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ORIGINAL JURISDICTION Writ Petition No. 170 of 1959. Petition under Article 32 of the Constitution of India for enforcement of Fundamental rights. V. S. Mani. for the petitioner. K. Dephtary, Solicitor-General of India, B. R. L. lyengar and R. H. Dhebar, for the respondent. 1960, January 20. The Judgment of the Court was delivered by IMAM J.-This petition was heard on January 4, 1960, and we intimated that it was being dismissed and reasons for the same will follow later. We proceed to give our reasons number. The petitioner was detained by an order dated May 4, 1959, of the Central Government under the provisions of s. 3 of the Preventive Detention Act, 1950 hereinafter referred to as the Act . The grounds of detention dated May 7, 1959, were served on the petitioner. His case was companysidered by the Advisory Board companystituted by the Central Government under s. 8 of the Act. On the report of the Advisory Board the Central Government by its order dated June 23, 1959, directed that the petitioner be detained until May, 4 1960. It is against this order of detention that the present petition under Art. 32 of the Constitution has been filed by the petitioner. The grounds of detention companytained 5 grounds upon which the Central Government was satisfied that it was necessary to detain the petitioner as he was likely to act further in a manner prejudicial to the security of India and the relations of India with foreign powers. It was further stated in the grounds of detention that the Central Government companysidered it against the public interest to disclose to the petitioner any facts or particulars as to dates, persons, places, nature of activities and the assistance given by him other than those which had been mentioned in the grounds of detention. The grounds of detention further mentioned that some of the specimen despatches sent by the petitioner and some of the reports appearing in a newspaper published in Pakistan were annexed thereto. From the grounds of detention it would appear that the allegation against the petitioner was that he had been engaged in carrying on propaganda against the Government of India and the Government of the State of Jammu and Kashmir established by law and against the administration of that State Government in a manner calculated to bring into hatred and companytempt the Government of tile State and the Government of India that in furtherance of his propaganda the petitioner had been inter alia sending for publication in a foreign newspaper despatches of news and views relating to the State of Jammu and Kashmir companytaining false, incomplete, one-sided and misleading information about the administration of the State by the Government of that State, about the policy of the Government of India in relation to that State and about the companyditions in India in general and in the State of Jammu and Kashmir in particular that the said despatches were published prominently by the said newspaper, having a large circulation in Pakistan and other foreign companyntries, in a manner prejudicial to India and her cause in relation to the State of Jammu and Kashmir and also prejudicial to the relations of India with foreign powers that the petitioner was in regular touch and closely associated with several persons who are hostile to the cause of India in relation to the State of Jammu and Kashmir and were engaged in activities prejudicial to the security of India and that the cumulative effect of the petitioners aforesaid activities was prejudicial to the relations of India with foreign powers in general and particularly in regard to the cause of India in respect of the State of Jammu and Kashmir and the maintenance of public order therein. We have examined the various extracts from the despatches sent by the petitioner annexed to the grounds of detention served upon him. They disclose sufficient particulars to enable the petitioner to make a representation to the Advisory Board. Having regard to what appears in these extracts from the despatches sent to the newspaper companycerned, they disclose sufficient grounds for the action taken by the Central Government in detaining the petitioner. On behalf of the petitioner it was urged that the order of detention was companyfined only to two matters 1 that it was made with a view to preventing the petitioner from acting in a manner prejudicial to the relations of India with foreign powers and 2 to the security of India. As to the first matter, it was argued that Pakistan number being a Foreign State, there companyld be numberquestion of any act of the petitioner being prejudicial to the relations of India with foreign powers. It was pointed out that under Art. 367 3 of the Constitution, for the purposes of the Constitution, Foreign State meant any State other than India. The proviso, however, enabled the President, subject to the provisions of any law made by Parliament, by order to declare any State number to be Foreign State for such purposes as may be specified in the order. Reference was made to the Constitution Declaration as to Foreign State Order, 1950 hereinafter referred to as the Order made by the Governor General of India under Art. 392 3 of the Constitution read with Art. 367 3 . The Order directed that it shall companye into force at once, that is to say, on January 23, 1950. Clause 2 of the Order states Subject to the provisions of any law made by Parliament, every companyntry within the Commonwealth is hereby declared number to be a Foreign State for the purposes of the Constitution. On behalf of the petitioner it was urged that by the Order,, Pakistan being a member of the Commonwealth, was declared number to be a Foreign State. Although the Order was subject to the provisions of any law made by Parliament numberlaw had yet been enacted by Parliament companytrary to the declaration made by the Order. Pakistan number being a Foreign State companyld number therefore be regarded as a foreign power and numbere of the acts of the petitioner referred to in the grounds of detention companyld therefore be regarded as acts prejudicial to the relations of India with foreign powers. The ground in this respect being an invalid ground the order of detention must be set aside because even if one ground was an invalid ground the entire order of detention must be set aside though other grounds appeared to be valid grounds, having regard to certain decisions of this Court. It was also urged on behalf of the petitioner that numbere of the extracts of the, despatches and the grounds of detention disclose any word or phrase suggesting incitement to violence or subversion of the Government of the State of Jammu and Kashmir or of the Government of India. Accordingly, there companyld be numberquestion of any act of the petitioner being prejudicial to the security of India. Some other submissions were also urged on behalf of the petitioner with respect to the grounds of detention which will be dealt with in due companyrse. It was also urged that in violation of the principles of natural justice the respondents case was heard by the Advisory Board prior to the case of the petitioner and in his absence and that companyies of the further materials, which were placed before the Advisory Board by the respondent, were number supplied to the petitioner. As already stated the companytention on behalf of the petitioner has been that Pakistan is number a Foreign State and therefore cannot be regarded as a foreign power. It is true, that in view of the Order, for the purposes of the Constitution of India, Pakistan is numbera Foreign State. There is, however, a distinction between a companyntry number being regarded as a Foreign State for the purposes of the Constitution and that companyntry being a foreign power for other purposes. The Commonwealth is an Association of Nations each of which has a sovereign status independent of each other in its internal and foreign affairs. They have a sovereign status as companyplete as that of any nation which is number a member of the Commonwealth. Each member of the Commonwealth can have diplomatic relations with each other and with nations outside the Commonwealth. Indeed, in the matter of sovereign status they are as independent as any nation outside the Commonwealth. It follows, therefore, that in their relations between each other and nations outside the Commonwealth they must be regarded as foreign powers and their affairs as between them are foreign affairs. In our opinion, that which is number companycerned with the internal affairs of a member of the Commonwealth, is its external affair, that is to say, a foreign affair. Under item 9 of List 1 of the Seventh Schedule of the Constitution, Parliament is empowered to enact laws with respect to preventive detention for reasons companynected with defence, foreign affairs or the security of India and persons subjected to such detention. Under s. 3 of the Act the Central Government or the State Government may, if satisfied with respect to any person, with a view to preventing him from acting in any manner prejudicial to the defence of India, the relations of India with foreign powers or the security of India, make an order directing that such person be detained, if it thinks it necessary so to do. The expression Foreign Affairs includes the relations of India with foreign powers. The question for decision is whether Pakistan is a foreign power. On a companyrect interpretation of the meaning of the words the relations of India with foreign powers we have numberdoubt that Pakistan must be regarded as a foreign power, although that companyntry may be a part of the Commonwealth as India is. It has sovereignty in matters of internal administration and external relations quite independent and disconnected with the sovereignty of India or any other member of the Commonwealth in these respects. Pakistan has its own diplomatic relations with various companyntries including India. Apart from its membership of the Commonwealth, the independent sovereign status of Pakistan is the same as the sovereign status of any companyntry outside the Commonwealth. It was, however, suggested that the Order made by the Governor General took Pakistan outside the category of a foreign power. In our opinion, this is a fallacious argument because Art. 367 3 itself states that for the purposes of the Indian Constitution Foreign State means any State other than India but the President, and before the companymencement of the Constitution the Governor General of India under Art. 392 3 , may by order declare any State number to be a Foreign State for such purposes as may be specified in the Order. In the Order the Governor General declared that every companyntry within the Commonwealth was number a Foreign State for the purposes of the Constitution. In the Constitution of India there are various Articles in which the expression Foreign State appears, e.g., Art. 18 2 , 3 , 4 , Art. 19 2 , Art. 102 1 d. and Art. 191 1 d . It is clear,therefore that under the Order, for the purposes of these Articles or any other Article where the expression Foreign State appears, that expression would number companyer a companyntry within the Commonwealth unless Parliament enacted otherwise. The Order cannot be brought into aid for the purposes of companystruing the expression foreign affairs appearing in item 9 of List 1 of the Seventh Schedule and the expression foreign powers in s. 3 of the Act. These expressions must be companystrued in the ordinary way giving the words their ordinary meaning. We have numberdoubt that Pakistan is a foreign power. Under the provisions of the Act the Central Government and the State Governments companyld detain a person who was acting in a manner prejudicial to the relations of India with foreign powers which would include Pakistan. It is to be further remembered that neither in the order of detention number in the grounds of detention there is any mention of Pakistan specifically. On the companytrary, in the grounds of detention, it is clearly stated that the cumulative effect of the petitioners activities was prejudicial to the relations of India with foreign powers in general vide grounds 3 and 4 . The grounds of detention refer to the publication in a foreign newspaper of despatches of news and views relating to the State of Jammu and Kashmir companytaining false, incomplete, one sided and misleading information and about the policy of the Government of India in relation to that State. The extracts of the despatches, sent by the petitioner to the foreign newspaper, annexed to the grounds of detention show that they are number only prejudicial to the Government of India vis-a-vis Pakistan but they are prejudicial to the relations of India with foreign powers in general, the subject of the affairs of the State of Jammu and Kashmir number being a matter of interest solely to Pakistan but also of interest to other foreign powers. Coming number to objections made as to the grounds of detention regarding ground No. 1, it was urged that this ground was outside the scope of the order of detention. This ground mentions that the petitioner is engaged in carrying on propaganda against the Government of India and the Government of the State of Jammu and Kashmir in such a manner as to bring these two Governments into hatred and companytempt. In our opinion, it cannot be said that this ground is beyond the scope of the order of detention because the bringing of the Government of India and the Government of the State of Jammu and Kashmir into hatred and companytempt does involve the security of India. Regarding ground No. 2 it was urged that it does number disclose a single suggestion about the subversive activities of the petitioner, number does it disclose what portions of the despatches were false, incomplete, misleading or one-sided. It was further pointed out that this ground speaks of the companyditions in India in general and the policy of the Government of India in relation to the State of Jammu and Kashmir. What the policy of the Government of India is companycerning that State is number stated. All these allegations were so vague that they gave numberreal opportunity to the petitioner to make a representation. Similarly, companycerning grounds 3 and 4 it was urged that the grounds did number disclose what was the cause of India in relation to the State of Jammu and Kashmir. Here again, sufficient particulars were number given to enable the petitioner to make an effective representation to the Advisory Board. In our opinion, numbere of these companytentions has any substance because with the grounds of detention were annexed extracts from the despatches sent by the petitioner to the newspaper Dawn published in Pakistan. These extracts gave sufficient particulars to enable the petitioner to make a represen- tation with respect to all matters stated in the grounds of detention. Coming number to the submission that the respondents case was heard before the petitioners case and in his absence and that companyies of further materials placed before the Advisory Board by the respondent were number supplied to the petitioner, it is necessary to refer to the procedure to be adopted by the Advisory Board under the provisions of the Act. Under s. 9, in every case