read with Section :l5(4) of the Income Tax Act, 1962 arose for decision in these &ppeals.

Allowing C.A. 1575/71 and dismissing C.A. 1965/71 (both by certificates) the Court. ( B

HELD : I. The Company as a purchaser of the properly of the certificate debtors had locus standi to prefer the claim. The company preferred a claim objecting to the sale of property on the ground that it was not liable to be sold as it had purchased the property from the two certificate debtors. In the Bengal Public Demands Recovery Act, 1913, there is no express provision enabling a person other than the Certificate debtor claiming an interest in the property to he sold to file any objection. He, of course, under section 22 can take recourse to the said provision by filing an application to set aside the sale of immovable property on deposit of the amounts provided therein.

But the rules in Schedule II under secion 38 have the effect as if enacted in the body of the Act. In Schedule II is to be found rule 39 which is very much like rule 58 of Order 21 of the Code of Civil Procedure, 1908. [561 F--G]

(a) It was open to it to show under rule 40 that at the date of the service D of notice under section 7 it had some interest in the property in dispute.

If the notice served at the beginning of the two Certificate cases under section 7 on the two Certificate-debtors was not a valid notice in the sense that in one case on the reduction of the amount of the Certificate it became necessary to give a fresh notice and in the other without a fresh demand notice under the Income-tax Act for the enhBnced amount, the Certificate case could not proceed, then the Company had validly E purchased the property and its purchase was not void. The property purchased by it could not then be sold for realization of the income-tax dues against the two brothers. If, however, no fresh notice was necessary to be served in either of the two cases then it is plain that the Company's purchase was void es against the claim enforceable in execution of the Certificate. [561 H, 562 A-

(b) It is clear from sections 7, 8, 9 and 10 of the Bengal Public Demands

Recovery Act, 1913, that if the Certificate is modified or varied by the certi ficate officer under Section 10, while disposing of the petition of objection filed by the Certificate-debtor under section 9, then the Certificate case proceeds further without a fresh notice under section 7. [561 D-E]

In the instant case, the amount was not reduced on the objection of the Certificate-debtor but it wa5 reduced on receipt of the information front the Income Tax Officer. [561 EJ

2. The transfer was void against the Certificate claims in both cases under section S(a) of the Bengal Public Demands Recovery Act, 1913. In both the clV!les notices under section 7 of the Bengal Act bad been served upon the Certificate debtor before the property in question was tmnsferred by them to the company. In neither of the two cases did the certificate proceeding became invalid, in one case by reduction of the demand and in the other by an enhancoment, since clause (c) of section 3(1) of the Validation Act clearly and expreasly provides that no proceedings in relation to Government dues

UNION v. J. HENDERSON 557

'fihall be invalid merely because no fresh notice was served upon the assessee, A Jtfter the dues were enhanced or reduced in any appeal or proceeding. [566 E--F]

R.m Swarup Gupta v. Behari Lal Ba/Jeo Prasad and Ors., 95 I.T.R. 339;

Ditinguished.

3. (a) On a plain reading of clause (a) of section 3 of the Validation

~.\ct, it is clear that the intention of the Legislature is not to allow the nullifica~ !ion of the proceedings which were initiated for recovery of the original demand.

On the basis of another notice of demand for the enhanced amount two .courses are open to the department (i) to initiate another proceedings for the

recovery of the amount by which the dues arei enhanced treating it 86 a separate demand or (2) to cancel the first proceedings and start a fresh one

for the recovery of the entire amount including the enhanced one.

In the latter case, the first proceedings started for the recovery of the original amount will lose it! force and the fresh proceedings will have to proceed de nova.

But in th(~ former, the proceedings are not affected at all. [564 E-G] c

3. (b) The argument that the effect of sub-section ( 4 of section 35 of the Income Tax Act has not been done away with by clause (a) of section 3 .of the Validation Act, 1964 is not correct. Firstly on a correct interpretation of sub-section ( 4) of section 35 it would be noticed thaot though the expression used i! "the &um payable" but in the context it would mean only the "extra D .enhanced sum payable" and not the whole of the enhanced amount. The expression "sum payable" had to be used in 5ub section ( 4) because that i; ub section was also providing for a contingency where by the rectification order the 001ount of refund was reduced.

In such a case the expression "the

um payable" would obviously mean the difference between the amount refunded

and the reduced amount which was liable to be refunded.

Secondly, even -if it were to be held that in the case of enhancement the expression "the sum E payable" in sub section ( 4) means the whole of the enhanced amount by a rule of harmonious construction it has got to be held that in view of section 3(1)(a) of the Validation Act even in the case of a rectification a notice of demand i~ to be served now only in respect of the amount by which the Government dues are enhanced.

[565 B-E]

4. Sub clause (i) of clause (b) of sub section (I) of section 3 of the F Validation Act clearly provides that it is not necessary for the Taxing Authority to serve upon the assessee a fresh notice of demand.

The only thing which he is required to do that he has to give intimation of the fact of such deduction to the assessee and to the Tax Recovery Officer.

The purpose . of giving intimation to the assessee is to bring it to his pointed knowledge that the demand ag&inst him has been reduced, although by other methods also mch as by service of a copy of the Appellate Order or the revisional order G being served on him hei may be made a.ware of that. The intimation to the Tax Recovery Officer is essential as without that intimation from tbe Taxing Authority he cannot reduce the amount of. the Certificate debt in the proceedings already commenced. [565 E-H]

(a) The view of the High Court that the provunon contained in subclause (ii) of clame (b) of oection 3 (I) of the Validation Act i• mandatory and in abnce of a formal intiD1!.tion to the asse!!ee and to the Tax Recovery Officer as required by the seid provision the proceedings initially started could

110! be continued under •ubclauoe (iii),;, Rot 1u•tainab!e in law. [565 H, 566 A]

(b) On the facts of the case in C.A. 1575(NT)/71, the requirement of sub-clause (ii) stood fulfilled and nothing further had to be done in thematter by the Taxing Authority.

That being so the proceedings initiated on the basis of the notice of demand served upon the nssessee before the reduction of the amount in appeal could be continued in relation to the amount so reduced from the stage at which such proceedings stocxl immediately bfore such disposal a" provided for in sub-clause (iii). [566 C-D]

CIVIL APPELLATE JURISDICTION : Civil <\ppeal Nos. 1575 and 1965 of 1971.

From the Judgment and Order dated 12-1-1968 of the Calcutta High Court in Civil Rule No. 2523 and 2527 of 1960.

C V. S. Desai, S. P. Nayar aud Miss A. Subhashini for the Appellant.

S. T. Desai, J. Ramamurthi and D. N. Gupta for the Respondents and Vice-Versa.

The Judgment of the Court was delivered by

UNTWALIA, J.-These two appeals one by the Union of India and the other by M/s Jardine Henderson Ltd. are by certificate grnnted by the Calcutta High Court. Since the facts in both the cases are very much similar involving the interprptation of the various clauses of section 3(1) of The Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, hereinafter referred to as: the Validation Act, the two appeals have been heard together and are being disposed of by this judgment.

There were two brothers named Basanta Kumar Daw, respondent no. 2 in CiviJ Appeal No. 1575 of 1971 and Haridhan Daw, respondent no. 2 in Civil Appeal No. 1965 of 1971. The facts of Civil Appeal No. 1575 of 1971 are these : For realization of arrears of income-tax dues the Certificate Officer of 24 Parganas forwarded to the Collector a Certificate in accordance with Section 46(2) of the Indian Income-tax Act, 1922 specifying the amount of arrears due from respondent no. 2. Thereupon a Certi11cate case was started against him (Basanta Kumar Daw) nnder the Bengal Public Demands Recovery Act, 1913, hereinafter called the Bengal Act, by the Certificate Officer acting as a Collector.

Notice nnder section 7 was served on the Certificate-debtor oo 31-10-1949. Basanta Kumar Daw entered appearance and filed an objection under section 9 of the Bengal Act. This objection was rejected by the Certificate Officer by his Order dated March 8, 1951. On April 2, 1951 the Certificate-debtor made an application for review of the said order dated 8-3-1951 stating therein, inter alia that the appeal preferred by him before the Income-tax Appellate Tribunal had been alfowed in part and some payments also had

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been made since then; the Certificate case, the.refore, could not proceed for the recovery of the sum of Rs. 36,874.10 annas, the original amount mentioned in the Certificate.

