74 5

MADHAV PRASAD JATIA

COMMISSIONER OF INCOME TAX, U.P., LUCKNOW

April 17, 1979

[P. N. BHAGWATI AND V. D. TULZAPURKAR, JJ.]

Income-Tax Act 1922, Section l0(2)(iii), !0(2)(xv)-Deduction against business incorne-Condition.r 'lo be satisfied under Section 10{2)(iii) and 10(2)(.[V) for c!ain1ing deduction, explained-Words and Phrases-"For the purpose of business'', scope of.

The appellant-assessee carried on money-lending and other businesses and derived income from various sources such as investment in shares, properties and business.

Pursuant to her promise to donate a sum of Rs. 10 lacs for setting up an Engiiieer!~1g College to commemorate the memory of her lat'e husband, she actually made over a sum of Rs. 5.5 lacs by depositing the same in a joint account opened in the name of the District fagistrate, Bulandshahr aud Smt. Indcrmani Jntia for the College.

The lxtlance of Rs. 4.5 lacs was left with the asscssee and V.'as treated as a debt to the institution and interest thereon at 6% per annum with effect from October 21, 1955 was to be finally deposited in the technical institute account. Though in the books of accounts, on November 21, 1955, a sum of Rs. 10 lacs was debited to her capital account and corresponding credit was given to the account of the institute, the assessec aictual1y paid the sum of ~- 5.5 lacs to the institution on January 7, 1956 from the overdraft account which she had with the Central Bank of India, Aligarh.

In the assessment proceedings for the assessment years 1957-58, 1958-59, 1959-60, the assessee claimed the deduction of these sums-Rs. 20,107/- Rs. 25,470/- ood Rs. 18,445/- being th'e respective items of interest paid by her to the bank on Rs. 5.5 lacs during the samvat years. The assessee contended that she had preferred to draw on the overdraft account of the bank for the purpose of paying the institution in order to save her income earning assets, namely, the shares, which she would have otherwise been required to dispose of :lnd therefore, the interest paid by her should be allowed. As regards interest on the remaining sum of Rs. 4.5 lacs (which was left as a loan with the assessee) that was debited to her account, the assessee claimed that it was a permissible

deduction.

The taxing authorities took the view that the claim for deduction was not G admissible either against business income under section 10(2) or against income from investments under section 12(2) of the Income Tax Act, 1922.

The appeal!'i preferred to the Appellate Tribunal failed.

The references made to the High Court went against the assessee.

Dismissing the appeals by special leave, the Court

HELD : I. Under section 10(2)(iii) of Income Tax Act, 1922, three amditions are required to be satic; fi'ed in order to enable the ru; sessee to claim a deduction in respect of interest on borrowed capital, namely, (a) that money

8-330 SCI/79

A (ca.pita!) must have been borrowed by the assessee, (b) that it must have been borrDwcd for the purpose of business and (c) that the assessee must paid interest on the said amount and claimed it as a deduction.

[7SSB-C]

2. As regards the claim for deduction in respect of expenditure under s. !0(2)(xv), the assessee must also satisfy three conditions namely (a) it (the expenditure) must not be an allowance of the nature described in clauses (i) R to (xiv); (b) it must not be in the nature of capital expenditure or personal

expenses of the assessee and (c) it must have been laid out or expended wholly and exclusively for the purpose of his business. [755C-D]

3. The expression "for the purpose of business" occurring in s.10(2)(iii) as also in 10(2)(xv) is wider in scope than the expression "for the purpose of earning income profits or gains" occurring in s. 12(2) of the Act and, therefore, the scope for allowing a deduction uuder s. 10(2)(iii) or 10(2)(xv) would be much wider than the one available under s. 12(2) of the Act.

[755D-EJ

(.'on1n1issioner of Income Tax v. Malayala1n Plantations Ltd., 53 ITR 140 -. (SC); applied.

4. Neither there had been any confusion of the issue nor any wrong D approach had been adopted by the taxing authorities, the Tribunal or the Hih Court. The case of the assessee had been considered both by the Tribunal as

ell as by the High Court under s.10(2)(iii) or 10(2)(xv) and not under s.12(2). In fact, in Reference No. 775 of 1970 the questions framed by the Tribunal in terms referred to s.10(2) (iii) and 10(2) (xv) and proceeded to seek the High Court's opinion as to whether the sums representing interest paid by tile assessee to the Ce.-.tral Bank on the overdraft of Rs. 5. 5 lacs for E the concerned three years were allowable as deduction under either of the said pro, isions of the Act and the High Court after considering the matter and the authorities on the point had come to the conclusion that such interest was not allowable as a deduction under either of the said provisions. [743J>-G)

5. It is true that the High Court did refer to the decision of the Bombay High Court in Bhai Blturiben's case but that decision was referred to only for F the purpose of emphasising, one aspect which was propounded by that Court, namely, that the motive with which an assessee could be said to have made the borrowing would be irrelevant. In fact the High Court found that there was no material to show that the assessee, in tho instant case, would necessarily

have had to employ the business assets for making payment to charity. The High Court actually considered the assessee's case under section 10(2)(iii) and 10(2)(xv) and disallowed the claim for deduction under these provisions G principally on the ground that the said borrowing of Rs. 5.5 lacs was unrelated

to the business of the assessee.

[754G-H, 755A-BJ

Diza/ Bhuriben Lallubhai v. Commissioner of Income Tax, North Cutch and Saura•htra, 29 I.T.R., 543; explained.

(6) In the instant case:

(a) The amount of Rs. 5.5 lacs having been actually parted with by the :i.ssessee on January 7, 1956, and having been accepted by the institute the same being deposited in the joint account of the assessee and the District

> ..,

MADHAV PRASAD JATIA V, C.I.T. U.P. LUCKNOW 747

Magistrate, Bulandshahr for the Engineering College, the gift to lhal extent A

-'I was undoubtedly complete with effect from the said date. [756A.q

(b.) The said payment made by the assessee by drawing a cheque on the overdraft account was a borrowing which was made to meet her personal obligation and not the obligation of the business and as such Cxpenditure incurred by the assessee by way of payment of interest thereon was not for carrying on the business nor in her capacity as a person carrying on that I business. Such expenditure could by no stretch of imagination be regarded as business expenditure. [756C, Fl

(c) It is true that initially on November 21, !955 the capital account

~ of the assessee was debited and the college account wa9 credited with the

iF'8um of Rs. 10 lacs in the books of th'e assessee but making of these entri~

~ in the assessee's books would not a1ter the character of the borrowing nor C would the said borrowing be impressed with the character of business expenditure for admittedly, the assessee maintained only one common set of books .. in which were inoorporated entries pertaining to her capital, assets and income from all her difference sources.

The borrowing was completely unrelated to the purpose of the business and was actually used for making charity. It is, therefore, clear that the interest that was paid on the sum of Rs. 5.5 lacs to the bank by the assessee for the three concerned years .vas D rightly held to be not deductible either 11t1der section 10(2) (iii) or under section 10(2)(xv) of th'e Act. [756FH, 757A]

Commissioner of. Income Tax, Bombay City II v. Bombay Samachar Ltd., Bombay, 74 ITR 723; Commissioner of Income Tax, Bontbay City IV v.