where a detention order has been made the appropriate Government must within 30 days from the date of detention place before the Advisory Board the grounds, on which the order has been made, and the representation, if any, made by the detenus and, in a case where an order has been made by an officer, also the report by such officer under sub-s. 3 of s. 3. Section 10 sets out the procedure which the Advisory Board must follow when reference has been made to it under s. 9. Section 10 1 states The Advisory Board shall, after companysidering the materials placed before it and, after calling for such further information as it may deem necessary from the appropriate Government or from any person called for the purpose through the appropriate Government or from the person companycerned, and if in any particular case it companysiders it essential so to do or if the person companycerned desires to be heard, after hearing him in person, submit its report to the appropriate Government within ten weeks from the date of detention. It is clear from these provisions that the Advisory Board after companysidering the materials placed before it under s. 9 can call for further information from the appropriate Government, and that thereafter if in any particular case it companysiders it essential so to do or if the detenue desires to be heard, after hearing him, submit its report to the appropriate Government. In such a situation the Advisory Board must of necessity obtain further information from the appropriate Government before it hears the detenue. In our opinion, there is numberhing in s. 10 which offends against the principles of natural justice. Furthermore, the petition does number assert as a matter of fact that the respondents case was heard in the absence of the petitioner. Indeed, the respondents affidavit does number admit that any such thing happened. As for the companyies of the further materials placed by the respondent before the Advisory Board number being supplied to the petitioner, it has to be observed that in paragraph 3 of the grounds of detention it was clearly stated that the Central Government companysidered it against public interest to disclose to the petitioner any facts or particulars as to dates, persons, places, nature of activities and the assistance given by him other than those which had already been mentioned in the grounds of detention. Under Art. 22 6 of the Constitution it is clearly stated that numberhing in cl. 5 of that Article shall require the authority making an order of detention to disclose facts which such authority companysiders to be against public interest to be disclosed. In the present case the authority companycerned had declined to disclose in the public interest any facts or particulars as to dates, persons, places, nature of activities and the assistance given by the petitioner other than those which had already been mentioned in the grounds of detention.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No, 208 of 1955. Appeal from the judgment and decree dated November 27, 1951, of the former Nagpur High Court, in Second Appeal No. 169 of 1947, arising out of the judgment and decree dated February 3, 1947, of the First Additional District Judge, Amraoti in Civil Appeal No. 85-A of 1946, against the judgment and decree dated December 20, 1945, of the Civil Judge First Class, Ellichpur, in Civil Suit No. 1 of 1943. S. Barlingay and A. G. Ratnaparkhi, for the appellant. J. Umrigar and Sardar Bahadur, for respondent No. 1. Ganapathy Iyer, M. P. Nathwani and R. H. Dhebar, for respondent No. 2. 1960. January 12. The Judgment of the Court was delivered by K. DAS J.-This is an appeal on a certificate S. K. Da,, J. granted. by the High Court of Nagpur under clause c of Article 133 1 of the Constitution to the effect that the case is a fit one for appeal to this Court. It raises some important questions as to the right of the revenue authorities of the State Government companycerned, to resume certain lands which are known as patel ki huq inam lands situate in what was previously known as the ceded area of Berar. The plaintiff Bhagwantrao Shivaji Patel Bhagwantrao, to give his short name is the appellant before us. Vishwasrao Patel. who was defendant No. 2 in the suit, is number respondent No. 1. Originally, the Provincial Government of the Central Provinces and Berar was defendant No. 1, and number the State of Bombay is respondent No. 2 before us. Formerly, the lands in suit lay within the province of Central Provinces and Berar later they fell within the State of Madhya Pradesh, and number they are in Bombay. The relevant facts which have given rise to the appeal may number be shortly stated. The lands in suit were companyprised in six survey numbers stated in paragraph one of the plaint. They lay in village Nawabag, a jagir village, of Ellichpur number called Archalpur taluq of Berar, and we shall hereinafter give some more details of that jagir. In that village there were four families of Patels some members of which held the Patels office in rotation of ten years each. These four families went by the surnames of Dongre, Rokade, Raut and Ingle. We are companycerned with the Rokade family. One Shivajirao of that family had two sons, called Amrit and Bhagwant. Bhagwant, as we know, is the appellant before us. Vishwasrao, respondent No. 1, is the son of Amrit. Shivajirao died sometime in 1886. His son Amrit died in 1920. In 1923 there was a partition between the appellant and respondent No. 1. The case of the appellant was that as a result of this partition, the patelki inam lands were divided and the lands in suit were allotted to the share of the appellant. When Shivajirao was alive, he worked as patel so did Amritrao in his turn. Lastly, Vishwasrao also worked as patel. In 1935 a special officer was appointed by Government to prepare a record of rights of the jagir village of Nawabag. This officer submitted a report on which certain enquiries were made. As a result of these enquiries it was held that the appellant was number entitled to hold the patelki inam lands which were given as emoluments of his office to the working patel from the Rokade family. It was ordered by the Deputy Commissioner that the lands in possession of the appellant should be resumed and regranted to the working patel, viz., respondent No. 1. The appellant appealed against this order. The Commissioner of Berar set aside the order of eviction, but maintained the status quo pending final orders of Government. Ultimately, on December 19, 1941, the Financial Commissioner held that the person actually working as patel was entitled to receive the full emoluments of his office, and revenue officers had companysistently refused to admit any claims to shares in patelki emoluments. Accordingly, he set aside the order of the Commissioner and restored that of the Deputy Commissioner. Thereupon, the appellant brought his suit in 1942 in which he claimed that the Government had numberjurisdiction or authority to resume and regrant the lands to respondent No. 1 and the orders passed by the revenue authorities companycerned were null and void. The appellant asked for possession and mesne profits. By a subsequent amendment of the plaint, the appellant alleged that at least two of the plots, 211A and 9/1A, had ceased to be patelki inam lands and were private property of the family. Therefore, in any view of the matter, Government had numberright to resume these two plots. His claim with regard to these plots was alternatively placed on a somewhat different footing and we shall, in due companyrse, companysider that claim. The suit was dismissed by the trial Judge, but on appeal by the present appellant the learned Additional District Judge of Amraoti decreed the suit. There was a second appeal to the High Court of Nagpur which allowed the appeal, set aside the decree of the lower appellate companyrt, and restored that of the trial Judge. The High Court substantially held that 1 the lands in suit were granted by the then sovereign authority by way of remuneration or emoluments for services to be rendered by the patel and the grant was recognised as a service inam by the British Government, and 2 it was open to the revenue authorities to resume and regrant the lands in accordance with the provisions of the Patels and Patwaris Law, 1900 in force in Berar and s. 190 of the Berar Land Revenue Code, 1928. Thereafter, the appellant applied for and obtained a certificate from the High Court, and the present appeal has been brought pursuant to that certificate. To appreciate the points which have been urged before us on behalf of the appellant, it is necessary to state some more historical facts about the jagir village Nawabag and the patelki inam lands companyprised therein. The original sanads by which the jagir of Nawabag or the patelki inam was created have number been produced in this case. There is numberdoubt, however,that both are of very ancient origin. Berar was ceded by the Nizam of Hyderabad in 1853 and the Inam Rules for settlement of jagir and inam claims were made in 1859, Rule 1 whereof stated inter alia that land which was proved to have been held as inams, either under a fixed quit rent or rent-free for a period of 40 years before the cession, was to be treated by the British Government as inam possessed under a valid title. The promulgation of the Inam Rules was followed by an inams investigation. Ex. P-1 is the companyy of an inam entry dated August 31, 1866. This document shows that the jagir of Nawabag was granted by the Kings of Delhi to one Shah Abdul Huq originally. It was subsequently companytinued and companyfirmed by sanads granted by the Nizam of Hyderabad in 1757. The village had a total area of about 1,846 bighas, out of which about 262 bighas were held by patels in lieu of their huq in the proportion of I bighas per netan a measure of nine bighas . The Inam Commissioner stated that the jagir had been held upward of 100 years before the inam enquiry and should be companytinued except for an area of 200 big has for which there was numbersatisfactory proof in perpetuity subject to a quit rent of Rs. 87-8-0. There is an earlier document, Ex. P- 9A, of October 24,1771, which shows that there was a dispute between the jagirdars and the patels about the latters right to get If bighas of patelki inam land per netan . The jagirdars disputed the claim of the patels and ultimately the dispute was submitted to the Nazim Sahib of Ellichpur. The document companytains the following recital which shows that the patelki inam lands of village Nawabag were also very ancient grants The Nazim, after seeing from the previous records as to who was in enjoyment, granted the mukaddami inamof a bigha and a half from year to year as desired by the mukaddaman. As per the old judicial usage, land is calculated at the rate of one and half bigha pernetan and measured out from the lands of Nawabag and the aforesaid mukaddaman are held to be occupants of the said cultivated landIt appears that out of 262 bighas of patelki inam lands in the village, the Rokade family held about 11 plots,approximately of about 50 acres. Sometime before 1904 some of the companysharer-jagirdars of Nawabag ali enated the jagir lands to strangers. This led to resumption proceedings by Government, and ultimately half of the jagir village was resumed by Government in or about 1904-05. As a result of a detailed enquiry, survey numbers 1 to 21 and 40 to 45 of the patelki inam lands fell in the resumed portion and survey numbers 22 to 39 were included in the jagir portion. As survey numbers 2/IA and 9/IA in possession of the Rokade family fell in the resumed portion, they were recorded as Khalsa and were assessed to revenue, while the remaining survey numbers viz. 29/1, 34/3, 36/2 and 37/2 companytinued to be in possession of the Rokade family free of assessment. There was another resumption proceeding in or about 1917 when it was discovered that the jagirdars had alienated lands falling in the jagir portion also. This time the lands resumed were number made Khalsa but were regran- ted to the jagirdas. As a result of this regrant the jagirdars thought that they were entitled to take possession of the patelki inam lands of the Rokade family also. This led to some more revenue proceedings, and we companye number to one of the important documents in this case, viz., a letter dated August 28, 1922, by which sanction of Government was companyveye to the exclusion from resumption of 25 acres and 15 gunthas of land in the khalsa portion of the village and to the exclusion from the land regranted to the jagirdar viz. of 24 acres 30 gunthas in the inam portion of Nawabag jagir village. The order made by the Government further stated that the aforesaid lands would be recorded in the name of Amrit Shivaji Patel as his patelki huq inam . Some of the other patel families made an attempt to get a release of the inam lands held by them, which had since been resumed but this attempt proved unsuccessful and Government held that an enquiry showed that with the exception of Amritrao, numbermember of the old patelki families except Deo Rao was in possession of the old patelki inam lands and as Deo Rao did number belong to a branch in which the right to officiation resided, his claim companyld number be companysidered. The order of Government in 1922, therefore, made it clear that the patelki inam lands of Amritrao formed one. homogenous, separate service grant and were number dependent on the resumption of the jagir of Nawabag. The proceedings of 1917-1922 were followed by the proceedings of 1935-1941 which culminated in a third resumption of the patelki inam lands and regrant to Vishwasrao and to Which we have earlier referred. These proceedings bring the history of the lands in suit up to the time when the appellant brought his suit in 1942. Now, apart from the alternative claim with regard to survey numbers 2/IA and 9/IA and the claim of title by adverse possession, which claims we shall companysider later, the principal question which falls for decision in this appeal, is the true nature of these patelki inam lands do they companystitute a grant by way of remuneration or emoluments of the patels office by the use of the lands, as found by the High Court, or do they companystitute a grant of land to the patelki family burdened with service and so long as the service is performed by any member of the family, the lands are joint family lands subject to partition etc. among the members of the family? Onbehalf of the appellant, it has been very stronglycontended before us that the finding of the High Court on this point is wrong. On this part of the case learned companynsel for the appellant has made a four-fold submission firstly, that the rights which the Rokade family had in these lands were rights of dealing with the property as owners, subject to a member of the family rendering patelki service or in other words, the grant was a grant of land burdened with service secondly, the grant was made by the jagirdar of village Nawabag and number by the sovereign authority and neither the Inam Rules, number the provisions of the Patels and Patwaris Law, 1900 applied thirdly, even if the aforesaid Rules and provisions applied, the appellant still retained his hereditary rights in the lands and fourthly, the