The Certificate Officer declined to review his previous order and rejected the review petition.

But he made certain enquiries from the Income-tax Officer whether the amount of the Certificate had to be reduced.

The Incometax Officer informed him that the Tribunal had reduced the demand on appeal on 13-9-1950 and after adjustment of the previous payments made by the Certificate-debtor the revised demand stood at Rs. 19,001.3 annas only. Thereupon the Certificate Officer amended the Certificate on the basis of the information received from the Income-tax Officer and reduced the demand.

On July 18, 1956 he directed the issue of sale notice under Rule 46(2) framed under the Bengal Act in respect of the half share of Basanta Kumar Daw (the other half belonging to his brother Haridhan Daw) in premises nos. 201 to 205/1, Old China Bazar .Street,, Calcutta.

Now a few facts of the other appeal being Civil Appeal No. 1965 . of 1971 may be stated. The Income-tax Officer &ent a requisition to the Certificate Officer of 24 Parganas for the recovery of a sum of Rs. 59,541.15 annas against Haridhan Daw, respondent no. 2 in this appeal . A Certificate case was started.

A notice under section 7 of the Bengal Act was served on the Certificate-debtor on January 30,

1951. He also filed a petition of objection under section 9. But the Certificate Officer by his order dated January 13, 1954 rejected the objection filed by the Certificate-debtor under the Bengal Act.

A review application was also rejected in this case on January 27, 1954.

On March 2, 1954, the Income-tax Officer informed the Certificaie Officer that the original demand of Rs. 59,541.15 annas had been enhanced to Rs. 59,604.7 annas under section 35 of the Income-tax Act and requested him to realize the enhanced amount.

The order under section 35 was passed on March 2, 1953.

The Certificate Officer thereupon informed the Income-tax Officer that the Bengal Act did not provide for enhancing the demand of the existing Certificate and asked him to file a separate Certificate for the additional amount.

He how~ ever, continued the Certificate proceedings for the recovery of the original amount.

M/s. Jardine Henderson Ltd., respondent in Civil Appeal No. 1575 of 1971 and appellant in Civil Appeal No. 1965 of 1971 purchased the whole of the premises in question on .September 20, 1954 for a total sum of Rs. 3,00,100/- purchasing one half of the undivided share from each of the two brothers. l 6-253SCI/79

In both the cases the Company received a notice on August 6, 1956 fixing a date for settling the terms of the sale proclamations in res-- pect of the respective one half share of each of, the two Certificate-debtors.

Immediately thereafter the respondent-company made an application in each of the two cases that it had purchased the property being unaware of the pendency of any Certificate case against any of its vendors for realization of income-ta)( dues and that the Company was the owner of the property and it was not liable to be sold as that of the Certificate-debtor.

The Certificate Officer rejected the objection holding that the purchase having been made after service of notice under section 7 of the Bengal Act on the Certificate-debtor, was void as against any claim enforceable in eJCecution of the Certificate and hence 1he Company had no right to object to the sale.

The Company went up in appeal before the Commissioner and succeetled in both the cases.

Two revisions were filed before the Board of Revenue which were allowed.

The respondent-company then moved the High Court under Article 227 of the Constitution. The petition giving rise to Civil Appeal No. 1575 was allowed and hence the Union of India has come up in appeal.

The other petition giving riSe to Civil Appeal No. 1965 of 1971 was dismissed by the same Bench and the Company has, therefore, come up in appeal.

The Validation Act was not there when the orders were passed either by the Commissioner or the Board of Revenue.

But in the High Court as also here the main controversy between the' parties was the effect of the Validation Act on the two Certificate proceedings.

Mr. V. S. Desai, appearing for the Union of India, in the first in stance submitted that the order reducing the amount of the Certificate in Civil Appeal No. 1575 was an order under section 10 of the Bengal

Act. Hence the notice served under section 7 on the Certificate-debtor continued to have its effect in spite of the reduction of the amount and no fresh notice under section 7 was necessary to be served. In agreement with the High Court we have no difficulty in rejecting this argument.

We may first read some of the relevant provisions of the Bengal Act.

Section 7 reads as follows :-

"When a certificate has been filed in the office of a Certificate-officer under section 4 or section 6, he shall cause to be served upon the certificate-debtor, in the prescribed manner, a notice in the prescribed form and a copy of the certificate."

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The effect of service of notice of certificate is provided in section 8 which provides :-

"From and after the service of notice of any certificate under section 7 upon a certificate-debtor-

( a) any private transfer or delivery of any of his immovable property situated in the district in which the certificate is filed, or of any interest in any such property, shall be void against any claim enforceable in execution of the certificate."

Under Section 9 the Certificate-debtor may file a petition of objection denying his liability in whole or in part.

Under section 10 it is provided :-

"The Certificate-officer in whose office the original certificate is filed 'shall hear the petition, take evidence (if necessary), and determine whether the certificate-debtor is liable

for the whole or any part of the amount for which the certi- D ficate was signed; and may set aside, modify or vary the certificate accordingly : "

On reading the provisions aforesaid it is clear that if the Certificate is modified or varied by the Certificate Officer under section 10 while disposing of the petition of objection filed by the certificate-debtor under section 9, then the Certificate case proceeds further without a fresh notice under section 7. But in the instant case the amount was not reduced on the objection of the Certificate-debtor but it was reduced on receipt of the information from the Income-tax Officer.

In the Bengal Act itself there rs no expre5s provision enabling a person other than the Certificate-debtor claiming an interest in the property to be sold to file any objection.

He, of, course, under section 22 can take recourse to the said provision by filing an application to set aside the sale of i=ovable property on deposit of the amounts provided therein.

But the rules in Schedule II under section 38 have the effect as if enacted in the, body of the Act.

In Schedule II is to be found ru'le 39 which is very much like rule 58 of Order 21 of the Code of Civil Procedure, 1908.

The Company preferred a claim objecting to the safo of property on the ground that it was not liable to sale as it had purchased the property from the two Certificate-debtors. Tt was, therefore, not quite accurate to say that the Company had no locus stdndi to prefer the claim. It was open to it to show under rule 40

that at the date of the service of notice under section 7 it had some interest in the property in dispute.

If the notice served at the beginning

A of the two Certificate cases under section 7 on the two Certificatedebtors was not a valid notice in the sense that in one case on the reduction of the amount of the Certificate it became necessary to give a fresh notice and in the other without a fresh demand notice under the Income-tax Act for the enhanced amount, the Certificate case could

not proceed, then the Company had validly purchased the property and its purchase was not void.

The property purchased by it could not then be sold for realization of the income-tax dues against the two brothers.

If,, hower, no fresh notice was necessary to be served in either of the two cases then it is plain that the Company's purchase was void as against the claim enforceable in execution of the Certificate.

The answer in both the cases has got to be given with reference to the Validation Act and no other point of any consequence was argued or could be pressed with any success in either of the two appeals.

In Income-tax Officer, Kolar Circle, and another v. Seghu Buchiah Setty(!) best Judgment assessments had been made for the assessment

yrs 1953-54 and 1954-55.

A notice of demand for each of the two yoars was served upon the assessee under section 29 of the Income-tax Act, 1922.

The asses'see preferred appeals.

In the meantime for non-payment tax he was treated as a defaulter and a Certificate was for-· warded to the Collector under section 46(2).

Thereafter the tro' payable by the assessee was substantially reduced in appeal.

The In- come-tax Officer infonned the assessee of the reduced tax liability and called upon him to pay the reduced amouut No fresh notice of de-- mand was issued under section 29.

Pending further appeals to the Appellate Tribunal the assessee wanted the Certificate proceedings to be stayed and on his request being rejected he moved the High Court under Article 226 of the Constitution. The High Court held that the

department was not entitled to treat the respondent as a defaulter in the absence of a fresh notice of demand and quashed the recovery proceedings.

On appeal to this Court the majority view expressed was that the amount of tax asses'sed being reduced as a result of the orders of the Appellate Assistant Commissioner, a fresh demand notice hail to be served on the respondent before he could be treated as a defaulter.

The recovery proceedings initiated against him on the basis of the orig; inal demand notice were therefore rightly quashed by the High Coun.

The Statement of Objects and Reasons which led to the introduc:- tion and passing of the Validation Act would show that it was to get over the difficulties in the collection of income-tax and other direct taxts

created by the Supreme Court decision in Seghu Buchiah Setty's cae'e

(I) 52 LT.R. 511 -

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UNION v. J. HENDERSON (Untwalia, !.) 563 '

(supra) that the Validation Act was passed with retrospective effect. The interpretation of this Act falls for our consideration for the first time in this Court.