Kishinchand, 109 I.T.R. 569; distinguished;

( d) Both the Tribunal as well as the High Court were ri&ht in taking tho view that the certificate dated October 17, 1958 was of no avail to the

as&essee inasmuch as it merely stated that the assessee had promised n: donation of Rs. 10 lacs on October 21, 1955, out of which RB. 5.5 lacs were deposited in the joint account maintained in the name of the assessee and ; the District Magistrate, Bulandshahr for the college and the remaining 'um of Rs. 4.5 lacs was left as a loan with the assessee and interest thereon at 6% per annum was to be finally deposited in the technical institute account. -(The Tribunal and the High Court were also right in taking two view. that

"'beyond making entries in the books of account of the assessee there was no ' material on record lo show that the assessee had actually made over a sum __. of Rs. 4.5 lacs to the college or that the college had accepted the said r donation with the result that the amount credited to the college account in her books represented her own funds and lay entirely within her power of disJl06ition and that being so, the interest credited by the ass.ssee on the said sum of Rs. 4.5 lacs and the accretion thereto continued to belong to the assessee, and, therefore she was not entitled to the deduction in respect of such interests, and [758C-0]

( e) If no trust in favour of the college in regard to the amount of RB. 4.5 lacs could be said to have come into existence either on October 21, 1955 or November 21, 1955 or on any other subsequent date during the relevant years, no deduction in respect of interest credited by the ass.., ee to the account of the college over the said sum can be allowed.

[759AB]

Clvn. APPELLATE JURISDICTI0:-1 : Civil Appeal Nos. 1831-1833 Of 1972

Appeals by Special Leave from the Judgment and Order dated 22-9-1971 of the Allahabad High Court in LT. References Nos. 775/70 and 342/64.

S. C. Manchanda and Mrs. Urmila K; ipoor for the Appellant.

V. S. Desai and Miss A. Subhashini for the Respondent.

;.-

The Judgment of the Court was delivered by .. - TuLZAPURKAR, J.-Tbe assessee, Smt. Indermani Jatia, widow of ·) Seth Ganga Sagar Jatia of Khurja, carried on money-lending and other businesses and derived income from various sources such as investment in shares, properties and businesses.

However, the capital, assets and income in respect of different sources of income were incorporated in one common set of books.

With a view to commemorate the memory of her deceased husband, on October 21, 1955 she promised a donation of Rs. 10 lacs for setting up an Engineering College at Khurja to be named "Seth Ganga Sagar Jatia Electrical Engineering Institute Khurja".

She also promised a further sum of Rs. 1.5 lacs for the construction of a Femille Hospital at Khurja but this subsequent donation of Rs. 1.5 laC! was to include the total interest that was to accrue on the sum of Rs. 10 lacs earlier donated to the college. In pursuance of the promise made on October 21, 1955 she actually made over a sum of Rs. 5.5 lacs by depositing the same in a joint account opened in the names of the District Magistrte, Bulandshahr and Smt. Indermani Jatia for the college while the balance of Rs. 4.5 lacs was left • with the assessee and was treated as a debt to the Institution and interest thereon at 6% per annum with effect from October 21, 1955 )- was to be finally deposited in the Technical Institute account.

These , facts become clear from a certificate dated October 17, 1958, issued by the District Magistrate, Bulandshahr which was produced before the Appellate Tribunal.

The aforesaid transaction came to be recorded in the books of the assessee as follows : At the beginning of the accounting year (Samvat year 2012-13-accounting period 13-11-1955 to 1-11-1956) relevant to the assessment year 1957-58 the capital account of the assessee showed a net credit balance of Rs. 23,80,753. Initially on November 21, 1955, a sum of Rs. 10 lacs was debited to her capital account and corresponding credit was given to the account of the

said Institute.

At the close of the said accounting year (i.e. on

MADHAV PRASAD JATIA V. C.I.T. U.P. LUCKNOW 749 (Tulzapurkar, !.) 1-11-1956) after debiting the aforesaid sum of Rs. 10 lacs the capital account showed a net credit balance of Rs. 15 ,06,891. Thereafter, during the sam.e year of account the assessee actually paid only a sum of Rs. 5.5 lacs to the institution on January 7, 1956 from the overdraft account which she had with the Central Bank of India Ltd., Aligarh.

At the beginning of the accounting year the amount outstanding in the overdraft was Rs. 2,76,965; further overdrafts were raised during the accounting year with the result that at the end of the year th6 liability of the assessee to the bank was Rs. 9,55,660; among the further debits to this account during the year • < was said sum of Rs. S.S lacs paid to the Engineering College on rJanuary 7, 1956.

The balance of the promised donation, namely, , Rs. 4.5 lacs was, as stated earlier, treated as a debt due by her to the Institute and accordingly she was debited with interest thereon at 6% per annum with effect from October 21, 1955.

In the assessment proceedings for the assessment years 1957-58, 1958-59 and 1959-60 the assessee claimed the deduction of three "1ms-Rs. 20,107/-, Rs. 25,470/- and Rs. 18,445/• being the

respective items of interest paid by her to the bank on Rs. 5 .5 lacs during the Samvat years relevant to the said assessment yeaf!l.

The .. .._ assessee contended that she had preferred to draw on th.e overdraft account of the bank for the purpose of paying the institution in order to save her income earning assets, namely, the shares, which she would have otherwise been required to dispose of and, therefore, the interest paid by her should be allowed.

As regards interest on the remaining sum of Rs. 4.5 lacs (which was left as a loan with the assessee) that was debited to her account, the assessee urged • that she was also entitled to claim the same as a permissible deduction; the claim in respect thereof, however, was made for the assess- . ..; _ _f ment years 1958-59 and 1959-60. As regards the three sums paid

...

'-..by way of interest on Rs. 5.5 lacs to the bank, the taxing authorities ' took the view that said claim for deduction was not admissible either

against business income under s. 10(2) or against income from investments under s. 12(2) of the Indian Income Tax Act, 1922.

alo the claim for deduction of interest credited to the college account G on Rs. 4.5 lacs was disallowed.

The assessee preferred appeals to

• the Appellate Tribunal. It was contended on behalf of the assessee I.bat she bad promised a donation of Rs. 10 lacs to the Engineering College on October 21, 1955, that the obligation to pay the said amount arose on November 21, 1955 when the amount was debited to her capital account and the corresponding credit was given to the H account of the institution, and that out of this total donation a sum of Rs. 5 .5 lacs was actually deposited in the joint account of the

I!'

assessee and the District Magistrate, Bulandshahr on January 7, 1956 for which the overdraft with the Central Bank was operated and hence the interest was deductible as business expenditure.

As regards interest on Rs. 4.5 lacs that was debited to her account and credited to the Institute's account it was urged that this balance amount was kept in trust for the institution and hence the accruing interest thereon which was debited to her account should be allowed as a deduction.

In support of these submissions a certificate issued by the District Magistrate, Bulandshahr dated October 17, 1958 was produced before the Tribunal. The Appellate Tribunal, however, con- , _. firmed !he disallowance of interest claimed in respect of the sum o'-.