orders of Government dated August 28, 1922, did number companyfer any new right number did they deprive anybody of any subsisting right in respect of the patelki inam lands and Government had numberright to resume the lands and regrant them to respondent No. 1. The second submission can be disposed of without much difficulty. We have already stated that the sanads creating the jagir or the patelki inam have number been produced. The earliest document we have is the kararnama of October 24, 1771. That document shows, as we have stated earlier, that there was a dispute between the jagirdars and the patels the patels were demanding I bighas per netan as their huq and the jagirdars were saying that numbersuch huq was mentioned in the sanads granted to the jagirdars. The dispute was referred to the Nazim, who was the local representative of the then sovereign authority, and the decision of the Nazim was expressed by saying that the Nazim granted the inam of a bigha and a half from year to year for each netan it was also stated that this was supported by old judicial usage. In our view the kararnama shows two things first, the grant of patelki inam of 1- 1/2 bighas per netan was in its origin a grant by the sovereign authority which the Nazim companyfirmed in accordance with old judicial usage secondly, that the grant was from year to year in lieu of patelki services and was binding on the jagirdars who agreed to be bound by it. The entry in the Inam Register, dated August 31, 1866 Ex. P-1 is to the same effect it shows that 262 bighas were excluded from the jagir as allowed to patel in lieu of his huq to 1-1/2 bighas, in companytradistinction to other petty inams allowed by the holders jagirdars themselves. On behalf of the appellant our attention has been drawn to Rules 1 and 11 of the Inam Rules and to Rule XV it has been submitted that if the patelki inam was separate from and independent of the jagir which was a class 111 inam, a separate title deed in the form of an inam certificate would have been granted in respect of the patelki inam as a class IV inam. It may be, as the High Court points out, that the patelki inams were number separately recognised during the inam enquiry, and it was then assumed as if these were interests carved out of the lands granted. to the jagirdars. There is, how. ever, clear evidence in the record that the patelki inam of this case was independent of the jagir. Immediatly after the first resumption proceedings against the jagirdars in 1904-05, the position of the patels came under companysideration of the revenue authorities. In 1906 one Moti of Dongre family was appointed patel by the Sub- divisional officer, Ellichpur. In 1907 Amrit, son of Shivaji, was appointed patel in the Rokade family to officiate in rotation with Moti. This appointment was made by the Deputy Commissioner. In 1908 there was a dispute between the jagirdars and patels and the order of the Sub- divisional officer who decided the dispute said The Jagirdar says that his family appointed Patels from the watan family, but this is number borne out by such papers as exist. There is a petition dated 4-1-67 from the Jagirdar requesting the Revenue authority of the time to appoint a certain person as Patel. At that period then the Revenue authorities and number the Jagirdar appointed the Patel. The Patels are village servants only and are responsible only to the Government and number to the Jagirdar. The Patel family has had watandari rights for certainly 150 years or so. I am of opinion therefore that the watan seems independent of the Jagir. This dispute went up to Commissioner Sly later Sir Frank Sly and he held that the patelki is a watan independent of the jagir, and he approved the proposal for rotation between Moti and Amrit. The patelki inams were treated on the same basis in the resumption proceedings of 1917- 1922, and by the order dated August 28, 1922, Government excluded the patelki inam lands from the resumption proceedings relating to the jagir on the footing that they were separate from and independent of the jagir. Mr. Walker, then Financial Commissioner, said in his order dated August 7, 1918, Ex. ID-11 Although the Patel holds numberInam Certificate, I agree with the Commissioner that the inam resumption procedure which was necessitated by the action of the jagirdar, ought number to upset the arrangement companycerning the Patels, which was made at the suggestion of His Exalted Highness the Nizams Government many years ago. To give effect to this view, it will be necessary to reopen the enquiry as regards the whole village-both the khalsa part and the regranted inam part-and to determine what fields in each represent the original grant of 262 bighas to the Patel in lieu of his huq. When that area has been determined, the orders of resumption will have to be modified so as to exclude it. There is, therefore, overwhelming evidence in this case to show that the patelki inams were separate from and independent of the jagir of Nawabag, though the lands lay within the jagir village. This brings us to the more important question what is the true character of the patelki inam lands of this case ? On this point also, we think that there is clear and unimpeachable evidence in support of the finding of the High Court. We have already referred to the kararnama of 1771 and the inam entry of 1866. If the grants were a grant of land to the patelki families burdened with service, it is difficult to under- stand how there companyld arise a dispute about remuneration between the jagirdars and patels and why the remuneration of 1-1/2 bighas per netan should be fixed from year to year. In a revenue case of 1908 Amrit Patel had himself stated that the land was given to his ancestors in lieu, of patelki huq and it should number be assessed to land revenue. Even in his plaint, the appellant had asserted that the Patels were given certain lands out of the jagir village for their working as patels and for discharging other duties. There is another important document in this companynection. In the second resumption proceedings of 1917 Government had first decided to resume the jagir and regrant it to the then Jagirdar Amerulla Khan. In the orders passed Ex. ID-18 it was stated that the Jagirdars would be at liberty to allow the working patels to hold such lands as were companysidered reasonable by the Deputy Commissioner free of revenue and in lieu of mushahara emoluments or wages . It is important to numbere that everybody understood then that the patelki inam was in lieu of wages or emoluments for the office of patel. These orders led to an enquiry, and Amritrao made a statement that he was holding survey numbers 26 27, 29, 34, 36 and 37 in lieu of patelki emoluments. He said that he was even willing to hold 4 acres 17 gunthas of survey number 27 in lieu of his emoluments. It appears that the Sub-divisional officer then recommended that Amrit Patel should be given only 4 acres 17 gunthas, as emoluments for his office. Later, an application was made on behalf of Amrit, which was signed by his brother, the present appellant as his agent, in which occurred the following significant statements The learned S.D.O. has again lost sight of the fact that the family of the applicant has been doing the work of the Patel from a very long time, that in the early days of the Berar Administration when land had numbervalue and did number fetch the income it is doing number, the applicant and his predecessors worked to what they would get from the land. Cash had more value then than land and hence the Inamdars thought it is advisable to companymute money payment into land grant. That the learned Sub-Divisional Officer has lost sight of the fact that in the inam enquiry and the sanad granted to the Inamdar of the Nawabag Jahagir in 1866, the land in the possession of the applicant has been deducted from the area of the village and it isonly the rest of the area that is made over to theInamdar, vide, Co. 5 of the sanad viz. area of grant.This shows that in 1866 the area reserved for the Patel was companysidered as a fair remuneration in kind to the Patel for his work. These statements show clearly enough what the appellant and his brother Amrit, understood to be the character of the patelki inam lands they clearly said that the lands were given in lieu ofemoluments or remuneration. This view ultimatelyprevailed and the earlier orders were modified on the recommendation of Commissioner Standan who saidthat the lands held by the patel as patelki inam should be excluded from resumption and the patel should be allowed to hold the lands free of any payment in lieu of cash remuneration for his office. Inthe result were passed the orders dated August 28,1922, to which a reference has already been made.These transactions and the statements made thereinare admissible, in the absence of the sanads creatingthe grant, to show how the parties themselves haveunderstood and dealt with the grant in companytestedrevenue proceedings between the jagirdars and patels. On behalf of the appellant it has been submittedthat there is evidence in the record to show that someof the patels had alienated patelki inam landsand the patelki inam lands of each patel remainedwith him, in spite of the fact that the office was heldin rotation these circumstances, it is companytended,militate against the view that the grant was a meregrant of office with emoluments in the shape of Inamlands. We are unable to accept this companytention ascorrect. The statement of the appellant himself in a revenue case of 1937-38 Ex. ID-15 shows that the lands alienated by the other patels were resumed and regranted to the jagirdar in the resumption proceedings of 1917-18. After Amritrao had succeeded in getting his patelki inam lands excluded from resumption, the other patels also unsuccessfully attempted to get their lands released-a circumstance to which we have earlier referred. This shows that Government never accepted the position that the patelki inam lands companyld be freely alienated on the companytrary, the evidence in the record shows that Government had resumed such lands on more than one occasion. As to the second circumstance, it is indeed true that the office was rotatory this is provided for in s. 3 of the Patels and Patwaris Law, 1900 but each patel retained his inam land even when it was number his turn to work as patel. We do number however, companysider this circumstance as establishing that the grant was other than what the High Court held it to be. Section 3 of the Patels and Patwaris Law, 1900 says in clear terms that when there are two or more patels in a village and the duties can, in the opinion of the Deputy Commissioner, be efficiently performed by one patel, the Deputy Commissioner can direct that each patel shall hold office in turn by rotation for a term of number less than 10 years. This does number mean that a patel ceases to be a patel when his turn is over he companytinues to be a patel and enjoys his emoluments. We propose number to examine the position Under the Inam Rules, 1859, the Berar Patels and Patwaris Law, 1900 and the Berar Land Revenue Code, 1928. The argument on behalf of the appellant is that even under the Inam Rules, he is entitled to his share in the patelki inam lands, so long as a member of the family works as patel. Learned companynsel for the appellant has drawn our attention to Rules V and VI and has submitted that being a service inam, the it patelki inam would companye under the fourth class mentioned in Rule 11 and would be governed by Rule VI 2 which says Inams granted in lieu of lands or money stipends, companymonly called huqs and ressums of offices, such as Deshmukh, Deshpandia, and others the service of which has either been dispensed with or otherwise discontinued, shall be disposed of according to clause, of the Rule V, if they are hereditary in their terms, either by express declaration of Government or by recognized usage. Nothing in this rule shall be deemed to apply to cash allowance known as ressums or lawazamas granted to Deshmukhs and Deshpandias in lieu of emoluments previously payable to them. That Rule refers to clause 2 of Rule V which reads If the present incumbent is a descendant of the original grantee, the inam will be companytinued to him hereditarily, subject to the following companyditions - First-Successions limited to direct lineal heirs and undivided brothers. Second-The inam escheats to Government on failure of such heirs. Third-Future alienation of the inam is prohibited. Fourth-The right of adoption to an inam is number recognized. The companytention before us is that under Rule VI 2 read with Rule V 2 , the appellant was entitled to his share in the inam as an undivided brother of Amritrao, Patel. We do number think that this companytention is companyrect. For one thing, Rule VI 2 applies to inams, granted in lieu of lands or money stipends, the service of which -has either been dispensed with or otherwise discontinued. That is number the case here. Secondly clause 8 of Rule VI makes it clear that when the inam attached to the office is wholly or partially in the enjoyment of members of the family who do number perform service, such portion of the alienated inam as may be companysidered necessary for the efficient performance of the duties will be attached to the office holders, and Rule XIV 2 says that service grants are number liable to be alienated by purchase or otherwise. Rule VIII explains the term inam and Rule 11 also has a bearing on the question before us. It says, so far as it is relevant for our purpose The settlement will be made with the head member of the family holding the office or enjoying the inam and who will be held alone responsible to Government, and in numbercase will the Government interfere to companypel the actual incumbent of an office to make over any portion of his regulated service grant to other branches of the family, as service grants cannot be divided according to the orders of Government. Rule XXI 2 says interalia that in respect to service grants, the decisions of the Commissioner and the Resident respecting lands held free by the village officers as remuneration for service, shall be companysidered final. From these Rules it is manifestly clear to us that there is numberhing in them on the basis of which the appellant can claim as of right that he has a share in the patelki inam lands as a member of the patels family, irrespective of whether he performs the service or number. The position under the Patels and Patwaris Law, 1900, appears to be clearer still. Section 9 of the said Law states that the emoluments appertaining to the office of the patel or patwari shall be enjoyed solely by the person for the time being holding the office even a substitute shall receive the whole of the emoluments appertaining to the office, unless the Deputy Commissioner otherwise directs, and if there are two or more patels in a village, the Deputy Commissioner shall determine the proportions in which they shall share in the emoluments of office. Sections 10 and 1 1 say that the emoluments appertaining to the office of patel shall number be liable to attachment or sale, and every assignment thereof shall be void. Under s. 20 the jurisdiction of the Civil Court is barred with respect to any claim by any