This is an Act "to provide for the continuation and validation of proceedings in relation to Government dues and for matters connected therewith." In the Schedule appended to the Act are enumerated various tax statutes including the Income-tax Act. "Taxing Authority" has been defined in clause ( d) of section 2 and clause ( e) defines "Tax Recovery Officer" to mean an officer to whom a certificate for the recovery of arrears of Government dues may be issued under this Act.

Section 3 without the proviso may be read as a whole :-

"Continuation and validation of certain proceedings.-

( 1) Where any notice of demand in respect of any Government dues is served upon an assessee by a Taxing Authority under any scheduled Act, and any appeal or other proceeding is filed or taken in respect such Government dues, then,-

( a) where such Government dues are enhanced in such appeal or proceeding, the Taxing Authority shall serve upon the assessee another notice of demand only in respect of the amount by which such Government dues are enhanced and a!ny proceedings in relation to such Government dues a:s are covered by the notice or notices' of demand served upon him before the disposal of such appeal or proceeding may, without the service of any fresh notice of demand, be continued from the 5tage at which such proceedings stood immediately before such disposal;

(b) where inch Government dues are reduced in such appeal or proceeding-

( i) it shall not be necessary for the Taxing Authority to serve upon the assessee a fresh notice of demand;

(ii) the Taxting Authority shall give intimation of the act of such reduction to the assessee, and where

a certificate has been issued to the Tax Recovery H Officer for the recovery of such amount, also to that officer;

(iii) any proceedings initiated on the basis of the notice or notices of demand served upon the assessee before the disposal of such appeal or proceeding may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately be'fore such disposal;

(c) no proceedings in relation to such Government dues (including the imposition of penalty or charging of interest) shall be invalid by reason ofu.y that no fresh notice of demand was served upon the assessee after the disposal of such appeal or proceeding or that such Government dues have been enhanced or reduced in such appeal or proceeding : "

• Th~ Act was made retrospective by an express provision in section 5.

Clause (a) deals with the case of an enhancement of Government dues and provides that the proceedings initiated may be continued from the stage al which such proceedings stood immediately before the dis·

posal of the appeal or proceedings in which the enhancement was made.

Another notice of demand is required to be served in respect of thf' amount by which the dues are enhanced.

On a plain reading of clausf'

(a) of section 3 it is clear that the intention of the legislature i's nolt to allow the nullification of the proceedings which were initiated for recovery of the original demand.

On the basis of another notice o:f demand for the enhanced amount, two courses are open to the department-(!) to initiate another proceeding for the recovery of the amount by which the dues are enhanced treating it as a separate demand or

(2) to cancel !lie first proceedings and start a: fresh one for the recovery of the entire amount including the enhanced one.

In the latter cas1: the first proceedings started for the recovery of the original amount will lose its force and the fresh proceeding will have to proceed de novo But in the former the first proceedings are not affected at all.

In Civil Appeal No. 1965 of 1971 this is exactly the view taken by the High Court and in our opinion rightly.

Mr. S. T. Desai appearing for the Company submitted that where the amount was enhanced in appeal or revision there was no express provision in the Income-tax Act for service of a fresh or another notice H of demand for the additional amount.

But if the amount was enhanced under the power of rectification under section 35 then sub-section

(4) thereof requires :-

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"Where any such rectification has the effect of enhancing the assessment or reducing a refund the Income-tax Officer

shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and suclt notice of demand shall be deemed to be issued under section 29, and the provisions of this Act shall apply accordingly."

The effect of this sub-section, according to the counsel, has not been done away with by clause (a) of section 3 of the Validation Act. We reject this argument as being unsound and for two reasons.

Firstly, on a correct interpretation of sub-section ( 4) of section 35 it would be noticed that though the expression used is "the sum payable" but in the context it would mean only the "extra enhanced sum payable" and not the whole of the enhanced amount.

The expression "sum payable" had to be used in sub-section ( 4) because' that sub-section was also providing for a contingency where by the. rectification order the amount of refund was reduced.

In such a case the expression "the

um payable" would obviously mean the difference between the amount

refunded and the reduced amount which was liable to be refunded.

The second reason is that even if it were to be held that in the case of enhancement the expression "the sum payable" in sub-section (4) means the whole of the enhanced amonnt by a rule of harmonious construction it has got to be held that in view of section 3 ( 1 )(a) of the Validation Act even in the case of a rectification a notice of demand is to be served now only in respect of the amount by which the Government dues are enhanced.

Now coming to the case of reduction dealt with in clause (ib) of sub-section (I) of section 3 of the Validation Act it would be seen that sub-clause (i) clearly provides that it is not necessary for the Taxing Authority to serve, upon the assessee a fresh notice of demand.

The only thing which he is required to do is that he has to give intimation of the fact of such deduction to the asse"ssee and to the Tax Recovery Officer.

The purpose of giving intimation to the, assessee is to

bring it to his pointed knowledge that the demand against him has been G reduced,, although by other methods also such as by service of a copy of the Appellate Order or the revisional order being served on him he may be made aware of that.

The intimation to the Tax Recovery Officer is essential as without that intimation from the Taxing Anthority he cannot reduce the amount of the Certificate' debt in the proceedings already commenced.

The High Court has taken the view that the H provision contained in sub-clause (ii) of clause (b) of section 3 (1)

'()f the Validation Act is mandatory and in absence of a formal intimation to the assessee and to the Ta!x Recovery Officer al! required by the said provision the proceedings initially started could not be continued under sub-clause (iii).

In our opinion the view of the High Court is not sustainable in law.

On the facts of this case the assessee himself in his review application had clearly mentioned that the demand against him stood reduced in appeal.

He also claimed that he had made certain payments.

Although the Tax Recovery Officer rejected his review petition, as, probably, he had no power of review, he took the precautionary measure of making inquiry from the Taxing Authority.

Thereupon the Taxing Authority gave him the information and the amount of the Certificate debt was substantially reduced.

We, therefore, hold that on the facts of this case the requirement of sub-cla'use

(ii) stood fulfilled and nothing further had to be done in the matter by the Taxing Authority.

That being so the proceedings initiated on the basis of the notice of demand served upon the assessee before the reduction of the amount in appeal could be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal as provided for in sub-clause (iii).

Clause (c) of section 3(1) of the Validation Act is also important and it clearly and expressly provides that no proceedings in relation to Government dues shall be invalid merely because no fresh notice of E demand was served upon the assessee after the dues were enhanced or rednced in any appeal or proceeding.

It is, therefore, plain that in neither of the two cases did the Certificate proceeding become invalid, in one case by reduction of the demand and in the other by an enhancement.

In both the cases notices under section 7 of the Bengal Act had been served upon the Certificate-debtors before the property in F' question was transferred by them to the Company.

The transfer was, therefore, void against the Certificate claims in both the cases under section 8(a) of the Bengal Act.

Mr. S. T. Desai called our attention to the decision of the Allahabad High Court in Ram Swarup Gupta v. Behari Lal Baldeo Prasad and G others. ( 1).

That case is, however, clearly distinguishable as in

that the property was sold in Cer.tificatc proceedings started for the realization of the original amount even after the amount had been reduced in appeal.

It is obvious that that sale wai; illegal and invalid as rightly held by the High Court because after reduction the demand had to be reduced on intimation by the Taxing Authority and the property could not be sold for the original amount.

(!) 95 I.T.R. 339

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For the reasons stated above, Civil Appeal No. 1575 of 1971 is allowed with costs payable by the respondent-company, the Judgment and Order of the High Court. are set aside and it is directed that the Certificate case shall proceed to disposal in accordance with law as expeditiously as possible.

Civil Appeal No. 1965 of 1971 is dismissed but we make no order as to costs in this appeal.

V. D. K.

C.A. No. 1965/71 dismissed.