Rs. 5.5 lacs holding that the said sum of Rs. 5.5 lacs over-drawn ., from the bank was not borrowed for business purposes but was borrowed for maldng over the donation and, therefore, the claim could not be sustained under s. 10(2) of the Income Tax Act, 1922. ' As regards the interest accruing on the sum of Rs. 4.5 lacs in favour of the Engineering College, the Appellate Tribunal held that no donation of that sum had been made by the assessee, that it was at best a promise by the assessee to the District Magistrate to pay that amount for purpose of charity and the mere entries in the assessee's own account book crediting the trnst, which had yet to come into existence, would not amount to a gift or charity for a trust and as such the interest credited to the account of the Engineering College was also disallowed.

Meanwhile, Smt. Indermani J atia died and her legal heir Madhav Prasad Jatia was substituted in the proceedings.

On the question whether the interest on Rs. 5.5 lacs was deductible for the assessment years 1957-58, 1958-59 and 1959-60, the • Tribunal declined to make any reference to the High Court, whereupon the assessee applied to the High Court under s. 66(2) and)-. upon the application being allowed, the Tribunal referred the question whether interest on the overdraft of Rs. 5.5 lacs-the sums of ' Rs. 20,107 (for the assessment year 1957-58), Rs. 25,470 (for the ,.. assessment year 1958-59) and Rs. 18,445 (for the assessment year ' 1959-60)-paid to the Central Bank was allowable as a deduction under s. 10(2) (iii) or 10(2) (xv) of the Indian Income Tax Act, 1922 (being Income Tax Reference No. 775 of 1970). As regards the deduction of interest on Rs. 4.5 lacs claimed for the assessment • years 1958-59 and 1959-60, the Tribunal itself made a reference to the Hivh Court under s. 66(1) and referred for the opinion of the High Court the question whether iu the facts and circumstances of the case the interest credited by the assessee to the account of Ganga Sagar Jatia Engineering College on the sum of Rs. 4.5 lacs >- '

MADHAV PRASAD JATIA V. C.l.T. U.P. LUCKNOW 751 (Tulzapurkar, /.) and accretion thereto was an admissible deduction for each of the Said two years (being Income Tax Reference No. 342 of 1964).

The High Court heard and disposed of both the references by a common judgment dated September 22, 1971. In the Reference No. 775 of 1970, the case of the assessee was that there was an obligation to pay Rs. 10 lacs to the Engineering College, that for the time being the assessee decided to pay Rs. 5.5 lacs, that it was open to the assessee to pay the amount from her business assets or to preserve the business assets for the purposes of earning income llnd instead borrow the amount from the bank and that she had accordingly borrowed the amount from the bank and, therefore, since the borrowing was made to preserve the business assets, the interest therecn was deductible under s. 10(2) (iii) or 10(2) (xv) of the Act.

The High Court observed that there was nothing to show that the

assessee would necessarily have had to employ the business assets for making payment of that amount, and secondly, it was only where money is borrowed for the purposes of business that interest paid thereon becomes admissible as a deduction, and since, in the instant case, the sum of Rs. 4.4 lacs was admittedly borrowed from the Bank for making payment to the Engineering College it was not a payment directed to the business purposes.

According to the High Court the mere circumstance that otherwise the assessee would have to resort to the liquidation of her income-yielding assets would not stamp the interest paid on such borrowings with the character of business expenditure.

After referring to the decisions one of the Bombay High Court in Bai Bhuriben Lallubhai v. Commissioner of Income-Tax, Bombay North Cutch and Saurashtra(') and the other of the Calcutta High Court in Manna/al Ratanlal v. Commissioner of Income-Tax Calcutta(2), the High Court rejected the contentioo of the assessee and held that interest paid on Rs. 5.5 lacs in any of the years was not deductible either nnder s. 10(2) (iii) or 10(2) (xv) of the Act and answered the questions against the assessee.

As regards the question referred to it in Income Tax Reference No. 342 of 1964, the High Court took the view that there was nothing on record before it to establish that the assessee had actually donated the entire amount of Rs. 10 facs to the Engineering College, that the certificate issued by the District Magistrate, Bulandshahr on October 17, 1958 merely showed that a balance of Rs. 4.5 lacs was left as a loan with the assessee and that the interest accruing thereon from the da.te of tlw '"i'ial donation "was to be finally deposited in the account of the Technical Institute" and that though the assessee bad made

(I) 29 l.T.R. 543.

(2) 58 l.T.R. 84.

II'

entries in her account books crediting the trust with the interest on the amount, th_e trust had not yet c001e into existence and as such the amount credited represented her own funds and lay entirely within her power of disposition.

With such material on record, the High Court confirmed the Tribunal's view that Rs. 4.5 lacs had not been donated by the assessee on October 21, 1955 in favour of the Engineering College and, therefore, the interest credited. by the assessee in favour of the Institute on the said sum and the accretion thereto continued to belong to the assessec and as such she was not entitled to the deduction claimed by her and accordingly the question wits also answered against the assessec. On obtaining special leave the C original assessee represented by her legal heir has preferred Civil Appeals Nos. 1831-1833 of 1972 to this Court.

• R

Mr. Manchanda appearing for the appellant has raised two or three contentions in support of the appeals.

In the first place he has contended that though the deduction claimed by the assessee in this case was on the basis of business expenditure falling under either s. 10(2)(iii) or 10(2)(xv), the taxing authorities, the Tribunal and the High Court have confused the issue by considering the claim for deduction under s. 12(2) of the Act.

According to him the scope for allowing the deduction under s. 10(2)(iii) or 10(2)(xv) was much wider than under s. 12(2) of the Act.

He urged that by applying the ratio of the decision in Bhuriben's case (supra), which was admittedly under s. 12 (2) of the Act, to the facts of the instant case the lower authorities as well as the High Court had adopted a wrong approach which led to the inference that the deduction claimed by the assesee was not admissible.

Secondly, he urged that considering the case under s. 10(2) (iii) or 10(2) (xv) the questn was when could the obligation to pay Rs. 10 lacs to the Engineering College be said to have been incurred by the assessee and according to him such obligation arose as soon as the donation or gift was complete and in that behalf placing reliance upon the certificate dated October 17, 1958, issued by the District Magistrate. Bulandshahr, as well as the entries made by the assessee in her books, he urged that the gift was complete no sooner the capital account of the assessee was debited and the college account was credited with the said rum of Rs. 10 lacs on November 21, 1955, especially when her capital account had a credit balance of Rs. 15,06,891 after giving the debit of Rs. 10 lacs; the gift in the circumstances would, according to him, be complete then as per decided cases such as Gopal Raf Swarup v.

(1) 77 I.T.R. 912.

(2) 77 I.T.R. 332.

MADRAY PRASAD JATIA V. C.I.T. U.P. LUCKNOW 7 5 3 (Tulzapurkar, !.) Commissioner of Wealth-Tax, Lucknow(') Naunihal Thakar Dass v.

Commissioner of lncome-T(lx, Punjab(').