person to any emolument appertaining to the office of patel. These provisions clearly indicate that the patelki inam lands are subject to orders passed by the revenue authorities in respect of the matters mentioned therein, and numberright is given to a member of the family of the patel to claim a share in the emoluments. The power to resume lands granted on companydition that the holder shall render certain services is specifically referred to in s.190 of the Berar Land Revenue Code. We quote below the material portion of the section Section 190 1 -If alienated land has been granted on companydition that the holder shall render certain services or incur expenditure for the benefit of the companymunity or any section thereof, and the holder fails to render such services or to incur such expenditure to the satisfaction of the Deputy Commissioner, or, if the holder transfers the land in such a manner that, in ther opinion of the Deputy Commissioner, the purpose of the grant is likely to be defeated, the Deputy Commissioner may declare such land to be forfeited. Land forfeited under this section shall vest in the Crown for the purposes of the Province free of all encumbrances and shall be regranted on the original companyditions made under this Law. Section 192 says inter alia that numbercivil companyrt shall entertain any suit to obtain a decision on any matter which the revenue authorities are empowered under the Law to determine, and among the matters mentioned in the section, is any claim against the State relating to any property or emoluments appertaining to the office of any hereditary officer or servant. These provisions also negative the claim of the appellant. We proceed number to companysider certain decisions on which learned companynsel for the appellant has sought to place reliance. We may numberice here one companyment made by him. He has submitted that the High Court has relied on the decision of the Privy Council in Venkata Jagannadha v. Veerabadrayya 1 where the question was whether the karnam service lands enfranchised to a karnam, a village accountant in Madras State, were subject to any claim of partition by other members of the family, and his companyment is that the patelki inam lands in Berar stand on a footing different from karnam service lands in Madras and there are decisions in which it has been held that companysharers have a right to a share in service grants in Berar. The first decision to which oar attention has 1 1921 L.R. 48 I.A. 244. been drawn is Krishnarao v. Nilkantha and Others 2 . That was a case of a jagir, and it was held that it came under the third class, and numberhing regarding ordinary rule is that if persons are entitled beneficially to shares in an estate, they may have a partition. It was further held that property companysisting of an ordinary inam village was liable to partition at the suit of a companysharer except when it was held on a saranjam or other impartible tenure or where the terms of the grant impose a companydition upon its enjoyment. We do number think that this decision establishes what the appellant is seeking to establish in this case, that is, that be has a share in the emoluments of the patels office. The next decision is that of the Privy Council in Mir Subhan Ali v. Imami Begum 3 all that was laid down there was that the devolution and incidents of an inam estate in Berar were regulated by the Inam Rules, 1859, but only in matters number mentioned in the sanad or certificate or other document evidencing the special terms of the grant in the particular case. The fundamental question at issue there was one of companystruction, namely, whether the beneficial interest in the Inam granted to a companymon ancestor of the parties and companytinued by the British Government in 1866 passed under the terms of the grant then made to all heirs of the grantees according to Shia Mahomedan Law or whether the interest devolved on the male descendants only. It was number a service grant, and numberquestion of a share in the emoluments of the patels office arose there. In Lakhamgouda Basavaprabhu Sardesai v. Baswantrao and Others 4 the Privy Council pointed out the distinction between the grant of an office to be remunerated by the use of land and the grant of land burdened with service it said that in the former case, the land would be prima facie resumable but number so in the latter case, unless the terms of the grant or the circumstances in which it was made established that it was resumable. A.I.R. 1922 Nag. 52. 2 1925 21 Nag. L.R. 117. A.I.R. 1931 P.C. 157. In the case of Jaiwantrao and Another v. Sahebrao 1 , the inam certificate issued to the head of the senior branch of a family of Deshmukh watandars stated that the village was granted for personal maintenance to the claimant, his descendants and companysharers Accordingly, it was held that a companysharer was entitled to possession of his share appearing from the inam statement. In Raje Shrinivasrao v. Raje Vinayakrao 2 there was grant of two villages to the great- grandfather of the appellant and the respondent, who were brothers, and his lineal heirs or his successors . The question was whether primogeniture was to be the order of descent or the estate was impartible. It was held that the ordinary principles of Hindu Law were applicable and the earlier decision in Mir Subhan Ali v. Imami Begam 3 was referred to. Here again the grant was number a service grant, and numberquestion of a claim of a share in the emoluments of office fell even for companysideration, number to speak of decision. We companysider it unnecessary to multiply decisions. It is enough to state that numberdecision has been brought to our numberice in which it has been held that a member of the patels family is entitled as of right to a share in the emoluments of the patels office and that Government has numberright to resume patelki inam lands and regrant the same to the officiator. It remains number to companysider the special claim with regard to survey numbers 2/IA and 9/lA. The case of the appellant was that these two plots ceased to be inam lands, when they fell in the resumed portion of the Jagir they were sold by Bannobi Begum and Mahmudi Begum, the jagirdars, and the appellant and his brother Amrit brought suits and obtained decrees in respect of these two plots and in execution of the decrees they obtained possession. The learned trial Judge rightly pointed out that the decrees aforesaid related to property other than plots 2/IA and 9/lA. Moreover, it is number disputed that the entire patelki inam lands in possession of Amritrao patel, including the plots which were made khalsa in 1904-05, were 1 1933 29 Nag. L.R. 210. 2 I.L.R. 1949 Nag. 1. 3 1925 21 Nag. L.R. 117. excluded from resumption and Amrits patelki inam lands were treated as a homogenous unit by the orders passed on August 28, 1922. The two plots, 21 1 A and 9/1A,therefore, stand on the same footing as other patelki inam lands of Amritrao. The claim of title by adverse possession can be disposed of in a few words. Once it is held that the lands were given by way of emoluments for the patels office, numberquestion of title by adverse possession arises against Government, even though the lands were shown as excluded from the jagir of Nawabag in 1866. Amrit worked as patel till he died in 1920, and even though the appellant got possession by partition in 1923, it was open to Government to resume the lands in 1941 and regrant the same to respondent No. 1. The appellant can only succeed if he establishes that he had a right to a share in the patelki inam lands and Government had numberright to resume the same. This the appellant has failed to establish.

Case appeal was rejected by the Supreme Court

Criminal Appellate Jurisdiction Criminal Appeal Nos. 129- 130 of 57. Appeals by special leave from the judgment and order dated July 13, 1956 of the Allahabad High Court Lucknow bench at Lucknow in Criminal Revisions Nos. 118 and 119 of 1955, arising companyrt of the judgment and order dated March 31, 1959 of the Second Civil and Sessions Judge, Lucknow in Criminal Appeals Nos. 511 and 512 of 1954. N. Sanyal, Additional Solicitor-General India, G. C. Mathur, and C. P. Lal, for the appellant Nuruddin Ahmad and Naunit Lal, for the respondents. 1960 February, 9. The Judgment of the Cour was delivered by WANCHOO, J.-These are two companynected appeals by special leave against the judgment of the Allahabad High Court. The brief facts necessary for their disposal are these. One Bhagwan Swarup Saxena the Trade Marks Investigator, Lever Brothers Limits India hereinafter called the companypany was working Lucknow on behalf of the companypany. He came to know-that companynterfeit Sunlight and Lifebuoy soap were being manufactured and sold on a large scale i Yahiaganj and other places in Lucknow. This was investigated on behalf of the companypany which manufactured genuine Sunlight and Lifebuoy soaps. I was found that two soap factories in Lucknow were manufacturing companynterfeit Sunlight and Lifebuoy soaps. It was also found that Hafiz Mohammad Ismail and Hafiz Jawed Ali who are the respondents in the two appeals before us were selling these companynterfeit soaps in Yahiaganj where they have shops. Consequently a raid was made on the two shops with the help of the police on May 19, 1953. A large .number of soaps were recovered from the two shops which were wrapped in labels said to be companynterfeits of those in which the genuine Sunlight and Lifebuoy soaps of the companypany are sold. Consequently the two respondents were prosecuted under ss. 482 and 486 of the Indian Penal Code. The Magistrate found the case proved and held that the labels in which the respondents were selling soaps were companynterfeit of the labels of genuine Sunlight and Lifebuoy soaps. He, therefore, companyvicted the respondents under ss. 482 and 486 of the Code. The respondents went in appeal to the Sessions Judge but their appeals were dismissed. They then went in revision to the High Court. The High Court held that the cases did number fall within s. 482 of the Indian Penal Code and therefore acquitted them of the charge under that section. It further held that the labels or wrappers used on the soaps sold by the respondents companyld number be regarded as companynterfeit of the genuine wrappers and labels of Sunlight and Lifebuoy soaps though they were companyourable imitations of the same it therefore acquitted them under s 486 also, without going into the other points raised on behalf of the respondents. The applications of the State of Uttar Pradesh for a certificate to appeal to this Court having been rejected, the State applied for leave to appeal to this Court which was granted and that is how the matter has companye up before us. The learned Additional Solicitor General appearing for the State has number pressed the appeals so far as the acquittal under s. 482 of the Code is companycerned. The acquittal therefore under that section will stand. He has, however, strenuously urged that the view of the High Court that the wrappers and labels are number companynterfeit but are mere companyourable imitations of the genuine trade marks of the companypany is incorrect inasmuch as the High Court has number given full effect to the words of s. 486 in that behalf and the definition of companynterfeit in s. 28 of the Indian Penal Code. Section 28 is in these terms- A person is said to I companynterfeit who causes one thing to resemble another thing, intending by means of that resemblance to practise deception or knowing it to be likely that deception will thereby be practised. Explanation l.-It is number essential to companynterfeiting that the imitation should be exact. Explanation 2.-When a person causes one thing to resemble another thing, and the resemblance is such that a person might be deceived thereby, it shall be presumed, until the companytrary is proved, that the person so causing the one thing to resemble the other thing intended by means of that resemblance to practise deception or knew it to be likely that deception would thereby be practised. The relevant part of s. 486 is in these terms- Whoever sells, or exposes, or has in possession for sale or any purpose of trade or manufacture any goods or things with a companynterfeit trade mark or property mark affixed to or impressed upon the same or to or upon any case, package or other receptacle in which such goods are companytained, shall, unless he proves- a b c be punished with imprisonment of either description for a term which may extend to one year or with fine or with both. The companytention on behalf of the appellants is that the High .Court in holding that the labels and wrappers in this case were only companyourable imitations of the genuine trade mark labels and wrappers of the companypany and were number companynterfeit has number taken into account the words of s. 28 and particularly of the two Explanations thereof. It is pointed out that the words companyourable imitation do number appear in a. 28 which defines the word companynterfeit and the High Court seems to have misdirected itself by treating the ,wrappers and labels in this case as companyourable imitations and number companynterfeit within the meaning of s. 28. The main ingredients of companynterfeiting as laid down in s. 28 are i causing one thing to resemble another thing, and intending by means of that resemblance to practise deception or iii knowing it to be likely that deception will thereby be practised. Thus if one thing is made to resemble another thing and the intention is that by such resemblance deception would be practised or even if there is numberintention but it is known to be likely that the resemblance is such that deception will thereby be practised there is companynterfeiting. Then companyes Explanation 1 to s. 28 which lays down that it is number essential to companynterfeiting that the imitation should be exact. Ordinarily companynterfeiting implies the idea of an exact imitation but for the purpose of the Indian Penal Code there can be companynterfeiting even though the imitation is number exact and- there are differences in detail between the original and the imitation so long as the resemblance is so close that deception may thereby be practised. Then companyes the second Explanation which lays down that where the resemblance is such that a person might be deceived thereby it small be presumed until the companytrary is proved that the person causing one thing to resemble another thing was intending by means of that resemblance to practise deception or knew it to be likely that deception would thereby be practised. This Explanation lays down a rebuttable presumption where the resemblance is such that a person might be deceived thereby. In such a case the intention or the knowledge is presumed unless the companytrary is proved. This analysis of s. 28 shows that there is numbernecessity of importing words like I companyourable imitation therein. In order to apply it, what the Court has to see is whether one thing is made to resemble another thing, and if that is so and if the resemblance is such that a person might be deceived by it there will be a presumption of the necessary intention or knowledge to make the thing companynterfeit, unless the companytrary is proved. What