C.A. No. 1965/71

UNION OF INDIA

JARDINE HENDERSON Al'<D ORS

N. L. UNTWALIA

R. S. PATHAK, JJ.

Sections 7 to 10

Section 3(l)(a)

section 35

Income Tax Act, 1962

Seghu Chctty

section 5

Jerdine Henderson

September 20, 1954

section 7

August 6, 1956

section 7

Article 227

section 3(1 )(a)

Validation Act, 1964

Income Tax Act, 1962

section 22

Schedule II

Schedule II

Code of Civil Procedure, 1908

section 7

section 7

Income-tax Act

sections 7, 8, 9 and 10

Recovery Act, 1913

Section 10

section 9

section 7

section 7

section 3(1)

section 3

section 35

section 3

Validation Act, 1964

section 35

section 3(1)(a)

section 3

Calcutta High Court

C V. S. Desai

S. P. Nayar

A. Subhashini

S. T. Desai

J. Ramamurthi

D. N. Gupta

UNTWALIA

Union of India

Jardine Henderson Ltd.

section 3(1)

Basanta Kumar Daw

Haridhan Daw

Section 46(2)

Indian Income-tax Act, 1922

Basanta Kumar Daw

section 7

section 9

April 2, 1951

July 18, 1956

Basanta Kumar

Haridhan Daw

Calcutta

section 7

January 30,

1951

section 9

January 13, 1954

January 27, 1954

March 2, 1954

section 35

Income-tax Act

section 35

March 2, 1953

Jardine Henderson Ltd.

section 7

Article 227

Union of India

V. S. Desai

section 10

section 7

section 7

Section 7

section 4

section 6

section 8

section 7

Section 9

section 10

section 10

section 9

section 7

section 22

Schedule II

section 38

Schedule II

Code of Civil Procedure, 1908

section 7

section 7

Income-tax Act

section 29

Income-tax Act, 1922

section 46(2)

section 29

Article 226

Supreme Court

Seghu Buchiah Setty

Income-tax Act

section 2

Section 3

section 5

section 3

S. T. Desai

Income-tax Act

section 35

section 29

section 3

section 35

section 3

section 3

section 3

section 3(1)

section 7

section 8(a)

Allahabad High Court

V. D. K.


STATE OF PUNJAB & ORS.

DEWAN'S MODERN BREWERIES LTD.

March 16, 1979

[N. L. UNTWALIA AND R. S. PATHAK, JJ.J

Punjab General Sales Tax Act 1948-Sales effected on permits prescribing price, quantity and the person to whom goods should be sold-Sales tax if j' / could be levied-Tax levied retrospectively-Validity of-Concensuality if lacking where dealer did not know that tax was to be paid.

The sa]es tax authorities levied tax on the sales of liquor effected by the respondent who was a whole saler in that commodity. Impugning the levy, the respondent contended in the High Court that when it sold liquor against permits issued by the authorities there was no volition because the price and 1he quantity of goods to be sold and the person to whom sold were all fixed and therefore there "'as no sale in the eye of law which would attract tax. The Department, on the other hand, contended that even when goods were sold against a permit there was still an area of volition in that the parties could decide on the quality and brand of liquor, the quantity, whether in bulk or in instalments. the size of the package and so on, all of which showed that thf.re was no restraint on the volition of the parties and therefore there was sale which attracted tax.

A single judge of the High Court, following a decision of the Division Bench of the same High Court in Jagatiit Distilling and Allied Industries Ltd.

v. The State [28 STC 709], quashed the order of assessment. A Division Bench dismissed the appeal in limine.

Allowing the State's appeal

HELD : The transactions were sales exigible to tax. [571 G]

1. The decision of this Court in Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer, [1978] 2 SCR 433 justifies imposition or sales tax on the sale of liquor on permits. A conspectus of the provisions of the Punjab Excise Act and the Rules shows that there is an area of agrement sufficient enough for the parties to bring, by their volition, the impugned transctions within the ambit of sales. [570 G; 571 A]

Vishnu Agencies (P) Ltd. etc. v. Commercial Tax Officer & Ors.

Etc., [1978] 2 SCR 433; followed.

Jagatiit Distilling and Allied Industries Ltd. v. The State, 28 STC 709 overruled.

2 (a) It is well settled that sales tax could be imposed retrospectively.

TI1erefore, even though in this case the tax was levied retrospectively by a validation ordinance, the respondent would be deemed to have entered the trade and carried it on on the basis that it would be, liable to pay sales tax. [571 DJ

• ..

'(b) Even assuming that the respondent carried on the trade thinking that it would not be liable to pay sales tax, the area of concensuality still left for the purpose of agreeing to the final terms of the transactions between the res pendent and its retail dealers was quite sufficient for the application of the ntio of Vishnu Agencies. [571 F-G]

C1vn, APPELLATE JURISDICTION : Civil Appeal No. 2028 1974.

Appeal by Special Leave from the Order dated 6-9-1975 of the '( Punjab aud Haryana High Court in LP.A. No. 516/73 .

.._..

Hardev Singh and R. S. Sodhi for the Appellants.

L. N. Sinha, P. P. Singh and E. C. Agarwala for the Respondent.

The Judgment of the Court was delivered by

UNTWALIA J.-The respondent-company in this appeal by special 1eave has a Distillery and Brewery at Jammu.

It maintains wholesale depots at various places in the State of Punjab, the main depot being at Ludhiana. As a whole-seller it supplied Indian made foreign liquor to permit holders on the permits issued by the respective Excise and Taxation Officers, the competent authorities under the Punjab Excise Act and the Rules framed thereunder.

Sales tax under the Punjab General Sales Tax Act, 1948 was imposed in respect of the sales aforesaid by an order of assessment dated the 30th November, 1972.

The respondent, thereupon filed a Writ Petition in the High Court for the quashing of the said order and to restrain the appellants from recovering the amount of Rs. 46,396.22 paise from the petitioner.

The main ground of attack on the imposition of sales tax was that the -alleged sales were not sales in the eye of law as the respondent had no volition in the distribution of liquor which was received from the manufacturing concern at Jammu.

The prices were fixed by the Competent authorities and the respondent had to charge the fixed price from its retailers holding L-2, L-4, L-5 and L-10 licences.

The respondent company holds L-.1 licence which is meant for whole-sale dealers.

The State contested the application and in its counter asserted that the excise trade like many other trades, or even more, had to be regulated and controlled by various Rules and Regulations and inspite of all the restrictions placed thereby an area was still left where the whole-seller and the retail purchaser had to arrive at an agreement by their volition. According to the case of the appellants "the

uahty a.nd bra?d .of Foreign Liquor, lifting of the specified quantity m blk liter or m mstalments, the size of packages (i.e. Bottles, pints,

<Or Nips) and mode of payment (cash or credit or part payment) and

SUPREME COURT REPORTS [1979] 3 s.c.R.

the prices, are the matters which are decided by the petitioner and' his purchasers and there is no law or rule restricting the volition• or liberty of the petitioner in this respect."

Following a Division Bench decision of the Punjab & Haryana High Court in Jagatjit Distilling and Allied Industries Ltd. v. The State(')

a learned single Judge of that Court allowed the writ application and quashed the assessment order.

A Letters Patent appeal from tl:1<i .srud order was dismissed in !imine. Hence this appeal.

This case, in our opinion, is squarely covered by a recent decision of this Court delivered by a Bench of seven Judges in Mjs Vishnu Agencies (Pvt.) Ltd. etc. v. Commercial Tax Officer and others ei'c.(2) The High Court in the case of Jagatjit Distilling and Allied Indu.stries

Ltd. (supra) had mainly relied upon two decision's of this Court to hold that the transactions in that case were not sales.

The said decisions are Mis New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar(3) and Chittar Mal Narain Das v. Commissioner of Sales Tax U.P.('). In the case of Vishnu Agencies (supra) the former case was considered in paragraph 36 to 39 of A.I.R. volume at pages 463-464 and it was held that the view expressed in the majority judgment was not good law and the one contained in the minority judgment was approved.

Chittar Mal's case was also considered in paragraph 44-45 at page 467 and it was distinguished on the ground that the said decision "can he justified only on the view that clause 3 of the Wheat Procurement Order

envisages compulsory acquisition of wheat by the State Government from the licensed dealer." But then the criticism in that case of the Full Berich decision of the Allahabad High Court in Commr. Sales-tax, U.P. v. Ram Bi/as Ram Gopal(') "which held while construing cl'. 3 that so Ion!( as there was freedom to bargain in some areas the transaction could amount to a sale though effected under compulsion of a Statute" wa~ not endorsed.

It is, therefore, plain that to that extent Chittar Mal's case is also not good law.

The decision of the High Court in Jagatjit's case is no longer goog law.

We liave examined the various relevant provisions of the Punjab Excise Act and the Rules framed thereunder.