He further urged that though the sum of Rs. 5.5 lacs was actually paid by the assessee by borrowing the amount on January 7, 1956 from the overdraft account with the Central Bank of India Ltd. the said overdraft was a running overdraft account opened by her for business purposes and if from such overdraft account any borrowing was made interest thereon would be deductible under s. 10(2) (iii) or 10(2) (xv) as being expenditure incurred for the purposes of the business. According to him, once a borrowing was made from an overdraft account meant for business purposes, the ultimate utilization of that borrow- ..,('"' ing will not affect the question of deductibility of interest. paid on \ such borrowing under s. 10(2) (iii) or 10(2) (xv) and in that behalf he placed reliance upon two decisions of the Bombay High Court, namely, Comniissioner of Income-Tax, Bombay City ll v.

Bombay Samachar Ltd., Bombay(') and Commissioner of Income Tax, Bombay City-IV v. Kishinchand Chellaram.( 2 ) He, therefore, urged that the High Court had erred in sustaining the disallowance in respect of interest paid by the asses see on Rs. S. 5 lacs to the Bank in the three years in question as also the disallowance in regard to the interest credited by the assessee to the account of the Engineering College in the two years in question on the sum of Rs. 4.5 lacs and the accretion thereto.

--<.

On the other hand, Mr. Desai for the Revenue, disputed that there was any confusion of the issue or that any wrong approach had been adopted by the lower authorities or by the High Court as suggested by learned counsel for the appellant. He pointed out that initially the assessee had specifically raised the plea that the borrowing of Rs. 5.5 lacs had been resorted to with a view to save income-yielding investments, namely, the shares and, therefore, both the alternative cases as to whether the interest paid on Rs. 5.5 lacs was an admissible deduction eiti1er against business income under s. 10(2) (iii) or income from investments under s. 12(2) were considered by the taxing authorities and the taxing authorities held that such interest was not admissible u.nder either of the provisions. He pointed out that so far as the Tribunal Uild the High Court were concerned the assessee's claim for deduction under s. 10(2) (iii) or 10(2) (xv) had been speifically considered and ncga'ived. He sought to justify the view of the Tribunal and the High Court in regard to the disallowance of interest paid by

(!) 74 I.T.R. 723.

(2) 109 JTR. 569.

the assessee on the sum of Rs. 5.5 lacs to the Bank in the three concerned assessment years as also the disallowance of interest credited by the assessee to the account of the Engineering College on the sum of Rs. 4.5 lacs and the accretion thereto; as regards the sutn of Rs. 5.5 lacs he contended that the real question was not as to when the obligation to pay to the college was incurred by the assessee but whether the obligation incurred by the assessee was her personal obligation or a • business obligation arrd whether the expenditure by way of payment of interest to the Bank was incurred for the purpose of carrying on busi- ness and as regards the sum of Rs. 4.5 lacs whether the trust in favour of the college had at all come into existence on October 21, 1955 or * November 21, 1955 as contended for by the assessee and on both the . ...._) questions the view of the Tribunal and the High Court was right. As regards the two Bombay decisions, namely Bombay Samacha; 's case

(supra) and Kishinchand Chellaram's case (supra), he urged that the ratio of the decisions was inapplicable to the instant case.

At the outset we would like to say that we do not find any substance in the contention of learned counsel for the appellant that there has been any confusion of the issue or that any wrong approach has been adopted by the taxing authorities, the Tribunal or the High Court.

After going through the Tribunal's order as well as the judgment of the High Court we are clearly of the view that the case of the assessee has been considered both by the Tribunal as well as by the High Court under s. 10(2) (iii) or 10(2) (xv) and not under s. 12(2). In fact, in Reference No. 775 of 1970 the questions framed by the Tribunal in terms referred to s. 10(2) (iii) and 10(2) (xv) and proceeded to seek the High Court's opinion as to whether the sums representing interest paid by the assessee to the Central Bank on the overdraft of Rs. 5 .5 lacs for the concerned three years were allowable as a deduction under either of the said provisions of the Act and the High Court after )- considering the matter and the authorities on the point has come to ' • the conclusion that such interest was not allowable as a deduction nnder either of the said provisions It is true that the High Court did refer to the decision of the Bombay High Court in Bai Bhuriben's case (supra) but that decision was referred to only for the purpose of emphasizing one aspect 'Vhich was propounded by that Court, namely, that the motive with which an assessee could be said to have made the borrowing would be irrelevant and that simply because the assessee in that case had ch0sen to borrow money to buy jewellery it did not follow that she had established the purpose required to be proved under s. 12(2) that she borrowed the money in order to maintain or preserve the fixed deposits or helped her to earn interest. This is far, from say-

MADHAV PRASAD JATIA V. C.I.T. U.P. LUCKNOW 755 (Tulzapurkar, /.) ing that the ratio of that case has been applied by the High Court to the instant case. In fact, the High Court found that there was no material to show that the assessee fn the instant case would necssarily have had to employ the business assets for making payment to charity.

The High Court actually considered the assessee's case under s. 10(2)

(iii) and 10\2) (xv) and disallowed the claim for deduction under these provis:ons principally on the ground that the said borrowing of Rs. 5.5 lacs was unrelated to the business of the assessee.

Proceeding to consider the claim for deduction made by the assessee under s. 10(2) (iii) or 10(2) (xv), we may point out that under s. 10(2) (iii) three condi'.ions arc required to be satisfied in order to enable the assessee to claim a deduction in respect of interest on borrowed capital, namely, (a) that money (capital) must have been borrowed by the assessee, (b) that it must have been borrowed for the purpose of business and ( c) that the assessee must have paid interest on the said amount and claimed it as a deduction. As regards the claim for deduction in respect of expenditure under s. 10(2)(xv), the assessee must also satisfy three conditions, namely, (a) it (the expenditure) must not be an allowance of the nature described in clauses (i) to (xiv), (b) it must not be in the nature of capital expenditure or personal expenses of the assessee and ( c) it must have been laid out or expended wholly and exclusively for the purpose of his business. It cannot be disputed that the expression "for the purpose of bminess" occurring in s. 10(2) (iii) as also in 10(2) (xv) is wider in scope than the expression "for the purpose of earning income profits or gains" occurring ins. 12(2) of the Act and, therefore, the scope for a\loy, ing a deduction under s. 10(2) (iii) or 10(2) (xv) would be much wider than the one available under s. 12(2) of the Act. This Court in the case of Commissioner of Income Tax, Kera/a v. Malayalam Plantations

Ltd.(1) has explained that the former expression occurring ins. 10(2)

{iii) and 10(2) (xv), its range being wide, may take in not only the day-to-day running of a business but also the rationalisation of its administration and modernisation of its machinery; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title; it may also comprehend payment of statutory Jues and taxes imposed as a pre-condition to commence or for the carrying on of a business; it may comprehend many other acts incidental to the carry!ng on of the business but, however wide the meaning of the expression may be, its limits are implicit in it; the purpose shall be for the purpose uc business, that is to say, the expenditure incurred shall be

(1) 53 J.T.R. 140.

A for the carrying on of the business and the assessee shall incur it in his capacity as a person carrying on the business.