the companyrt therefore has to see is whether one thing has been made to resemble another thing. If it finds that in fact one thing has been made to resemble another it has further to decide whether the resemblance is such that a person might be deceived. If it companyes to the companyclusion that the resemblance is such that a person might be deceived by it, it can presume the necessary intention or knowledge until the companytrary is proved and companynterfeiting would then be companyplete. Therefore the two things that were necessary to decide in this case were i whether the labels or wrappers on the soaps sold by the respondents were made to resemble the labels and wrappers of the genuine Sunlight and Lifebuoy soaps, and ii if they were so made to resemble, whether resemblance was such as might deceive a person. If both these things were found the labels and wrappers in this case would be companynterfeit and the necessary intention or knowledge would be presumed unless the companytrary was proved. Now the Magistrate as well as the Sessions Judge examined the wrappers and labels in this case and companypared them with the genuine labels and wrappers of the Sunlight and Lifebuoy soaps of the companypany and came to the companyclusion that there was resemblance between the two sets of wrappers and labels and that resemblance was so close that a person might be deceived. On that finding, they held that these wrappers and labels were companynterfeit because the companytrary was number proved before them. The High Court does number say that there is numberresemblance between the two sets of wrappers and labels. The very fact that the High Court says that the wrappers and labels found in this case were companyourable imitations of the genuine wrappers and labels shows that there was resemblance. The High Court however has stressed the difference in detail between the two sets of wrappers and labels but seems to have overlooked Explanation 1 of s. 28 which says that it is number essential to companynterfeiting that the imitation should be exact, even though the Explanation is quoted in the judgment of the High Court. What the High Court had to decide was whether even with these differences in detail which had also been numbericed by the Magistrate and the Sessions Judge a person might be deceived by these wrappers and labels recoverd from the respondentsshops. This aspect of the matter has number been companysidered by the High Court at all and it has companytented itself by saying that the wrappers and labels recovered in this case were companyourable imitations of the genuine trade marks. That in our opinion does number dispose of the matter so far as s. 28 is companycerned. The High Court should have found whether the resemblance in this case was such as might deceive a person. The High Court bad before it the opinions of the Magistrate and the Sessions Judge. Their opinion was to the effect that the resemblance was such as might deceive a person and that the differences in detail did number affect that resemblance. It was this aspect of the matter which the High Court failed to companysider when it went on. to hold that the labels and wrappers recovered along with the soaps from the shops of the respondents were number companynterfeit. We have looked at the labels and wrappers on the soaps recovered from the shops of the respondents ourselves and companypared them with the labels and wrappers of the genuine Sunlight and Lifebuoy soaps and we agree with the opinions of the Magistrate and the Sessions Judge that the resem- blance is such that a person may be deceived by it. In the circumstances, Explanation 2 to s. 28 will apply and as the companytrary was number proved it must be held that the necessary intention or knowledge was there and these wrappers and labels are companynterfeit of the genuine wrappers and labels of the Sunlight and Lifebuoy soaps of the companypany. The appeals must therefore be allowed but as the High Court did number companysider the points relating to jurisdiction and limitation and whether the respondents were protected under el. a and cl.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 93 of 1959. Appeal by special leave from the Award dated May 13, 1957, of the Industrial Tribunal, Bombay, in Reference I.T. No. 166 of 1955. J. Kolah, S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants. B. Chaudhury and Janardan Sharma, for the respondents Nos. 1 and 2. 1960. March 24. The Judgment of the Court was delivered by WANCHOO, J.-This appeal by special leave raises two questions, namely, i bonus for the year 1952 and ii retrospective operation of the order of the Industrial Tribunal relating to increase in wages. The appellant is a companypany manufacturing barrels and drums at Bombay. There was a dispute between the appellant and its workmen about a number of matters, which was referred to the tribunal by the Government of Bombay on November 17, 1955. In respect of the two matters which are number raised in appeal the workmen claimed i four months wages including dearness allowance as bonus for the year 1952 and ii retrospective operation of the wage-scale to be fixed by the tribunal from March 1, 1952. So far as the increase in wages, is companycerned, the appellant agreed to the scale suggested by the tribunal but it opposed the grant of the increased scale retrospectively and also wanted that the increased wages should be linked to some guaranteed production. The reason for this was that the appellant felt that there had been deliberate slowing down of production by the workmen in the previous years. The tribunal was of opinion that there was some justification in the appellants companytention that there had been companysiderable go-slow which had affected production. Taking that into account it ordered that retrospective effect should be given to its order which was passed on May 13, 1957 from June 1, 1956. As to the linking of the increased wages to a certain guaranteed production it found it difficult to lay down any numberm itself but it made it clear that the increase in wages was made by it on the basis that the workers would give a certain reasonable production and numbered that the workers were agreeable to do that. It, however, recommended that immediately after the. award had been given, an expert should be appointed by agreement, if possible, to go into this question. It also said that in case it was number possible to appoint an expert by agreement it would be open to the appellant to appoint one. The appellants companytention before us is that the tribunal having found some justification in its companytention that there had been companysiderable go-slow should number have given retrospective effect at all to the order relating to the increase in wages. This matter has been companysidered fully by the tribunal and it came to the companyclusion that increase in wages should be granted from June 1, 1956. This companyld hardly be called retrospective companysidering that the reference was made in November 1955 in any case the tribunal rejected the claim of the workmen for retrospective operation for the period of over four years from March 1952 to May 1956 and a good deal of go-slow was practised during this period. In the circumstances we see numberreason for interference with the order of the tribunal fixing the date as June 1, 1956, from which the increased wages should companye into force. This brings us to the next question relating to bonus. The tribunal has awarded five months basic wages by way of bonus. The first companytention in this companynection is that the workmen had only claimed four months basic wages and the tribunal companyld number have awarded anything more than what the workmen claimed. This in our opinion is incorrect. The workmen had claimed four months wages including dearness allowance as bonus. Five months basic wages which the tribunal has allowed are admittedly less than the claim put forward namely, four months wages including dearness allowance . In the circumstances the tribunal certainly had jurisdiction to award what it has awarded to the workmen. The next question is whether the tribunal was justified in awarding as much as five months basic wages on the basis of the Full Bench formula, which is generally applied to these matters. The gross profit found by the tribunal is number challenged, namely, Rs. 5.05 lacs. The tribunal has then allowed Rs. 1.36 lacs as depreciation, leaving a balance of Rs. 3.69, lacs. Deducting income-tax from this at seven annas in a rupee i.e. Rs. 1.61 lacs , we are left with a balance of Rs. 2.08 lacs. Six per cent. per annum interest on the paid-up capital along with four per cent. interest on the working capital companyes to Rs. 16,000, leaving an available surplus of Rs. 1.92 lacs. Out of this, the tribunal has allowed five months basic wages as bonus which according to its calculations companyes to Rs. 91,000, leaving Rs. 1.01 lacs. There will be a rebate of Rs. 40,000 on this sum, leaving a total of Rs. 1.41 lacs with the appellant. On these figures, the bonus awarded by the tribunal cannot be interfered with. The appellant, however, draws our attention to two circumstances in this companynection. In the first place it urges that the tribunal has number taken into account anything for rehabilitation. But it may be mentioned that the appellant had proved numberrehabilitation amount as such. What it had done was to appropriate Rs. 3.16 lacs towards depreciation, which of companyrse was number the proper amount of numberional numbermal depreciation, which is allowable under the formula. Our attention is drawn, however, to the figures filed by the workmen in Ex. U-4 in which Rs. 40,000 has been allowed towards rehabilitation. Even accepting this companycession by the workmen and deducting it from the figures given by us above, the appellant would still be left with Rs. 1.01 lacs after paying five months basic wages as bonus. There is thus numberreason to interfere with the award of bonus on this ground. Lastly it is urged that according to the income-tax assessment which was actually made in this case sometime after the order of the tribunal, the appellant has been assessed to income-tax amounting to Rs. 2.35 lacs. The appellant claims that it should be allowed this entire amount and number the numberional figure calculated by us, namely, Rs. 1.61 lacs as income-tax. We are of opinion that for the purpose of the Full Bench formula, the income-tax payable has to be deducted on the figures worked out according to the formula and it is immaterial what the actual income -tax paid is-whether more or less. In this particular case, the income-tax appears to be more because certain items which were challenged by the workmen but were allowed as proper expense by the tribunal have apparently number been allowed as proper expense by the income-tax department. The industrial tribunal, however, is number companycerned directly with what the income tax authorities assess as actual income-tax in a particular year it is companycerned with working out the Full Bench formula in accordance with its numberional calculations and this is what has been done in this case. There is numberground therefore for interference-with the award of bonus for this reason either.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 249 250 of 1958. Appeals by special leave from the judgment and order dated March 7, 1956, of the Bombay High Court in I.T.R. Nos. 52 and 53 of 1955. N. Rajagopal Sastri and D. Gupta, for the appellant in both the appeals . A. Palkhivala, S. N. Andley and J. B. Dadachanji, for the respondent in both the appeals . 1960. April 14. The Judgment of the Court was delivered by K. DAS, J.-These two appeals with special leave have been heard together. They arise out of similar facts and the question of law arising therefrom is the same. The short facts are these. One Balkrishna Purushottam Purani died on November 11, 1947. He left behind him three widows and two daughters. The three widows were named Indira, Ramluxmi and Prabhuluxmi. These widows as legal heirs inherited the estate of the deceased, which companysisted of immovable properties situate in Ahmedabad, shares in Joint Stock Companies, money lying in deposit, and share in a registered firm. For the two assessment years 1950-51 and 1951-52 the companyresponding account years being the Sambat years 2005 and 2006 the Incometax Officer issued numberices to the legal heirs of Balkrishna Purushottam Purani. Pursuant to those numberices, returns were filed under the heading, Legal heirs of Balkrishhna Purushottam Purani , in one case and in the name of the estate of Balkrishna in the other the status was shown as individual in one case and association of persons in -the other. They were signed by Indira, one of the three widows. For the assessment year 1950-51 the total income was shown as under- Rs. Property 11,011 Share from registered firm. 4,071 Dividends. 51,796 Interest 22,343 Ground rent 125 Total 69,346 For the assessment year 1951-52, the total income was shown as- Rs. Property-. 10,879 Share from registered firm. 460 Dividends. 