We find that an area of agreement sufficient enough for the parties to cover by their volition to bring the transactions in question within the ambit of sales was left in the field.

Broadly speaking the stand taken on behalf of the

(I) 28 S.T.C. 709

(2) [1978! 2 S.C.R.

433~A.I.R. 1978 S.C. 449.

(3) 14 S.T.C. 316~[1963] Suppl. 2 S.C.R. 459.

(4) 26 S.T.C. 344~[1971] 1 S.C.R. 671.

(5) A.LR. 1970 All. 518.

. , \

' j

.appellants in their counter. was correct, except that in regard to the

fixation of price we assume in favour of the respondent-companJ that the price had been fixed, as usually it is so in the excise trade.

Even so the decision of this Court in Vishnu Agencies (supra) and the various other previous decisions reviewed therein justifies in law :the imposition of sales tax by the impugned order in question.

Mr. Lal Narayan Sinha tried to distinguish the decision in Vishnu Agencies (supra) by pointing out that sales-tax for the period in question was imposed by the Punjab General Sales Tax (Amendment and Validation) Ordinance, 1972 which was promulgated on the 15th November, 1972 with retrospective effect.

The respondent-company, counsel submitted, cannot be said to have entered into the trade and carried it on during this period by a volition as it did not know that sales-tax would be chargeable for this period and, therefore, it had not realised sales-tax from its customers.

He drew our attention to paragraph 33 of the judment of this Court in Vishnu Agencies at page 461. In our opinion t11e argument of the learned counsel is not sound and for two reasons.

Firstly, it is well settled and it was not disputed that sales-tax could

be impoied retrospectively.

That being so the respondent-company will be deemed to have entered the trade and carri¢ it on the basis that it would be liable to pay sales-tax. Secoudly, even assuming it was not so, what has been pointed out in the begining of paragraph

'33 as a primary fact of willingness to trade in the commodity strictly On the terms of Control Orders is-only ohe of the reasons which led to the decision that an area of agre0ment between the parties was left to their consensus. In our opmion such a part of the area as the one hinted at is not very important and does not form the whole and sole basis of the conclusions arrived at in the case of Vishnu Agencies.

Even assuming in favour of the respondent-company that it did not carry on the trade thinking that it would be liable to pay sales-tax, the area of consensuality still left in the field for the purpose of agreeing to the final terms of the transactions between the company and its retail dealers was quite sufficient for the application of the ratio of Vishnu Agencies. Having considered all that was submitted on behalf of the respoudent-company we find that there is no escape from the conclusion in this case that the iransactions in question were sales exigible to sales-tax.

For the reasons stated above, we allow this appeal with costs in this Court only.

The judgment and order of the High Court are set ·~~ H

'P.B.R.

Appea~ allowed.

STATE OF PUNJAB & ORS

DEWAN'S MODERN BREWERIES LTD

March 16, 1979

N. L. UNTWALIA

R. S. PATHAK, JJ

Punjab General Sales Tax Act 1948

[1978] 2 SCR 433

[1978] 2 SCR 433

Hardev Singh

R. S. Sodhi

L. N. Sinha

P. P. Singh

E. C. Agarwala

UNTWALIA

Jammu

Punjab

Ludhiana

30th November, 1972

SUPREME COURT REPORTS [1979] 3 s.c.

Punjab & Haryana High Court

Vishnu Agencies

Chittar Mal

clause 3

Allahabad High Court

Jagatjit

[1971] 1 S.C.R. 671

Lal Narayan Sinha

15th November, 1972


VITHAL DATTATRAYA KULKARNI & ORS.

SHAMRAO TUKARAM POWER & ORS.

March 21, 1979

(R. S. SARKARIA, P. S. KAILASAM AND 0. CHINNAPPA REDDY, JJ.J

Bombay Tenancy and Agricultural Lands Act, 1948-S. 40-Scope of- Whether heirs of a protected tenant who died before the commencement of the 1956 Amendn1ent Act are entitl:ed to recover possession from the landlord.

Section 3 of the Bombay Tenancy Act, 1939 classified a tenant as a pro .. tected tenant in respect of any land if he 'had held such land continuously for a period of six years immediately preceding 1st January, 1938 to 1st January,_ 1945 and had cultivated such land personally during that period. Tenancy held by a protected tenant could be terminated only in the circumstances stated in s. 5 as for example, failure to pay arrears of rent subletting and so on. Section 7 provided that the landlord could recover possession of the land from the protected tenant on the ground that he bonafide required such and for the purpose of cultivating it personally or for a nonagricultu.ral purpose.

If after taking possession of the land he ceased to use it for that purpose at any time within 12 years from the date on which he took posses~ sion the landlord was required to restore possession of the land under s. 7(2) to the protected tenant. The Act also defined that a protected tenant shall include his heirs by an explanation to this section.

The 1939 Act was repealed and replaced by the Bombay Tenancy and Agricultural Lands Act, 1948. This Act also empowered the landlord to terminate the tenancy of a protected te:ant by giving the tenant one year's. notice in writing if he bonafide required the land for any of the purposes mentioned in the Act and the grounds on which a tenancy could be tern1i 4 nated were also enumerated in the Act. A provision similar to s. 7(i) of the 1939 Act was contained in s. 34(i) of this Act.

The 1948 Act did not contain prov1s1ons corresponding to Explanation (ii) to s. 7 of the 1939 Act declaring that a tenant shall include his heirs. Section 40 provided that if a protected tenant died the landlord shall offer to continue the tenancy on the same terms on which such tenant was. holding it at the tin1e of his death, to the heir or heirs of the deceru.ed tenant. The Explanation to s. 40 declared that a heir meant the lineal de5 .. cendant of a tenant or his adopted son and failing both, his widow.

The 1948 Act underwent substantial changes in 1956. Section 40 as amended in 1956 provided that on the dath of the tenant the landlord shall

be deemed to have continued the tenancy on the same terms and conditions "-..., on which such tenant was holding it at the time of his death to such heir or heirs of the deceased tenant as may be willing to continue the tenancy.

The land in dispute belonging to the appellants was held by the respondent's father who was a protected tenant within the meaning of that term

in the 1939 Act.

In June, 1950 the appellants recovered possession of thee

' i

y. D. KULKARNI V. S. T. POWER 573

land allenging that they needed it for their personal cultivation. In 1951 the potected tenant died. In 1962 the landlords sold a part of the land, whereupon the respondents who were the heirs of the late protected tenant filed a petition alleging that the landlords had ceased to cultivate the land personally within 12 years from the date of dispossession of the protected tenant and, therefore, they were entitled to recover possession of the land. While the Aval Karkun and the Deputy Collector held in favour of the heirs of the tenant, the Revenue Tribunal allowing the revision application of the landlords dismissed the application of the tenant/respondents.

The High Court in a petition under Art. 226 of the Constituton reversed the order of the Revenue Tribunal.

In appeal to this Court it was contended on behalf of the appellants that the right of a protected tenant whose tenancy had been determined and \\'ho had been dispossessed of the land under s. 39 of the Bombay Tenancy and Agricultural Lands Act was a right which was personal to the tenant himself and, which could not for that reason be exercised by the tenant's heirs.

Allowing the appeal.

HELD : The contrast betvveen s. 40 before and after its amendment in 19 56 was that while after the amendment, the heirs of the tenant were automatically deemed to succeed to the tenancy there was no such deeming before the 1956 amendment. The landlord was merely required to make an offer and it was not stipulated what would happen if he did not make the offer. Where the landlord had obtained possession of the land for cultivating it personally there could be no question of making an offer to continue the tenancy.

The 1948 Act before its amendment in 1956 contained no provision corresponding to Explanation (ii) to s. 7 of the 1939 Act.

Therefore under the provisions of 1948 Act as it stood before the 1956 amendment the right of a tenant to recoVer possession of the land from the landlord who had obtained possession of such land on the ground that he required it to cultivate it perso~ nally was not a heritable right. [581 B-E]

Explanation (ii) to s. 7 of the 1939 Act expressly provided that for the purpose of that section a tenant included his heirs. The position under the 1948 Act after its amendment in 1956 as could be seen from ss. 4B and 40 was that the tenancy under the Act was heritable. When it is found that the tenancy was heritable the right given to the tenant may be exercised by the heirs of the tenant also. In the instant case death of the protected tenant occurred in 1951 i.e. before the 1956 Act came into force.