So far as the daim for deduction of interest paid by the assessee on the sum vf Rs 5.5 lacs to the Bank in the three concerned years is concerned, t11e real question that arises for determination is whether the particular borrowing of Rs. 5 .5 lacs was for the purposes of business of the asscssee or not? The amount of Rs. 5.5 lacs having been actually parted with by the assessce on January 7, 1956, and having been accepted by the institute the same being deposited in the joint account of the assessee and the District Magis:rate, Bulandshahr for the Engineering College, the gift to that extent was undoubtedly complete with effect from the said date. The said payment was made by the assessee by drawing a d, eque on the overdraft account which she had with the Central Bank of India Ltd., Aligarh. In regard to this overdraft account the Tribunal has noted that a: the beginning of the accounting year the amount outstanding in the said over-draft was Rs. 2,76,965, that further overdraits were raised during the accounting year with th~ result that at the end of the year the assessee's liability to the bank in the said account rose to Rs. 9,56,660 and that among the further debits to this account during the year was said sum of Rs. 5.5 lacs paid to the college on January 7, 1956. On a consideration of the aforesaid position of the overdraft and the other material on record, the Tribunal has recorded a clear finding of fact which has been accepted by the High Court that the said borrowing of Rs. 5.5 lacs made by the assessee from the Bank on January 7, 1956 had nothing to do with the business of . the assessee but the amount was directly made over to the college in part fulfilment of the promised donation of Rs. 10 lacs with a virw to commemorate the memory of her deceased husband after whom the college was to be named. In other words the borrowing was made to meet her personal obligation and not the obligation of the business and as such expenditure incurred by the assessee by way of payment of interest thereon was not for carrying on the business nor in her capacity as a per.on' carrying on that business. Such expenditure can by no stretch of imagination be regarded as business expenditure. It is true that initially on November 21, 1955 the capital account of the assessce was debited and the college account was credited with the sum of Rs. 1 O lacs in .the books of the assessee but in our view making of these entries in the assessee's books would not alter the character of the borrowing nor would the said borrowing be impressed with the character of business expenditure, for, admittedly, the assessee maintained only one common set of books in which were incorporated entries pertaining to her capital, assets and income from all her different sources.

It is, therefore, clear to us that the interest that was paid on the sum

>- •

1~.

MADHAV PRASAD JATIA V. C.I.T. U.P. LUCKNOW 757 (Tulzapurkar, J.) of Rs. 5.5 lacs to the bank by the assessee for the three concerned years A was rightly held to be not deductible either under s. 10(2) (iii) or under s. 10(2.J (xv) of the Act.

The two Bombay decisions on which reliance was placed by the counsel for the appellant, namely, Bombay Samachar's case tsupra) and Kishinc!Umd Chellaram's case (supra) are clearly distingubhable B and do not touch the issue raised in the instant case before us. In the former case, the assessee had during the relevant assessment years paid amounts of interest on capital which was borrowed from outsidas and had claimed deduction in respect of such interest. It was not disputed that the capital borrowed by the assessee from the outsiders was admittedly used by the assessee for the purpose of its business. The taxing C authorities had taken the view that if the assessee had collected outstandings wluch were due to it from others it would have been able to reduce its indebtedness and save a part of the interest which it had to pay oa its vwn borrowings, that the asscssee could not be justified in allowing its outstandings to remain without charging any interest thereon while it was paying interest on the amounts borrowed by it, and that to the extent to which it would have been in a position to collect interest on the outstandings due to it from others, it could not be permitted to claim as an allowance interest paid by it to outsiders. The High Court held that such a view was clearly unsustainable and observed that it is not the requirement under s. 10(2) (iii) that the assessec must further show that the borrowing of the capital was necessary for the

business "° that if at the time of the borrowing the assessee has sufficient amount of its own the deduction could not be allowed and the High Court further took the view that in deciding whether a claim

of interest on borrowing can be allowed the fact that the assessee had' llmple resources at its disposal and need not have borrowed, was not a relovant matter for consideration.

The decision in Kishinchand Chel/aram's case (supra) was rendered in the peculiar facts which obtained. In ll:tat case. The Tribunal had recorded a clear finding that since the business of the assessee was that of banking there was no borrowal as such but only acceptance of deposits by the assessee from its. clients which were made by the assessee in the conrse of and for the purposes of its business. In those circumstances the Tribunal took the view that the aspect as to how these deposits, which were admittedly received by the assessee from the depositors in the course of its banking business, were subsequently utilized would not be material for the purpose of deciding the question whether interest paid by the assessee on these deposits should be allowed under s. 10(2) (xv) of the Act and the High Court refused to interfere with that view of the Tribunal and rejected the Revenue's application for a Reference. In the instant

case admittedly the borrowing of Rs. 5.5 lacs had been made by the assesseo to meet her personal obligation and not the obligation of her business. The borrowing was completely unrelated t9 the purpose of the business and was actually used for making charity. On these facts it will be clear that the interest paid on such borrowing cannot be allowed as deduction either under s. 10(2) (iii) or 10(2) (xv).

Turning to the question of interest credited by the assessee during the assessment years 1958-59 and 1959-60 to the aceount of the Engineering College on the sum of Rs. 4.5 lacs and the accretion thereto the real question is whether the gift or donation of Rs. 4.5 lacs was complete and a trust of that amount came into existence in C favour of the college as has been contended for by the assessee. The only material on which reliance has been placed by the assessee in this behalf consists of the entries made in the assessee's books of accounts and the certificate dated October 17, 1958 issued by the District Magistrate, Bulandshahr but from this material it is difficult to draw the inference suggested by the counsel for the appellant. In D our view both the Tribunal as well as the High Court were right in taking the view that the certificate dated October 17, 1958 was of no avail to the assessee inasmuch as it merely stated that the assessee had promised a donation of Rs. 10 lacs on October 21, 1955, ont of which Rs. 5.5 lacs were deposited in the joint account maintained E in the name of the assessee and the District Magistrate, Bulandshahr for the college and the remaining sum of Rs. 4.5 lacs was left as a loan with the assessee and interest thereon at 6% per annum was to be finally deposited in the Technical Institute account. The Tribunal and the High Court were also right in taking the view that beyond making entries in the books of account of the assessee there was no p material on record to show that the assessee had actually made over a sum of Rs. 4.5 lacs to the college or that the college had accepted the said donation with the result that the amount credited to the college account in her books reprented her own funds and lay entirely. within her power of disposition and that being so, the interest credited by the assessee on the said sum of Rs. 4.5 lacs and the accretion thereto G continued to belong to the assessee, and, therefore, she was not entitled • to the deduction in respect of such interests. Counsel for the assessee attempted to contend that the obligation to make over the said sum of Rs. 4.5 lacs could be said to have become enforceable on the basis of promissory estoppel but in our view, no material has been placed on record by the assessee to show that acting on the promised H donation the college authorities had actually incurred any expenditure towards construction or acted to their prejudice during the accounting period relevant to Ille asses8ment years 1958-59 and 1959-60 so as

...

...

MADHAV PRASAD JATIA V. C.l.T. U.P. LUCKNOW 7 59 (Tulzapurkar, !.) to support the plea of promissory estoppel. Of course, if in any subsequent years the assessee is in a position to place any material before the taxing authorities or the Tribunal or the Court which would support the plea of promissory estoppel the position in such years may be different. It is thus obvious that if no trust in favour of the college in regard to the amount of Rs. 4.5 lacs could be said to have come into existence either on October 21, 1955 or on November 21, 1955 or on any other subsequent date during the relevant years, no deduction in res'pect of interest credited by the assessee to the account of the college over the said sum can be allowed.