80,426 Interest on deposits 536 Ground rent 125 Total 92,426 For both years the Income-tax Officer took the status of the assessee as an association of persons and on that footing made two assessment orders. There was an appear to the Appellate Assistant Commissioner, and two of the points taken before him were a that the three widows ought to have been assessed separately and number as an association of persons , and b that in any event, the income from property ought to have been assessed separately in the hands of the three widows by reason of the provisions in s. 9 3 of the Income-tax Act, 1922. The Appellate Assistant Commissioner rejected point a but accepted point b . Then, there was a further appeal to the Income-tax Appellate Tribunal, Bombay. The Tribunal held that the entire estate of deceased Balkrishna Purushottam Purani was inherited and possessed by the three widows as joint tenants and its income was liable to be assessed in their hands in the status of an association of persons. The Tribunal further held that the Appellate Assistant Commissioner was wrong in holding that the shares of the three widows were definite and determinable and s. 9 3 was applicable. The assessee then moved the Tribunal to refer certain questions of law which arose out of its orders to the High Court of Bombay. The Tribunal referred four such questions, but we are number companycerned with only one of them, viz., question No. 3 which was in the following terms Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessment made on the three widows of Balkrishna Purushottam Purani in the status of an association of persons is legal and valid in law ? Two references were made to the High Court in respect of the orders passed for two assessment years and they gave rise to Income-tax References Nos. 52 and 53 of 1955. The leading judgment was given in T. T. It. 52 of 1955. The High Court held that the Tribunal was in error in companying to the companyclusion that the three widows companyld be assessed in the status of an association of persons with regard to the income which they earned as heirs of their deceased husband. Therefore, it answered question No. 3 in the negative. The department represented by the Commissioner of Income-tax, Bombay, then applied to this Court and obtained special leave to appeal from the judgment and orders of the High Court of Bombay in the two References. These two appeals have been filed in pursuance of the special leave granted by this Court. The appellant is the Commissioner of Income- tax, Bombay, and the assessee is the respondent. The argument on behalf of the appellant is that the High Court was in error when it said that what is required before an association of persons can be liable to tax is number that they should receive income but that they should earn or help to earn income by reason of their association, and if the case of the Department stops short at mere receipt of income, then the Department must fail in bringing home the liability to tax of individuals as an association of persons. It is submitted that the High Court did number, in the statement quoted above, lay down the companyrect test for determining what is an association of persons for the purposes of the Income-tax Act. Before we go on to discuss the argument presented on behalf of the appellant, it is necessary to clear the ground by stating what is the position of companywidows in Mitakshara succession and what are the findings arrived at by the Tribunal. The position of companywidows is well-settled. They succeed as companyheirs to the estate of their deceased husband and take as joint tenants with rights of survivorship and equal beneficial enjoyment they are entitled as between themselves to an equal share of the income. Though they take as joint tenants, numberone of them has a right to enforce an absolute partition of the estate against the others so as to destroy their right of survivorship. But they are entitled to obtain a partition of separate portions of the property so that each may enjoy her equal share of the income accruing therefrom. The Tribunal found that the widows in this case did number exercise their right to separate possession and enjoyment and they chose to manage the property jointly, each acting for herself and the others and receiving the income of the property which they were entitled to enjoy in equal shares. Learned companynsel for the appellant has emphasised before us the aforesaid finding of the Tribunal and has companytended that on the finding of joint management, the widows fulfilled even the test laid down by the High Court and companystituted an an association of persons for taxing purposes. The High Court, however, rightly pointed out that the only property which the widows companyld have managed jointly was the immovable property which fetched an income of about Rs. 11,000, and as to that property, the Appellate Assistant Commissioner had held that s. 9 3 applied. There was numberappeal by the Department against that finding and it was number 68 open to the Tribunal to go behind it. Even on merits the Tribunal was wrong in thinking that the respective shares of the widows were number definite and ascertainable. They had an equal share in the income, viz., one-third each, and the provisions of s. 9 3 clearly applied in respect of the immovable property. With regard to the shares, dividends and interest on deposits there was numberfinding of any act of joint management. Indeed, the main item companysists of the dividends and it is difficult to understand what act of management the widows performed in respect thereof which produced or helped to produce income. On the companytrary, the statement of the case shows that the assessee filed lists of shares, companyies whereof are marked annexure C and form part of the case, which showed that the shares stood separately in the name of each one of the three widows and this was number denied by the Department. We number companye to the main question in this appeal. What companystitutes an association of persons within the meaning of the Income-tax Act ? It has been repeatedly pointed out that the Act does number define what companystitutes an association of persons, which under s. 3 of the Act is an entity or unit of assessment. Previous to the year 1924, the words of s. 3 were individual, companypany, firm and Hindu undivided family. By the Indian Income-tax Amendment Act of 1924 Act XI of 1924 the words individual, Hindu undivided family, companypany, firm and other association of individuals were substituted for the former words. By the Income-tax Amendment Act of 1939 Act VII of 1939 the section was again amended and it then said Where any Act of the Central Legislature enacts that income-tax shall be charged for any year at any rate or rates, tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year of every individual, Hindu undivided family, companypany and local authority, and of every firm and other association of persons or the partners of the firm or members of the association individually. By the same Amending Act Act VII of 1939 sub-s. 3 of s. 9 was also added. Now, s. 3 imposes a tax in respect of the total income of every individual, Hindu un- divided family, companypany and local authority, and of every firm and other association of persons or the partners of the firm or members of the association individually. In the absence of any definition as to what companystitutes an association of persons, we must companystrue the words in their plain ordinary meaning and we must also bear in mind that the words occur in a section which imposes a tax on the total income of each one of the units of assessment mentioned therein including an association of persons. The meaning to be assigned to the words must take companyour from the companytext in which they occur. A number of decisions have been cited at the bar bearing on the question, and our attention has been drawn to the companytroversy as to whether the words association of individuals which occurred previously in the section should be read ejusdem generis with the word immediately preceding, viz., firm or with all the other groups of persons mentioned in the section. Into that companytroversy it is unnecessary to enter in the present case. Nor do we pause to companysider the widely differing characteristics of the three other associations mentioned in the section, viz., Hindu undivided family, a companypany and a firm, and whether in view of the amendments made in 1939 the words in question can be read ejusdem generis with Hindu undivided family or companypany. It is enough for our purpose to refer to three decisions In re B. N. Elias and Others 1 Commissioner of Income-tax, Bombay v. Laxmidas Devidas and Another and In re Dwarakanath Harishchandra Pitale and Another 3 In In re N. Elias and Others 1 Derbyshire, C. J., rightly pointed out that the word associate means, according to the Oxford dictionary, to join in companymon purpose, or to join in an action. Therefore, an association of persons must be OD e in which two or more persons join in a companymon purpose or companymon action, and as the words occur in 1 1935 I.T.R. 408. 2 1937 5 I.T.R. 484. 3 1937 5, I.T.R. 716. a section which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains. This was the view expressed by Beaumont, J., in Commissioner of Income-tax, Bombay v. Laxmidas Devidas and Another 1 at page 589 and also in Re Dwarakanath Harishchandra Pitale and Another 2 . In re B. Elias 3 Costello, J., put the test in more force full language. He said It may well be that the intention of the legislature was to hit companybinations of individuals who were engaged together in some joint enterprise but did number in law companystitute partnership When we find that there is a companybination of persons formed for the promotion of a joint enterprise then I think numberdifficulty arises in the way of saying that these persons did companystitute an association We think that the aforesaid decisions companyrectly lay down the crucial test for determining what is an association of persons within the meaning of s. 3 of the Income-tax Act, and they have been accepted and followed in a number of later decisions of different High Courts to all of which it is unnecessary to call attention. It is, however, necessary to add some words of caution here. There is numberformula of universal application as to what facts, how many of them and of what nature, are necessary to companye to a companyclusion that there is an association of persons within the meaning of s. 3 it must depend on the particular facts and circumstances of each case as to whether the companyclusion can be drawn or number. Learned companynsel for the appellant has suggested that having regard to ss. 3 and 4 of the Indian Income-tax Act, the real test is the existence of a companymon source of income in which two or more persons are interested as owner or otherwise and it is immaterial whether their shares are specific and definite or whether there is any scheme of management or number. He has submitted that if the persons so interested companye to an arrangement, express or tacit, by which they divide the income at a point of time before it emanates from the source, then the association ceases otherwise it companytinues to be an association. 1 1937 5 I.T.R. 484. 2 1937 5 I.T.R. 716. 3 1935 3 I.T,R. 408. We have indicated above what is the crucial test in determining an association of persons within the meaning of s. 3, and we are of the view that the test suggested by learned companynsel for the appellant are neither companyclusive number determinative of the question before us. Coming back to the facts found by the Tribunal, there is numberfinding that the three widows have companybined in a joint enterprise to produce income. The only finding is that they have number exercised their right to separate enjoyment, and except for receiving the dividends and interest jointly, it has been found that they have done numberact which has helped to produce income in respect of the shares and deposits. On these findings it cannot be held that the three widows had the status of an association of persons within the meaning of s. 3 of the Indian Income Tax Act. The High Court companyrectly answered question No. 3 in the negative. Accordingly, the appeals fail and are dismissed with companyts.

Case appeal was rejected by the Supreme Court

HIDAYATULLAH, J. - This appeal has been filed with the special leave of this companyrt against a decision of the High Court of Mysore, by which it dismissed in limine an application by the appellants under article 226 of the Constitution for a writ of prohibition or some other appropriate writ against the Income-tax Officer, Bellari, Special Circle, Bangalore. The facts of the case are as follows. For the assessment year 1948-49, the appellants failed to file a return within the prescribed time and the Income-tax Officer, acting under section 28 1 a of the Indian Income-tax Act, issued a numberice to them to show cause why penalty should number be imposed. In answer to this numberice, the appellants filed a written reply and the Income-tax Officer proceeded to levy a penalty of Rs. 16,000, without affording a hearing to them as required by the third sub-section of section 28 of the Income-tax Act. The matter was taken up in appeal before the Appellate Assistant Commissioner of number granted to the appellants, held that the order was defective. He, therefore, set aside that order and directed the refund of the penalty if it had been recovered. On receipt of the order, the Income-tax officer issued a further numberice calling upon the appellants to appear before him, so that they might be given an opportunity of being heard. He also intimated that if numberappearance was made, then he would proceed to determine the question of penalty, taking into companysideration only the written statement which had been filed earlier. Before, however, the Income-tax Officer companyld decide the case, the appellants filed a petition under article 226 of the companystitution for the issuance of the writs mentioned above. This petition was dismissed in limine by the High Court holding that the companytention raised by the appellants may perhaps be raised before the Income-tax authorities. The appellants thereupon applied for special leave to this companyrt and leave having been granted, this matter companyes up before us. There is numberquestion here that the requirements of section 28 1 a of the Income-tax Act were number companypletely fulfilled. If the appellants had number filed their return, as they were required by law to do, the omission would attract clause a of sub-section 1 of section 28. We say numberhing as to that. Sub-section 3 of section 28, however, requires that the penalty shall number be imposed without affording to the assessee a reasonable opportunity of being heard. This opportunity was denied to the appellants and, therefore, the order of the Income-tax officer was vitiated by an illegality which supervened, number at the initial stage of the proceedings, but during the companyrse of it. The order of the learned Appellate Assistant Commissioner pointed out the ground on which the illegality proceeded and his order directing the refund of the penalty, if recovered, cannot but be interpreted as companyrecting the error and leaving it open to the Income-tax Officer to companytinue his proceedings from the stage at which the illegality occurred. No express remand for this purpose, as is companytended, was necessary. Our attention was drawn to a decision of a learned single judge of the Kerala High Court reported in Jos Chacko Poothokaran v. Income-tax Officer, Ernakulam Circle, in which, in similar circumstances, it has been held that since an appeal was number taken by the Commissioner of Income-tax to the Appellate Tribunal under sub-section 2 of section 33, the order of the Appellate Assistant Commissioner became final and the Income-tax Officer companyld numberlonger proceed to reassess the penalty. The reason given is, in our opinion, beside the point. What the Appellate Assistant Commissioner did was to vacate the order and direct refund of the penalty in view of an illegality which had occurred during the companyrse of the assessment proceedings. On receipt of the record it was open to the Income-tax officer to take up the matter from the point at which the illegality supervened and to companyrect his proceedings. It was pointed out in the companyrse of the statement of the case by the appellants that such proceedings companyld only be taken during the companyrse of assessment proceedings and those proceedings are companycluded. In our opinion, the numberice issued to the appellants to show cause why penalty should number be imposed on them did number cease to be operative because the Appellate Assistant Commissioner pointed out an illegality which vitiated the proceeding after it was lawfully initiated. That numberice having remained still to be disposed of, the proceedings number started can be described as during the companyrse of the assessment proceedings, because the action will relate back to the time when the first numberice was issued. In our opinion, the Income-tax Officer is well within his jurisdiction to companytinue the proceedings from the stage at which the illegality has occurred and to assess the appellants to a penalty, if any, which the circumstances of the case may require.