His heirs had therefore no right to recover possession from the landlords. [579 G-H, 581 BJ

Vasant Hariba Londhe v. Jagannath Rarnchandra Kulkarni 71 B.L.R.

~.... 12; Bai Jarnna v. Bai Dhani, 61 Born. L.R. 419; Thakorelal v. Gujarat Revenue Tribunal, A.I.R. 1964 Guj. 183; Damadi/al & Ors. v.

Pareshrarn & Ors., AIR 1976 SC 2229 @ 2234; referred to.

CivIL APPELLATE JURISDICTION : Civil Appeal No. 1296 of 1969.

Appeal by Special Le, ave from the Judgment and Order dated H 11-11-1968 of the Bombay High Court in Special Civil Application No. 1080/65.

M. C. Bhandare, B. Datta and K. K. Manchanda for the Appellant.

A. N. Karkhanis for the Respondent.

The Judgement of the Court was delivered by

CHINNAPPA REDDY, J.-In respect of an extent of ten acres and 23 guntas of land in Survey No. 215 of Village Nathare, Haranax, one Tukaram Patla Power was a protected tenant under the provisions of the Bombay Tenancy Act, 1939, as amended by Act 26 of 1946.

The landlords, Vithal Kulkarni, Vasudeo Kulkarni and Krishnaji Kulkarni gave a: notice to Tukaram on 8th March, 1948 under Section 7(1) of the Bombay Tenancy Act, 1939, alleging that they required the land for their personal cultivation.

In December, 19~!8, the Bombay Tenancy Act, 1939 was repealed and replaced by the Bombay Tenancy and Agricultural Lands Act (57 of 1948). Thereafter, on 25th April, 1949, the Kulkarni brothers filed Tenancy Case No. 102 of 1949, before the Aval Karkun, to recover possession of the land from Tukariim.

The application was dismissed by the AYal Karkuu on 29th August, 1949, but in Tenancy Appeal No. 20 of 1950 filed by the landlords, the Collector of South Satara, Sangli, by his order dated 9th May, 1950, directed that possession of the land should be given to the Kulkarni brothers. The landlords accordingly recovered possession of the land on 18th June, 1950.

Tukaram died on 31st August, 1951. On 18th April, 1961, Vasudeo Kulkarni executed a deed of conditional sale in favour of Sopan Power in respect of a joint 1/9th share in the land. It was recited in the deed that possession was delivered to Sopan but that was disputed.

However, on 27th June, 1962, Sopan executed a deed of recoriveyance in favour of Vasudeo Kulkarni. On 16th April, 1962, Vithal Kulka.mi executed a deed of sale in respect of his 1/3rd share in the land in favour of Bapu Bhan More and Vilas Ganpatl More. On 7th July, 1962, Tukaram's heirs filed Tenancy Case No. 87 of 1962 against the Kulkarni brothers arid their alienees, under Section 3 7 and Sectioh 39 of the Bombay Tenancy and Agricultural Lands Act alleging that the landlords had ceased to cultivate the lands personally within twelve years from the date of dispossession of the tenant (Tukaram) and, therefore, they were entitled to recover possession of the land.

The Aval Karkun made an order in favour of Tukaram's heirs on 26th November, 1963. The order was confirmed by the Special Deputy Collector on 31st March 1964. The landlords and their alienees preferred Revision Applications before the Maharashtrll

Revenue Tribunal.

The Revenue Tribunal allowed the Revision Applications on 27th October, 1964, and dismissed the application

of Tukare.m's heirs filed under Sections 37 and 39 of the Bombay

I • . '

Tenancy and Agricultural Lands Act.

Tukaram's heirs invoked the jurisdiction of the High Court under Article 226 of the Constitution.

The High Court of Bombay by its judgmeut dated 11th November, 1968 allowed the Writ Petition, quashed the order of the Tribunal anj restored the order of the Aval Karkun as affirmed by the Special Deputy Collector.

The three Kulkarni brother~, Bapu Bhau More and Vilas Ganapati More, have preferred this appeal by special leave.

Shri M. C. Bhandare, learned Counsel for the appellants argued that the right of a protected tenant whose tenancy had been determined and who had been dispossessed of the land under Section 39 of the Bombay Tenancy and Agricultural Lands Act was a right which was personal to the tenant himself and, which could not for that reason be exercised by the tenant's heirs.

He argued that whatever may be the right of the heirs of a protected tenant dying subsequent to the Amending Act of 1956, the heirs of a protected tenant who died before the commencement of the 1956 Amending Act had no right to recover possession from the landlords.

He urged that there was a substantial difference between Section 40 of the Bombay Tenanc)

and Agricultural Lands Act as it stood before and after the 1956 amendment. He submitted that the decision of the Full Bench of the High Court of Bombay in Vasant Hariba Londhe v.

Jagannath Ramclzandra Kulkarni, U) applied to cases where the tenant died

after the Amending Act of 1956 and not before. Some other conten tions were also raised to which it is unnecessary to refer.

Shri A. N. Karkhanis, learned Counsel for the respondents, who presented the case of the respondents exteremely well, drew our attention to the provisions of the Bombay Tenancy Act and the Bombay Tenancy and Agricultural Lands Act before and after it was amended in 1956.

He submitted that a comprehensive view of the provisions of the Act showed that the right given to the protected tenant was heritable and, therefore, the heirs of Tukaram were entitled to exercise the right given to the tenant under Section 37 of the Act.

He submitted that the position was not different even under Section 40 of the Bombay Tenancy and Agricultural Lands Act as it stoud before the 1956 amendment.

He also advanced some other minor contentions which we do not consider necessary to mention here.

The Bombay Tenancy Act, 1939 preceded the Bombay Tenancy & Agricultural Lands Act, 1948.

Chapter III of the Bombay Tenancy Act, 1939 (Section 13A to Section 26) dealt with tenants generally, while Chapter II (Sections 3 to 13) of the Act dealt with a special class of tenants described in the Act as protected tenants. Section 3

(I) 71 B.L.R. 12

17-253SC1/79

classified a tenant as a protected tenant in respect of any land if he had held such land continuously for a period of six years immediately preceding 1st January 1938 to 1st January, 1945 and had cultivated such land personally during the aforesaid period. Section 3A was

introduced by way of amendment in 1946 and it provided that every tenant shall be deemed to be a pro\ected tenant for the purpose of the Act, on the expiry of one year from the date of coming into force of the amending Act.

Section 5 enumerated the rights and liabilities of a protected tenant and it was expressly provided that the tenancy of land held by a protected tenant shall not be terminated unless the tenant failed to pay the arrears of rent for a specified period or before the specified date or had done any Act which was destructive or partly injurious to the land or had sub-divided or sub-let the land or failed to cultivate personally or had used the land for a purpose other than agricultural.

Section 7 ( 1) invested the landlord with a special right to determine protected tenancy by giving the protected tenant one year's notice in writing on the ground that he bonafide required the land for the purpose of cultivating the land personally or for a nonagricultural purpose.

Section 7 (2) provided that if after taking possession of the land after the termination of the tenancy the landlord faikd to use it for the purpose for which he had obtained possesshm within one year from the date on which he took possession or ceased to use it for that purpose at any time within twelve years from the date on which he took possession, the landlord shall restore possession of the land to the tenant whose tenancy was terminated: by him unless the tenant had refused iri writing to accept the tenancy on the same terms and conditions as before or that the tenant, on an offer being made to him in writing, had failed to accept the offer within three months of the receipt thereof. Explanation II to Section 7 provided

"For the purposes of this Section a tenant shall include his heir as specified in sub-section (3) of Section 9''.

Section 9(3) specified that the lineal male descendants of a protected tenant or his adopted son, or, in absence of any lineal male descendant or an adopted son, his widow shall be deemed to be his heirs for the purposes of this section.

Section 9 (1) provided that if a protected tenant died, the landlord should continue the tenancy on the same terms and conditions on which the protected tenant was holding it at the time of his death to such one of his heirs who, within four months of the death of such tena:t,,

gave notice in writing to the landlord that he is willing to hold the land on such terms and conditions.

The Bombay Tenancy Act, 1939, was repealed and replaced by the Bombay Tenancy and Agricultural Lands Act, 1948. Chapter II

. " "

F • ;_ ..

~ ,.