-( In the circumstances, in our view, the High Court rightly answered

, the questions referred to it against the assessee in both the references.

C The appeals are accordingly dismissed with costs.

V.D.K.

Appeals dismissed .

5

MADHAV PRASAD JATIA

April 17, 1979

P. N. BHAGWATI

V. D. TULZAPURKAR, JJ.

Income-Tax Act 1922

Section 10

Bulandshahr

Indcrmani Jntia

October 21, 1955

November 21, 1955

January 7, 1956

Central Bank of India, Aligarh

section 10(2)

section 12(2)

Income Tax Act, 1922

section 10(2)(iii)

Income Tax Act, 1922

s. 12(2)

s. 10(2)(iii)

s. 12(2)

Bombay High Court

Bhai Blturiben

section 10(2)(iii) and 10(2)(xv)

November 21, !955

section 10(2)

section 10(2)(xv)

October 17, 1958

21, 1955

Allahabad High Court

S. C. Manchanda

Urmila K

V. S. Desai

A. Subhashini

TuLZAPURKAR

Khurja

Indermani Jatia

Central Bank of India Ltd.

Aligarh

rJanuary 7, 1956

s. 10(2)

s. 12(2)

Indian Income Tax Act, 1922

s. 10(2)

Income Tax Act, 1922

Indermani J atia

Madhav Prasad Jatia

s. 66(2)

Central Bank

s. 10(2)

Indian Income Tax Act, 1922

Hivh Court

s. 66(1)

Ganga Sagar Jatia Engineering College

22, 1971

s. 10(2)

Calcutta High Court

s. 10(2)

Manchanda

s. 10(2)(iii)

s. 12(2)

s. 10(2)(iii)

s. 12(2)

Bhuriben

s. 12

s. 10(2)

s. 10(2)

s. 10(2)

S. 5

Desai

s. 10(2)

s. 12(2)

s. 10(2)

Bombay Samacha

Kishinchand Chellaram

s. 10(2)

s. 12(2)

s. 10(2)

Bai Bhuriben

s. 12(2)

s. 10(2)

s. 10(2)

s. 10(2)

s. 10(2)(xv)

s. 10(2)

s. 10(2)

s. 12(2)

Tulzapurkar

It is, therefore, clear to us that the interest that was paid on the sum
•

1~.

MADHAV PRASAD JATIA V. C.I.T. U.P. LUCKNOW 757 (Tulzapurkar, J.) of Rs.

s. 10(2)

s. 10(2.J (xv)

Bombay Samachar

Kishinc!Umd Chellaram

s. 10(2)

Kishinchand Chel/aram

s. 10(2)

s. 10(2)

District Magistrate, Bulandshahr


HUSSAINARA KHANTOON & ORS.

HOME SECRETARY, STATE OF BIHAR, PATNA

April 19, 1979 [P. N. BuAGWArs, 0. CmNNAPPA REDDY AND A P. Sm, JJ.]

Leal Aid to Poor-Ad111i11istration of Criminal l11.stice-Co11.\tilurional obligation of Srate Gorel'nflu'nt-Frce lrgal sen-ices-A b.\l'llce of-I -i1it1rio1t of trial -Att. 21 Constitution of lndfa.

Crilninal Procedure (,'ode, 1973-S. 167(2)(a)-Riu/11 uf u11d1r-triul p1iso1Ier-Release on bail-E11title111cnt to co101sel at Stale expense. .....

On further hearing the petition for r'elease of under-tri::ils in the State of~ Bihar. i HEID : 1. The State Governments do not seem to be alive t.i their constitutional responsibility in the matter of provision of free legal services in the field of administration of criminal justice. If law is net only to speak justice " but abo deliver justice, legal aid is an absolute imperative. Legal aid is really nothing also but equal justice in action.

It is in fact the deliYi!ry system of •ecial justice.

[765D]

2. Every State Government will have to carry out its constitutional obligation to provide free legal services to every accused person who is in peril of losing his liberty and who is unable to defend himself through a lawyer by reason of his poverty or indigence in cases where the needs of justice so require. If free legal services are not provided to such an accused, the trial itself may run the risk of being vitiated as contravening Art. 21 and every State Government should try to avoid su'>'.':h a possible eventuality.

!765F-G]

3. When an under-trial prisoner is produced before a. 1v1agistrate and he has been in detention for 90 days or 60 days as the case may be, the f\.fagistrate must, before making an order of further remand to judicial custody, poin.t out to the under-trial prisoner that he is entitled to b'e released on bail.

[762H, 763A]

4. The Magistrate must take care to see that the right of the under-trial prisoner to the assistance of a lawyer provided at State cost is secure.d to him with a view to enable him to apply for bail in exercise of his right under proviso (a) to sub-section (2) of s. 167 Criminal Procedure Code

[763B]

5. The Magistrate must deal with the application for bail in accordance with tho guidelines laid down in the Court's order dated February 12, 1979.

[763C] ORIGINAL JURISDICTION : Writ Petition No. 57 of 1979.

• )-

• >

G Mrs. K. Hingorani for the Petitioner

U. P. Singh and S. N. Jlw fo.r the Respondent.

The Order of the Court was delivered by '

...

,< i

~ ,

BHAGWATI, J.

This writ petition has again come up before us for further directions. Mr. U.P. Singh, learned Advocate on behalf of the H State of Bihar, has intimated to us that pursuant to the directions given by us in our order dated 9th March, 1979('), the State of Bihar

(I) [1979] 3 SCR 532-544. > ..

' I I

has already released 70 undertrial prisoners whose names were set out in th~ chart filed by Mrs. Hingi:>rani on 9th March, 1979. It is highly regretable that these undertrial prisoners should have remained in jail without trial for periods longer than the maximum term for which they could have been sentenced if convicted. We fail to see what moral or

ethical justification could the State have to detain these unfortunate persons for such unreasonably long periods of time without trial. We feel a sense of relief that they should once again be able to breathe the air of freedom. But we find that there are still many more undertrial prisoners who fall within thls category of persons who have been in detention for periods li:>nger than the maximum term without their trial having been commenced. Mrs. Hingorani has filed before us at the hearing of the writ petition on 16th April, 1979 a second chart giving the names and particulars of some of these undertrial prisoners who have not yet got the benefit of the earlier order made by us.

There are 59 undertrial prisoners whose names and particulars are set out in this chart and we direct that they should be released forthwith as their continued detention is clearly illegal and in violation of their fundamental right under Art. 21 of the Constitution. There are also several other undertrial prisoners who are accused of multiple offences and even if we were to proceed on the assumption that the State would be able to secure their conviction and maximum sentences would be imposed on them and such sentences would not be concurrent in accordance with the usual practice followed by the courts but would be consecutive, they have already sullered the aggregate imprisonment which could be inflicted on them, and there is no reason why they should be subjected to any further detention. It may be poiuted out' that ordinarily the sentences imposed on conviction for multiple offences are concurrent and if we proceed on that assumption which is more realistic, it would be found that there are many undertrial prisoners who have already been in jail for periods exceeding the maximum term which could be imposed on them even if they were convicted of the multiple offences with which they are charged. We have requested Mrs. Hingorani to prepare a chart showing separately the above two categories of undertrial prisoners so that we can pass appropriate orders in regard to them at the next hearing of the writ petition.