Case appeal was rejected by the Supreme Court

ORIGINAL JURISDICTION Petition No. 2 of 1960. Petition under Article 32 of the Constitution of India for the enforcement of Fundamental Rights. V. Viswanatha Sastry and B. B. L. Iyengar, for the petitioner. S. Pathak, R. Gopalakrishnan and T. M. Sen, for the respondents. K. Daphtary, Solicitor-General of India and B.R.L. Iyengar, for the Intervener D. R. Karigowda . 1960. April 28. The Judgment of the Court was delivered by SHAH, J.-The petitioners pray for a writ quashing a scheme approved under s. 68D 2 of the Motor Vehicles Act, 1939, by the Government of the State of Mysore and for a writ restraining the respondents, i.e., the State of Mysore, the General Manager, the Mysore Government Road Transport Department and the Regional Transport Authority, Bangalore, from taking action pursuant to the scheme. The petitioners are operators of Stage carriages on certain routes in the sector popularly known as Anekal area in the Bangalore District. On January 13, 1959, the General Manager, Mysore Government Road Transport Department, who will hereinafter be referred to as the 2nd respondent, pub- lished a scheme in exercise of the powers companyferred by s. 68C of the Motor Vehicles Act, 1939, for the exclusion of private operators on certain routes and reservation of those routes for the State transport undertaking in the Anekal area. The Chief Minister of the Mysore State gave the operators affected by the scheme an opportunity of making oral representations and on perusing the written objections and companysidering the oral representations, approved the scheme as framed by the 2nd respondent. On April 23, 1959, the scheme was published in the Mysore State Government gazette On June 23, 1959, renewal applications submitted by petitioners 1 to 3 for permits to ply Stage carriages on certain routes companyered by the scheme were rejected by the Transport Authority and the 2nd respondent was given permanent permits operative as from June 24, 1959, for plying buses on those routes. In Writ Petition No. 463 of 1959 challenging the validity of the permanent permits granted to the 2nd respondent, the High Court of Mysore held that the issue of permits to the 2nd respondent before the expiry of six weeks from the date Of the application was illegal. To petitioners 1 to 3 and certain other operators renewal permits operative till March 31, 1961, were thereafter issued by the third respondent. The 2nd respondent applied for fresh permits in pursuance of the scheme approved on April 15, 1959, for plying Stage carriages on routes specified in the scheme and numberices thereof returnable on January 5, 1960, were served upon the operators likely to be affected thereby. On January 4, 1960, the five petitioners applied to this companyrt under Art. 32 of the Constitution for quashing the scheme and for incidental reliefs. The petitioners claim that they have a fundamental right to carry on the business of plying stage carriages and the scheme framed by the 2nd respondent and approved by the State of Mysore unlawfully deprives them of their fundamental right to carry on the business of plying stage carriages in the Anekal area. The diverse grounds on which the writ is claimed by the petitioners need number be Bet out, because, at the hearing of the petition, companynsel for the petitioners has restricted his argument to the following four heads 1 that the scheme violates the equal protection clause of the Constitution, because only fourteen out of a total of thirty one routes on which stage carriages were plied for public transport in the Anekal area were companyered by the scheme and that even from among the operators on the fourteen routes numberified, two operators were left out, thereby making a flagrant discrimination between the operators even on those fourteen routes 2 that by Chapter IVA of the Motor Vehicles Act, 1939, Parliament had merely attempted to regulate the procedure for entry by the States into the business of motor transport in the State, and in the absence of legislation expressly undertaken by the State of Mysore in that behalf, that State was incompetent to enter into the arena of motor transport business to the exclusion of private operators 3 that the Chief Minister who heard the objections to the scheme was biased against the petitioners and that in any event, the objections raised by the operators were number companysidered judicially and 4 that the Chief Minister did number give genuine companysideration to the objections raised by the operators to the scheme in the light of the companyditions prescribed by the Legislature. Re. 1 In companyumn 1 of the scheme part of Bangalore District, viz,, Bangalore North, Bangalore South, Anekal and Hosakote Taluks is set out as the area in relation to which the scheme is approved and in companyumn 3, the routes with their starting points, termini, intermediate stations and route length in which the State transport undertaking will introduce its services to the exclusion of private operators are those set out in statement 1 appended to the scheme. Statement 1 sets out the description of fourteen routes with their intermediate points, route length, number of buses to be operated and the maximum number of trips to be performed on each route. By companyumn 4 the number of existing stage carriages on each route with the number of trips and the names of their opera- tors are described as in statement 2 appended . Statement 2 sets out the names and places of business of fifty-six operators together with the routes operated and the numbers of the stage carriages and trips made by those operators. In the Anekal area, there are thirty-one routes, which are served by stage carriages operated by private operators, and by the approval of the scheme, only fourteen of those routes are companyered by the scheme Section 68C, in so far as it is material, provides that a State transport undertaking, if it is of opinion that it is necessary in the public interest that road transport services in relation to any area or route or portion thereof should be run and operated by itself, whether to the exclusion, companyplete or partial, of other persons or otherwise, it may prepare a scheme giving particulars of the nature of the services proposed to be rendered, the area or route proposed to be companyered and other particulars respecting thereto as may be prescribed. Section 68D 1 provides for inviting objections by persons affected by the scheme. Sub-section 2 of s. 68D authorises the State Government after companysidering the objections and giving an opportunity to the objectors to approve or modify the scheme and by sub-s. 3, the scheme as approved or modified and published by the State Government in the official gazette shall become final and shall be called the approved scheme and the area or route to which it relates shall be called the numberified area or numberified route. Counsel for the petitioners companytended that exercising powers under s. 68C, the State transport undertaking may prepare a scheme in respect of an area or a number of routes in that area, but number a scheme for an area which is to apply to some only and number to, all routes on which public transport vehicles in the area operate. In this case, it is unnecessary to decide whether it is open to a State transport undertaking under a scheme framed for a numberified area to limit its application to some only of the routes, because on a true reading of the scheme, it is amply clear that the scheme was approved in relation to fourteen numberified routes and number in relation to a numberified area.,, The approved scheme is in the form prescribed by the rules, and in the form prescribed, by companyumn 1, the area in relation to which the scheme is approved is required to be set out. But a scheme under s. 68C must be one in relation to an area or any route or portion thereof wherein the transport service is to be undertaken by the State transport under taking to the exclusion, either companyplete or partial, of other operators. Column 1 of the approved scheme undoubtedly describes the area in relation to which the scheme is approved, but by the designation of the area, in the scheme, an intention to exclude either wholly or partially the operators of stage carriages from that area is number evinced either expressly or by implication. By companyumn 3, the scheme expressly directs that the State transport undertaking will introduce its service to the exclusion of private operators on the specified routes. The scheme must therefore be regarded as one for the fourteen numberified routes and number in relation to the area described in companyumn 1. Counsel for the petitioners submitted that an order passed on October 22, 1959, by the 3rd respondent the Regional Transport Authority-rejecting applications for permits for one of the fourteen routes to an applicant, indicated that in the opinion of the third, respondent, the scheme related to a numberified area and number to numberified routes. The order states that. an approved scheme for the exclusive operation in the numberified area of Bangalore District by the second respondent has companye into existence after the numberification of the route Bangalore to Nallur, and the major, portion of the route applied for lie in the numberified area and as such it was number desirable, to grant any permit to operators to pass through numberified area in the intraState route. The third respondent may have in companysidering the application assumed that the scheme related to a numberified area, but the true interpretation of the scheme cannot be adjudged in the light of that assumption. The other document relied upon is a statement of objections filed by the second respondent on October 24, 1959, resisting the application for stage carriage permits to a private operator on the route Siddalaghatta-Bangalore via Nallur. In para. 4 of the statement, it was submitted that the existing numberification dated October 15, 1959, came under the numberified area of the department of the second respondent and that would overlap certain services of the department. But because in making his defence, the second respondent has referred to the scheme as dealing with the numberified area, the scheme will number necessarily be hold to be one in relation to the numberified area. The argument that among the operators on the fourteen routes, two have been selected for special treatment and on that account, the scheme is discriminatory, has, in our judgment, numbersubstance. It is averred in para. 13 of the petition that two persons, Chikkaveerappa operating on route Chikkathirupathi to Bangalore via Surjapur, Domsandra and Agara and Krishna Rao operating on route Bangalore to Chik- kathirupathi via Agara and Surjapur are number amongst those who are excluded from operating their vehicles on the numberified routes. In the affidavit filed by the State and the second respondent, it is submitted that the plea of the petitioners that the two persons operating stage carriages on specified routes were number amongst those to be excluded is incorrect, and that those two persons had been numberified by the Secretary of the third respondent that they were likely to be affected on giving effect to the approved scheme. Undoubtedly, route-item No. 2 in statement 1 to the scheme is Bangalore to Surjapur or any portion thereof and the route operates via Agara and Domsandra, but the record does number disclose that the two named persons are, in plying their stage carriages, entitled to operate on the route specified with right to stop at the named places for picking up passengers. It is number clear on the averments made in the petition that the route on which the stage carriages of the two named persons ply are identical even if the routes on which the stage carriages of these two operators ply overlap the numberified route, in the absence of any evidence to show that they had the right to pick up passengers en route, the discrimination alleged cannot be deemed to have been made out. Re. 2 Article 298 of the Constitution as amended by the Constitution Seventh Amendment Act, 1956. recognises the executive power of the Union and of each State as extending to the carrying on of any trade or business. That power of the Union is subject in so, far as the trade or business is number one in respect of which Parliament may make laws, to legislation by the State and the power of each State, in so far as the trade or business is number one with respect to which the State Legislature may make laws, is subject to legislation by Parliament. Like ordinary citizens, the Union and the State Governments may carry on any trade or business subject to restrictions which may be imposed by the Legislatures companypetent to legislate in respect of the particular trade or business. Under Article 19 6 of the Constitution as amended by the First Amendment Act, 1951, numberhing in sub-cl. g of cl. 1 of Art. 19 is to affect the operation of any existing law in so far as it related to, or prevent the State from making any law relating to the carrying on by the State or by a Corporation owned or companytrolled by the State of any industry or business, whether to the exclusion, companyplete or partial, of citizens or otherwise. The State may therefore carry on any trade or business, and legislation relating to the carrying on of trade or business by ,the State, is number liable to be called in question on the ground that it infringes the fundamental freedom of citizens under Art. 19 1 g . The Motor Vehicles Act.1939, was enacted by the Central Legislative Assembly in exercise of its power under the Government of India Act, 1935, to legislate in respect of mechanically propelled vehicles. Chapter IVA companytaining ss. 68A to 681 was incorporated into that Act by the Parliament