• t

' .

of the Act (Section 3 to Section 30) contained 'General provisions regarding Tenancies' while Chapter III (Section 31 to Section 43) dealt with 'Protected tenants, their special rights and privileges'. 'Tenant' was defined to mean an Agriculturist who held the land on lease and to include a person who was deemed to be a tenant under the provisions of the Act. 'Protected tenant' was defined to mean a protected tnant under Section 31 of the Act.

Section 5 prescribed that no tenancy of any land shall be for a period of less than ten years and further provided that at the end of the said period and thereafter at the end of ten years, in succession, the tenancy shall, subject to the provisions of sub-section (2) and (3), be deemed to be renewed for a further period of ten years on the same terms and conditions, notwithstand: ing any agreement to the contrary. Section 5(3) provided that a tenancy was liable to be terminated on any of the grounds mentioned in Section 14. Section 5(2) further empowered the landlord to terminate the tenancy by giving the tenant one year's notice in writing if he bonafide required the land for any of the purposes specified in Section 34(1 ). Section 14 enumerated certain general grounds which entitled a landlord to terminate the tenancy, such as non payment of rent within the prescribed period, doing of an act which was destructive or permanently injurious to the land, division of the land in contravention of Section 27, sub-letting, failure to cultivate personally and use of land for a pnrpose other than agricu_Iture.

Section 31 declared as protceted tenants persons who were deemed to be protected tenants under Sections 3, 3A or 4 of the Bombay Tenancy Act, 1939. Section 3 2 clothed the protected tenant with the right to purchase from the landlord the land held by him as a protected tenant.

Section 34(1) gave to the landlord a special right to terminate the tenancy of a protected tenant by giving him one year's notice in writing that he required the land for cultivating personally or for any non agricultural use for his own purpose. Section 34(1) of the Bombay Tenancy and Agricultural Lands Act, 1948, corresponded to section 7(1) of the Bombay Tenancy Act, 1939. Section 37 of the 1948 Act provided that if after taking possession of the land after terminating the tenancy under Section 34 ( 1) , the landlord failed to use it for the purpose for which he had obtained possession within one year from the date on which he took possession or ceased to use it for that purpose at any time within twelve years from the date on which he took possession the landlord shall restore possession to the tenant whose tenancy was terminated by him unless he obtained from the tenant his refusal in:

writing to accept the tenancy on the same terms and conditions or the tenant had failed to accept the offer made by him in writing to give possession of the land on the same terms and conditions.

Section

SUPREME COURT REPORTS [1979] 3 S.C.Et.

37(1) of the 1948 Act corresponded to Section 7(2) of the 1939 Act.

One noticeable feature in the 1948 Act was that there was no provision corresponding to Explanation II to Section 7 of the 1939 Act which: declared that for the purposes of Section 7 a tenant shall include his heir as specified in Section 9 (3) of that Act.

This was a significartt omission.

Section 39 of the 1948 Act enabled the tenant to make an application where th(l landlord failed to comply with the provisions of Section 37. Section 40 provided that if a protected tenant died the landlord shall offer to continue the tenancy on the same terms on which such tenant was holding it at the time of his death to the heir or heirs cf the deceased tenant. The Explanation to Section 40 de1:- Jared that for the purposes of the Section, an heir meant the line:il male descendants of a tenant or his adopted son and failing ooth, his widow.

Section 40 of the 1948 Act replaced Section 9 of the 1939 Act though not in the same terms.

The 1948 Act underwent some substantial amendments in 1956. 'Tenant' under the Amended Act was defined to include a protected tenant and the provisions relating to the special rights and privileg1is. of the protected tenants contained in Chapter III of the Act were extended to all tenants.

Instead of providing as Section 5 of the unamended Act did, that no tenancy shall be for a period of less th2n ten years, and for renewal of the tenancy for ten year periods thereafter, Section 4B of the amended Act provided that no tenancy of any land shall be terminated merely on the ground that the period fixed

by the agreement or usage had expired. Section 31 of the 1948 Act as it stood originally was repealed and replaced by a new Section 31 which substantially enacted the provisions of Section 34 of the Act as it stood before the amendment.

What was Section 37 of the Act before amendment continued to be Section 37 after the amendment.

Section 40 was amended and it was declared that on the death of a tenant, the landlord shall be deemed to have continued the tenancy on the same terms and conditions on which such tenant was holding it at the time of his death to such heir or heirs of the deceased tenant as may be willing to continue the tenancy.

In this appeal we are concerned with Section 40 as it stood before it was amended in 19 5 6.

In order to understand the real controversy between ihe parties it is necessary to extract here Section 40 both as it stood before and after the 1956 amendment. Before the 1956 amendment Section 40 was

as follows:

"If a protected tenant dies, the landlord shall offer to continue the tenancy on the same terms and conditions on

which such tenant was holding it at the time of his death to the heir or heirs of the deceased tenant : Provided that the offer required to be made by the landlord under this section shall be made in writing :

,,,

Provided further that if any heirs of the deceased tenant do not agree to continue the tenancy on the same terms and conditions on which the deceased protected tenant was holding the land, the Collector may select an heir or heirs who is or are willing to continue the tenancy on the same terms and conditions.

The decision of the Collector shall be final.

• Explanation :-For the purposes of this section, an heir means the lineal male descendants of a tenant or his adopted son and failing both his widow who has not remarried".

Section 40 as it stood after the 1956 amendment is as follows :

" ( 1) Where a tenant (other than a permanent tenant) dies, the landlord shall be deemed to have continued the

temincy on the same terms and conditions on which such tenant was holding it at the time of his death, to such heir or heirs of the deceased tenant as may be willing to continue the tenancy.

(2) Where the tenancy is inherited by heirs other than the widow of the deceased tenant, such widow shall have a charge for maintenance on the profits of such land".

The question for consideration is whether the heirs of a tenant whose tenancy was terminated by the landlord on the ground that he required the land for his personal cultivation were entitled to exercise the right which the tenant would have, if alive, to obtain possession ( "" of the land if the landlord ceased to cultivate the land at any time within twelve years after he obtained possession, in other words, whether the right of the tenant to have the possession of the land restored on the failure of the landlord to cultivate the land personally at any time during the twelve years subsequent to his obtaining possession was a heritable right. The position was clear under the Bombay Tenancy Act, 1939. Explanation II to Section 7 of that Act expressly provided that for the purposes of the Section a tenant included his heirs, as specified in Section 9(3). The position under the Bombay Tenancy and Agricultural Lands Act, 1948, after it was amended in 1956 is also quite clear.

Section 4B and Section 40 show that the tenancy under the Act is heritable.

As already mentioned, while Section 4B provides for the continuation of the tenancy even after the expiry of the period fixed by the agreement or usage, Section 40

expressly provides for the continuation of the tenancy on the death of. the tenant, the heirs of the tenant stepping into the position of the

tenant.

Once it is round that the tenancy is heritable it follows that the right given to the tenant under Section 37(1) may be exercised by the heirs of the tenant also.

A Full Bench of the High Court of Bombay in Vasant Hariba Londhe v. Jagannath Ramchandra Ku/c

karni(') came to the same conclusion, Kotwal, C.J. observed:

"Section 40(1) provides that where a tenant other than a permanent tenant dies, the landlord shall be deemed to have continued the tenancy on the same terms and conditions on which such tenant was holding it at the time of his death, to such heir or heirs o! the deceased tenant as may be willing to continue the tenancy. It will be noticed that prior to the amendment of the Tenancy Act by the Bombay Act XIII of 1956 this section was worded thus "If a pro- . tected tenant dies, the landlord shall offer to continue the tenancy on the same terms and conditions on which such tenant was holding it at the time of his death to the heir or heirs of the deceased tenant .... " The expression used in the old S.40 was "offer to continue the tenancy" and there was no indication whatever as to what was to happen if the offer was not made but by the amendment made by the Amending Act XIII of 1956, sub-s. (!) was wholly re-cast and now there is no question of the landlord merely making an offer to the tenant to continue the tenancy on the same terms and conditions, but on the other hand, the section provides that "the landlord shall be deemed to have continued the tenancy on the same terms and conditions". The amendment, therefore, meets precisely the argument that is here advanced that the heir succeeding to the erstwhile tenant does not continue as a tenant on the same terms and conditions.