Mr. U.P. Singh, appearing on behalf of the State Government, will help Mrs. Hingorani in preparing this chart since Mrs. Hingorani has undertaken this public interest litigation as a matter of public duty and her resources are therefore,

und to be limited.

We are informed that amongst the undertrial prisoners there are some who are lunatics or persons of unsound mind. It is difficult to under-

10--330SCl/79

I ~.

' J

stand how such persons could possibly be kept in the same jail along with other undertrial prisoners. We should like to know from the State Govermnent, in an affidavit to be filed before the next hearing of the writ petition, as to what are the circumstances in which these persons have been kept as undertrial prisoners in the ordinary jails and what the State Government proposes to do in regard to them. Mrs. Hingorani will prepare a list showing the names and particulars of these persons and Mr. U. P. Singh on behalf of the State Government will render the neces .. sary help in this connection. The list may be filed by Mrs. Hingorani at

the next hearing of the writ petition so that we' may be able to pass final • orders in regard to this category of undertrial prisoners.

.- J

We find that pursuant to the directions given by us in our order dated . --, 9th March, 1979, Bageshwari Prasad Pandey, Superintendent of the Patna Central Jail has filed an affidavit dated 4th April, 1979 along with a chart showing the dates on which petitioners Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9 and 17 confined in the Patna Central Jail prior to their release on personal bond, were produced before the Magistrates in compliance with the proviso to section 167(2) of the Code of Criminal Procedure. A similar affidavit dated 4th April, 1979 has also been filed by Pradeep •

•. ; Kumar Gangoli, Superintendent of Muzaffarpur Jail along with a chart showing the dates on which petitioners Nos. 10, 11, 12, 13, 15, 16 and 18 who were previously confined in the Muzaffarpur Central Jail prior to their release on personal bond, were produced before the E Magistrates in compliance with the requirement of the proviso

to section 167 (2).

Bhuvan Mohan Munda, Superintendent . of the Ranchi Central Jail has also filed an affidavit dated 12th April, 1979 together with a chart showing the dates on which some of the nndertrial prisoners referred to in our Order dated 9th March, 1979 were produced before the Magistrates in compliance •

wit~ the requirement of the proviso to section 167(2}. It is apparent . )- from these charts that some of the petitioners and other undertrial prisoners referred to in these charts have been produced numerous times before the Magistrates and the Magistrates have been continually making orders of remand to judicial custody. It is difficult to believe that on each of the countless occasions on which these undertrial prisoners were produced before the Magistrates and the Magistrates made orders of remand, they must have applied their mind to the necessity of remanding those undertrial prisoners to judicial custody. We are also very doubtful whether on the expiry of 90 days or 60 days, as the case may be, from the date of arrest, the attention of the undertial prisoners was drawn to the fact that they were entitled to be released on ball nnder proviso (a) of sub-section (2) of section 167. When an undertrial prisoner is produced before a Magistrate and he has been in deten-

• i 1

i •

H. KHATOON v. !IOME SECRETARY (Bhagwati, J.)

7U3

tion for 90 days or 60 days, as the case may be, the Magistrate muJt, bCforo making an order of further remand tQ. judicial custody, point out to the undertrial prisoner that he is entitled to be released on bail.

The State Government must also provide at its own cost a lawyer to the undertrial prisoner with a view to enable him to apply for bail in exercise of his right under proviso (a) to sub-section (2) of section 167 and the Magistrate must take care to see that the right of the undertrial prisoner to the assistance of a lawyer provided at State cost is secured to hiin and he must deal witli the application for bail in accordance with _ the guidelines laid down by us in our Order dated 12th February, '(1979.(') We hope and trust that every Magistrate in the country and every State Government will act in accordance with this mandate of the Court. This is the constitutional obligaiion of the State Government and the Magistrate and we have no doubt that if this is strictly • carried out, there will be considerable improvement in the situation in regard to undertrial prisoners and there will be proper observance of the rule of Jaw.

The State Government has also filed an affidavit of B. Srinivasan, SujJerintendent of Pol!ee (C.J.D.), Government of Bihar, giving in Annexure (I) particulitnl regarding nnmber of cases pending investigation by the police in each sob-division of the State as on 31st December, 1978 and in Annexure (II), particulars resarding number of cases pendieg investigation for more than six months. These aunexures Show that a total number of 10,339 cases relating to major offences and 17,687 cases relating to minor offencel! were pending investigation in the State of Bihar on 31st December, 1978 and out of these, 5835 cal!es relating to major offences and 7228 cases relating to minor • offences were pending investigation for a period of more than six months. It is a matter of great regret that snch a large number of cases __ ( •honld be pending investigation for a period of more than six months

-- '--.and the number of such cases in relation to minor offences should be • over seven thousand. It is difficult to understand why as many as seven thousand and odd cases relating to minor offences should reniain pending investigation for more than six months. It is no doubt true that reasons have been attempted to be given by B. Srinivasan in a statement annexed to his affidavit, but we are not at all satisfied about the validity of these reasons, particularly in so far as investigation in rela- • tion to minor offences is concerned. One of the reasons given by B.

Srinivasan in his statement is that in 10 per cent of the cases investigation is held up because of delay in receipt of opinions from experts.

We find it difficult to appreciate this reason. We fail to see why the

State Government cannot employ more experts or set up a larger num-

(1) [1979] 3 S.C.R. 169-183

ber of testing laboratories or establish more forensic laboratories. It is also necessary to have more than one serologists in the State. This is a situation which the late Government can certainly remedy by taking prompt action.

There are also many other measures which can be taken by the State Government for the purpose of accelerating the pace of the investigating machinery but it would not be proper for this Court to suggest or recommend any such measures because this Court has not the. requisite expertise of material for doing so and moreover the National Police Commission appointed by the Government of India is seized of thi&

question and it is considering what steps and measures should .:- be taken for the purpose of expediting the investigative procei& and making qualitative improvement in it. But we would be failing itt .' our duty if we do not express our sense of amazement and horror at the leisurely and almost lethargic manner in which investigation into offences seems to be carried on in the State of Bihar. It is high time that the State of Bihar took steps to overhaul and streamline its investigative machinery so that no investigation may take more than the bare minimum time required for it and the judicial process may be set in motion without any unnecessary delay.

We directed by our Order dated 9th March, 1979 that on the next date when the undertrial prisoners, charged with bailable offenc.es, are produced before the Magistrates, the State Government should provide them with a lawyer at its own cost for the purpose of making applie3tion for bail and if any application for bail is made, the Magistra~ should dispose of the same in accordance with the broad guidelinei set out by us in our Judgment dated 12th February, 1979. We are told by Mr. U. P. Singh that the necessary instructions to this effect have been issued by the State Government to the District Magistrate, but we •

do not know whether and to what extent these instructions have been '\. carried out and lawyers at State expense have been provided to the _r undertrial prisoners accused of bailable offences for the purpose of • making application for bail on their behalf. We should like the State Government to file an affidavit stating how many undertrial accused or bailable offences who have been in jail for a period of more than 18 months as on 1st February, 1979 have been provided lawyers at State expenses and whether or not they have been released on bail in accordance with the directions given by us. The State Government will also file an affidavit giving similar information in regard to those undertrial prisoners who have been in jail for periods longer than half the maximum term of imprisonment for which they could, if convicted, be sentenced, because we had given direction of a like nature also in regard to these undertrial prisoners in our iudgmeot dated 9th March. 1979.