Besides, the new section introduced a fiction by the use of the words "deemed to have continued the tenancy" and therefore, whatever may have been the position prior to the amendment, s.40 as it now stads after the Amending Act XIII of 1956 automatically confers on the heir a tenancy on the same terms and conditions as were applicable to the deceased tenant". ..,

The learned Chief Justice then referred to the decisions in Bai Jamna

v. Bai Dhani(') and Thakorelal v. Gujarat Revenue Tribunal(•) andt

(1) 71 B.L.R. 12.

(2) 61 Born. LR. 419

(3) A.I.R. 1964 Gujarat 183

-4'

distinguished the two cases on the ground that on the date on which the death of the tenant took place in thos'e cases Section 40 as amended in 1956 had not come into force, whereas, in the case before the Full Bench the tenant had died after Section 40 was amended in 1956. In the case now before us, however, the death of the tenant took place before the Bombay Tenancy and Agricultural Lands Act was amended in 1956.

We have already extracted Section 40 before and after it was amended in 1956.

The contrast is apparent.

While under the amended Section 40 the heirs of the tenant were automatically deemed to succeed to the tenancy there was no such "deeming" before the 1956 amendment. The landlord was merely required to make an offer and it was not stipulated what would happen if he did not make the offer. Where the landlord had obtained possession of the land under Section 34 for cultivating the land presonally, there could be no question of making an offer to continue the tenancy since such an offer would be an exercise in futility.

There was also the significant circum stance that the 1948 Act (before it was amended in 1956) contained no provision corresponding to Explanation II to Section 7 of the 1939 Act.

The only reasonable conclusion, therefore, is that under the provisions of th!! Bombay Tenancy and Agricultural Land's Act, 1948, as it stood before it was amended in 1956, the right of a tenant to recover possession of land from a landlord who had obtained posses sion of such land on the ground 'that he required it to cultivate it personally was not a heritable right.

Shri Karkhanis, learned Counsel for the respondents relied on the decision of this Court in Damadilal & Ors. v. Parashram & Ors. ( ')

and argued that a statutory tenancy was heritable like a contractual tenancy.

This Court did not lay down the wide proposition that every statutory tenancy was heritable but the Court did quite definitely lay F down that it would be wrong to import the notions of English law relating to "statutory tenancy" and on that basis to hold that it was not transferable or heritable. It was observed by A. C. Gupta, J., as follows :

"We find it difficult to appreciate how in this country we can proceed on the basis that a tenant whose contractual tenancy has determined but who is protected against eviction by the statute, has no right of property but only a personal right to remain in occupation, without ascertaining what hi~ rights are under the statute.

The concept of a statutory tenant having no estate or property in the premises which he occupies is derived from the provisions of the English Rent

(l l AIR 1976 S.C. 2229 at 2234

Acts. But it is not clear how it can be assumed that the position is the same in this country without any reference to tht:

provisions of the relevant statute.

Tenancy has its origin in contract.

There is no dispute that a contractual tenant has an estate or property in the subject-matter of the tenancy, and heritability is an incident of the tenancy. It cannot be assumed, however, that with the determination of the tenancy the estate mnst necessarily disappear and the statute can only preserve his status of irremovability and not the estate he had in the premises in his occupation. It is not possible to claim that the "sanctity" of contract cannot be touched by legislation.

It is therefore necessary to examine the provisions of the Madhya Pradesh Accommodation Control Act, 1961 to find ant whether the respondents' predecessors in interest retained a heritable interest in the disputed premises even after the termination of their tenancy."

The learned Judge thereafter referred to the definition of tenant in the Madhya Pradesh Act and held that the definition made a person continuing in possession after the determination of his tenancy a tenant, unless a decree or order for eviction had been made against him, thus putting him at par with. a person whose contractual tenancy still subsisted. It was observed that the incidents of such tenancy and the contractual tenancy had to be the same in the absence of a contrary intention conveyed by any provision of the Act. It was further observed that the so called statutory tenant had, under Section 14 of the Madhya Pradesh Act, the right to sublet in common with the contractual tenant and, therefore, he must be said to have an interest in the premies occupied by him.

Thus the question whether a tenancy other than a contractual tenancy has any or all the incidents of a contractual tenancy has to be decided with reference to the provisions of the particular statute.

Though Section 5 of the Bombay Tenancy and Agricultural Lands Act as it stood before it was amended in 1956, did indicate by providing that notwithstanding any agreement to the contrary the minimum period of a tenancy shall be ten years renewable thereafter for successive periods of ten years, that the tenancy was heritable, the indication was definitely to the contrary when it came to the right of a protected tenant to have the land restored to him on the failure of the landlord to cultivate the land personally.

Our conclusion regarding the non-heritability of this right rests solely on our understanding of Section 40 of the Bombay Tenancy and Agricultural Lands Act as it

stood before it was amended in 1956, in relation to the right under Section 37. Nothing that we have said should be understood as indicating that any other right of a tenant or this very right after the 1956 amendment is not heritable.

Shri Karkhanis argued that having regard to the position that obtained both under the Bombay Tenancy Act and under the Bombay Tenancy and Agricultural Lands Act after the 1956 amendment, we 'should so interpret Section 40 as to make the right under Section 37 heritable. We are unable to do so in view of the language of Section 40 before it was amended in 1956. In the result we allow the appeal, set aside the judgment of the High Court and restore the decision of the Maharashtra Revenue Tribunal. In the circumstances of the case there will be no order regarding costs.

N.V.K.

Appeal allowed.

VITHAL DATTATRAYA KULKARNI & ORS

SHAMRAO TUKARAM POWER & ORS

March 21, 1979

R. S. SARKARIA

P. S. KAILASAM

0. CHINNAPPA REDDY, JJ

S. 40

Section 3

Bombay Tenancy Act, 1939

s. 5

Section 7

s. 7(2)

s. 7(i)

s. 34(i)

s. 7

Section 40

s. 40

Section 40

Aval Karkun

Art. 226

s. 39

s. 40

s. 7

s. 7

ss. 4B and 40

AIR 1976 SC 2229

CivIL APPELLATE JURISDICTION

M. C. Bhandare

B. Datta

K. K. Manchanda

A. N. Karkhanis

Vithal Kulkarni

Vasudeo Kulkarni

Krishnaji Kulkarni

Tukaram

8th March, 1948

Section 7(1)

Bombay Tenancy Act, 1939

Bombay Tenancy Act, 1939

25th April, 1949

Kulkarni

Tukariim

AYal Karkuu

29th August, 1949

Satara

Sangli

9th May, 1950

18th June, 1950

31st August, 1951

18th April, 1961

Sopan Power

Sopan

27th June, 1962

16th April, 1962

Vithal Kulka.mi

Bapu Bhan More

Vilas Ganpatl More

7th July, 1962

Section 3

Maharashtrll

Revenue Tribunal

Sections 37 and 39

Tenancy and Agricultural Lands Act

Tukaram

Article 226

High Court of Bombay

Bapu Bhau More

Vilas Ganapati More

M. C. Bhandare

Section 39

Section 40

Agricultural Lands Act

Section 37

Section 40

Bombay Tenancy Act, 1939

Agricultural Lands Act, 1948

Section 13A

Section 26

Sections 3 to 13

Section 3

1st January, 1945

Section 3A

Section 5

Section 7

Section 7

Section 7

Section 9

Section 9(3)

Section 9

Bombay Tenancy Act, 1939

Section 3

Section 30

Section 31

Section 43

Section 31

Section 5

Section 5(3)

Section 14

Section 5(2)

Section 34(1 )

Section 14

Section 27

Section 31

Sections 3, 3A

Bombay Tenancy Act, 1939

Section 3

Section 34(1)

Section 34(1)

section 7(1)

Bombay Tenancy Act, 1939

Section 37

Section 34

Section 7(2)

Section 7

Section 7

Section 9

Section 39

Section 37

Section 40

Section 40

Section 40

Section 9

Chapter III of the Act

Section 5

Section 4B

Section 31

Section 31

Section 34

Section 37

Section 37

Section 40

Section 40

Section 40

Section 40

Section 40

Section 7

Section 9(3)

Section 4B

Section 40

Section 4B

Section 40

Section 37(1)

Kotwal

Section 40(1)

Bombay Act XIII of 1956

Amending Act XIII of 1956

Amending Act XIII of 1956

Section 40

Section 40

Section 40

Section 40

Section 34

Section 7

Karkhanis

A. C. Gupta

Section 14

Section 5

Section 40

Section 37

Section 40

Section 37

Section 40

Maharashtra Revenue Tribunal

N.V.K.