We may point out that according to the law as laid down by Ui in our judgment dated 9th March, 1979, it is, the constitutional right of every accused person who is unable to engage a lawyer and secure legal services on account of reasons such as poverty, indigenctl c>r incommunicado situation, to have free legal services provided to him by the State and the State is under a constitutional mandate to provide a lawyer tosuch accused person if the needs of justice so require. We do not know whether the State Government has set up any machinery for the purpose of providing free legal services to persons who are -~. accused of offences involving possible deprivation of liberty and who

rre unable to engage a lawyer on account of poverty or indigence. 111is \ constitutional obligation cnnot wait any longer for its fulfilment, since more than 30 years have passed from the date of enactment of the Constitution and no State Government can possibly have any alibi for not carrying out this command of the Constitution. We are repeating this observation once again in the present judgment because we find that barring a few, many of the State Government dn not seem to be alive to their constitutional responsibility in the matter of provision o~ free legal services in the field of 'administration of criminal justice'. Let it not be forgotten that if law is not only to speak justice but also delive.r jlll!tice, legal aid is an absolute imperative. Legal aid is really nothing else but equal justice in action. Legal aid is in fact the delivery system of wcial justice. It is intended to reach justice to the common man who, as the poet song :

"Bowed by the weight of centuries be leans Upon his hoe and gazes on the ground,

The emptiness of ages on bis face, And on his back the burden of the World." -.( We hope and trust that every State Government will take prompt -..steps to carry out its constitutional obligation to provide free legal " services to every accused person who is in peril of losing his liberty and .. who is unable to defend himself through a lawyer by reason of his poverty or indigence in cases where the needs of justice so require.

If free legal services are not provided to such an accused the trial itself may run the risk of being vitated as contravening Article 21 and we have no dcubt that every State Government would try to avoid such a possible eventuality. ·

We have no report from the State Government as to whether women under "protective custody" in jails have been transferred to

remnd or welfare homes conducted by the social welfare department

a~ dfrected by us by our Order dated 26th February, 1979. Mr. U, P.

Smgh on behalf of the State of Bihar stated before us that this directio'n has been carried out by th~ State Government, but we should like to have an affidavit of some responsible officer of the State Government stating that women who were confined in jail under the label of "protective custody" have been transferred to welfare homes and that necessary instructions have been issued by the State

Government to the effect that women or children who are victims of offence or whose presence is required for giving evidence should not be kept in jail under so called "protective custody".

This affidavit may be filed by the State Government within ten days from today.

We had given direction by our Order dated 26th February, 1979 .~ that the State Government should enquire into cases where the offence - '). - charged against undertrial prisoners are triable as summons case•, 7 for the purpose of ascertaining whether there has been compliance with the provision enacted in section 167, sub-section (5) of the Code of Criminal Procedure. It is clear from this provision that if in aay

case tried by a Magistrate as a summons case the investigation is not concluded within a period of six months from the date on which the accused was arrested, the Magistrate must make an order stopping further investigation into the offence, unless the officer making the investigation satisfies the Magistrate that for special reasons and in the interest of justice, the continuation of the investigation beyond the period of six Irlonths is necessary.

With a view to securing coin pliance with this provision we directed that if, in a case triable by a Magistrate as a summons case, it is found that investigation has been going on for a period of more than six months without satisfying the Magistrate that, for special reasons and in the interest of justice, the continuation of the investigation beyond the period of six montha is .

necessary, the State Government will release the undertrial prisoner, • unless the necessary orders of the Magistrate. are obtained within a period of one month.

The reason for giving this direction wae that)- in such a case the Magistrate is bound to make an order stopping further investigation and in that e\l'.:mt, only two courses would be • open: either the police must immediately proceed to file a chargesheet, if the investigation conducted till then warrants such a cour•e, or if no cae for proceeding against the undertrial prisoner is dil!C!Ofled by the investigation, the undertrial prisoner must be released forthwith from detention.

The State Government has not filed before us any report of compliance with this direction and we wo11ld, therefore, require the State Government to do so within a period of ten days

from today.

We would also request the High Court to draw the attention of the Magistrates to the provision in section 167, sub-section

(5) and ensure compliancc with the requirement of this provision by the Magistrate. >- -

H. KllATOON v. HOME SECRETARY (Bhagwati, J.) 76 7

We find thaf pursuant to the direction given by us in our Order dated 9th March, 1979, the High Court of Patna has forwarded to us a compilation containing particulars giving the location of courts of Magistrates and courts of Sessions in the State of Bihar together with the total number of cases pending in each of these courts as on 31st December, 1978 with yearwise break up of such pending cases and briefly explaining the reasons why it has not been possible to dispose of these cases within a reasonable period of time.

The figures of pending cares given in the compilation are staggering and it is distressing to find that quite a few of these cases have been pending for _ more than five years, sometimes extending even to seven or nine or ten ( years.

We shall examine the position arising from the pendency of such a large number of cases for such long periods of time at the next hearing of the writ petition, with a view to considering what directions are necessary to be given to the State Government by way of taking positive action for the purpose of securing enforcement of the fundamental right of the accused to speedy trial.

We would, however, require tor this purpose information from the High Court of Patna as to the norms of disposals fixed by the High Court for the different categories of Magistrates and Sessions Judges in the State of Bihar, since without this information, it would not be possible for Ui

to decide whether the existing strength of courts and judges in the State of Bihar is adequate for the purpose of ensuring !!J>t'cdy trial to the accused or it is necessary to have additional courts and judges.

We would request the High Court to furnish this additional information to us at the next hearing of the writ petition.

We will proceed with the further hearing of the writ petition on 24th ,.

April. 1979.

-{_

N.V.K .

• - ...

HUSSAINARA KHANTOON & ORS

HOME SECRETARY, STATE OF BIHAR, PATNA

April 19, 1979

0. CmNNAPPA REDDY

S. 167(2)(a)

Art. 21

s. 167

Criminal Procedure Code

K. Hingorani

U. P. Singh

S. N. Jlw

BHAGWATI

U.P. Singh

[1979] 3 SCR 532

Hingi:>rani

9th March, 1979

Hingorani

16th April, 1979

Art. 21

U. P. Singh

Bageshwari Prasad Pandey

Patna Central Jail

section 167(2)

Code of Criminal Procedure

4th April, 1979

Pradeep

Kumar Gangoli

section 167

Bhuvan Mohan Munda

Ranchi Central Jail

section 167(2}. It is apparent . )

section 167

section 167

12th February, '(

B. Srinivasan

31st December, 1978

Bihar

B.

Srinivasan

[1979] 3 S.C.R. 169

National Police Commission

Government of India

State of Bihar

12th February, 1979

1st February, 1979

9th March.

Ui

Article 21

26th February, 1979

U, P.

section 167

Code of Criminal Procedure

section 167

High Court of Patna

24th ,.

April. 1979