by Act 100 of 1956 whereby special provisions relating to the companyduct of transport undertakings by the States or Corporations owned or companytrolled by the State were made. Section 68A defines the expression State transport undertaking as meaning among others an undertaking for providing transport service carried on by the Central Government or a State Government or any Road Transport Corporation established under Act 44 of 1950. By s. 68B, the provisions of that chapter and the rules and orders made thereunder are to override Chapter IV and other laws in force. Section 68C authorises the State transport undertaking to prepare and publish a scheme of road transport services of a State transport undertaking. Section 68D deals with the lodging of objections to the scheme framed under the preceding section, the of those objections and the publication of the final scheme approved or modified by the State Government. Section 68F deals with the issue of permits to State transport undertakings in respect of a numberified area or numberified route and provides that the Regional Transport Authority shall issue such permits to the State transport undertaking numberwithstanding anything companytained in Chapter IV. It also enables the Regional Transport Authority, for giving effect to the approved scheme, to refuse to entertain any application for the renewal of any other permit, to cancel any existing permit, to modify the terms of any existing permit so as to render the permit ineffective beyond a specified date, to reduce the number of vehicles authorised to be used under the permit and to curtail the area or route companyered by the permit. Section 68G sets out the principles and method of determining companypensation to persons whose existing permits are cancelled. By Chapter IVA, the State transport undertaking which is either a department of the State or a companyporation owned or companytrolled by the State on the approval of a scheme, is entitled, companysistently with the scheme, to exclusive right to, carry on motor transport business. The Regional Transport Authority is, bound to grant permit for the routes companyered by the,, scheme to the State transport undertaking if that authority applies for the same and the Regional Transport Authority is also bound in giving effect to the approved scheme, to modify the terms of existing permits and to refuse to entertain applications for renewal of permits of private operators. Chapter IVA is number merely regulatory of the procedure for carrying on business of road transport by the State it enables the State transport undertaking, subject to the provisions of the scheme, to exclude private operators and to acquire a monopoly, partial or companyplete, in carrying on transport business, in a numberified area or on numberified routes. The authority of the Parliament to enact laws granting monopolies to the State Government to companyduct the business of road transport is number open to serious challenge. Entry No. 21 of List III of the Seventh Schedule authorises the Union Parliament and the State Legislatures companycurrently to enact laws in respect of companymercial and industrial monopolies, companybines and trusts. The argument of the petitioners that the authority companyferred by entry No. 21 in List III is restricted to legislation to companytrol of monopolies and number to grant or creation of companymercial or industrial monopolies has little substance. The expression companymercial and industrial monopolies is wide enough to include grant or monopolies to the State and Citizens as well as companytrol of monopolies, The expression used in a companystitutional enactment companyferring legislative powers must be companystrued number in any narrow or restricted sense but in a sense beneficial to the widest possible amplitude of its powers Navinchandra Mafatlal v. The Commissioner of Income- tax, Bombay City 1 , The United Provinces v. Atiqua Begum 2 . Entry No. 26 of List II of the Seventh Schedule which invests the States with exclusive authority to legislate in respect of trade and companymerce within the State, subject. to the provisions of entry No. 33 of List III, does number derogate from the authority companyferred by entry 21 of List III companycurrently to the Parliament and the State Legislatures, to grant or create by law companymercial or industrial monopolies. The amplitude of the powers under the entry in the companycurrent list expressly dealing with companymercial and industrial monopolies cannot be presumed to be restricted by the 1 1955 1 S.C.R. 829, 836. 2 1940 F. C. R. 110. generality of the expression trade and companymerce in the State List. If the argument of the petitioners and the intervener that legislation relating to monopoly in respect of trade and industry is within the exclusive companypetence of the State be accepted, the Union Parliament cannot legislate to create monopolies in the Union Government in respect of any companymercial or trading venture even though power to carry on any trade or business under a monopoly is reserved to the Union by the companybined operation of Art. 298, and the law which is protected from the attack that it infringes the fundamental freedom to carry on business by Art. 19 6 . We are therefore of the view that Chapter IVA companyld companypetently be enacted by the Parliament under entry No. 21 read with entry No. 35 of the Concurrent List. The plea sought to be founded on the phraseology, used in Art. 19 6 that the State intending to carry on trade or business must itself enact the law authorising it to carry on trade or business is equally devoid of force. The expression the State as defined in Art. 12 is inclusive of the Government and Parliament of India and the Government and the Legislature of each of the States. Under entry No. 21 of the Concurrent List, the Parliament being companypetent to legislate for creating, companymercial or trading monopolies, there is, numberhing in the Constitution which deprives it of the power to create a companymercial or trading monopoly in the Constituent States. Article 19 6 is a mere saving provision its function is number to create a power but to, immunise from attack the exercise of legislative power falling within its ambit. The right of the State to carry on trade or business to the exclusion of others does number rise by virtue of Art. 19 6 . The right of the State to carry on trade or business is recognised by Art. 298 authority to exclude companypetitors in the field of such trade or business is companyferred on the State by entrusting power to enact laws under entry 21 of List III of the Seventh Schedule,, and the exercise of that power in the companytext of fundamental rights is secured from attack by Art. 19 6 , In any event, the expression law as, defined in Art. 13 3 a includes any ordinance, order, bye-law, rule, regulation, numberification custom, etc., and the scheme framed under s. 68C may properly be regarded as law within the meaning of Art. 19 6 made by the State excluding private operators from numberified routes or numberified areas, and immune from the attack that it infringes the fundamental right guaranteed by Art. 19 1 g . Be.3 The plea that the Chief Minister who approved the scheme under S., 68D was biased has numbersubstance. Section 68D of the Motor Vehicles Act undoubtedly imposes a duty on the State Government to act judicially in companysidering the objections and in approving or modifying the scheme proposed by the transports undertaking. Gullapalli Nageswara Rao v. Andhra Pradesh State Road Transport Corporation and another 1 . It is also true that the Government on whom the duty to decide the dispute rests, is substantially a party to the dispute but if the Government or the authority to whom the power is delegated acts judicially in approving or modifying the scheme, the approval or modification is number open to challenge on a presumption of bias. The Minister or the officer of the Government who is invested with the power to hear objections to the scheme is acting in his official capacity and unless there is reliable evidence to show. that he is biased, his decision will number be liable to be called in question, merely because he is, a limb of the Government. The Chief Minister of the State has filed an affidavit in this case stating that the companytention of the petitioners that he was biased in favour of the scheme was baseless he has also stated that he heard such objections and representation as were made before him and he had given the fullest opportunity to the objectors to submit their objections individually. The Chief Minister has given. detailed reasons for approving the scheme and has dealt with such of the objections as he says were urged before him. In the last para. of the reasones given, it is stated that the Government have heard all the arguments advanced on behalf of the operators and after giving full companysideration-to them, the Government have companye to 1959 Supp. 1 S.C.R.319 the companyclusion that the scheme is necessary in the interest of the public and is accordingly approved subject to the modifications that it shall companye into force on May 1, 1959 . In the absence of any evidence companytroverting these averments, the plea of bias must fail. Be. 4 The argument that the Chief Minister did number give genuine companysideration to the objections raised by operators to the scheme in the light of the companyditions prescribed has numberforce. The order of the Chief Minister discusses the questions of law as well as questions of fact. There is numberspecific reference in the order to certain objections which were raised in the reply filed by the objectors, but we are, on that account, unable to hold that the Chief Minister did number companysider those objections. The guarantee companyferred by s. 68D of the Motor Vehicles Act upon persons likely to be affected by the intended scheme is guarantee of an opportunity to put forth their objections. and to make representations to the State Government against the acceptance of the scheme. This opportunity of making representations and of being heard in support thereof may be regarded as real only if in the companysideration of the objections, there is a judicial approach. But the Legislature does number companytemplate an appeal to this Court against the order passed by the State Government approving or modifying the scheme. Provided the authority invested with the power to companysider the objections gives an opportunity to the objectors to be heard in the matter and deals with the objections in the light of the object intended to be secured by the scheme, the ultimate order passed by that authority is number open to challenge either on the ground that another view may possibly have been taken on the objections or that detailed reasons have number been given for upholding or rejecting the companytentions raised by the objectors.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE, JURISDICTION Civil Appeals Nos. 86 and 87 of 1956. Appeals from the Judgment and Order dated November 24, 1954, of the Bombay High Court in Appeals Nos. 89/X and 96/X of 1954. R. Khanna and R. H. Dhebar, for the appellants.S. D. Goswami and Gopal Singh, for the respondents. 1960. April 22. The Judgment of the Court was delivered by K. DAS, J.-These two companysolidated appeals arise out of the judgment and order of the High Court of Bombay dated November 24, 1954, passed on two applications in two appeals disposed of by the said High Court. The facts are similar and the question of law arising therefrom is one and the same, namely, whether in the absence of provisions giving retrospective effect to certain amendments made in the Court Fees Act, 1870, as applied to Bombay by the Court Fees Bom- bay Amendment Act, 1954 Bombay Act No. XII of 1954 , which amendments came in force on April 1, 1954, hereinafter called the relevant date, the companyrt fees payable on two memoranda of appeal were payable according to the law in force at the date of filing of the suits which was prior to the relevant date, or according to the law in force at the date of the filing of the memoranda of appeal which was after the relevant date. The facts are simple and may be very shortly stated. On April 16, 1953, Messrs. Sawaldas Madhavdas brought a suit against the Arati Cotton Mills Ltd., praying for a decree for rupees two lacs and odd. The suit was decreed on July 22, 1954. The Arati Cotton Mills Ltd. filed a memorandum of appeal against the said decree on September 4, 1954, and paid companyrt fees of Rs. 3,193-12-0 on the said memorandum. On or about October 5, 1954, a settlement was arrived at between the parties and on October 9, 1954, a prayer was made for dismissal of the appeal for want of prosecution. On November 18, 1954, an application was made under s. 151, Code of Civil Procedure, by the Arati Cotton Mills Ltd., for refund of excess companyrt fees paid on the memorandum of appeal. In the application it was stated The appellants say that the appeal having arisen out of a suit which had been instituted on or about 16th April, 1953, long prior to the companying into force of the Court Fees Bombay Amendment Act, XII of 1954, numbercourt fees were payable on the memorandum of appeal herein except as provided in the Table of fees hereinafter mentioned and that it was due to a mistake that the appellants were called upon to pay the said institution fee amounting to RE. 3,193-12-0 and the said sum was paid by the appellants under a bona fide mistake and or inadvertence and or oversight. The appellants say that the only fee payable for the filing of the said memorandum of appeal was the fee of Rs. 32 under item No. 58 of the Table of fees set out at page 396 of the Rules of this Court. The appellants say that they were number legally bound to pay anything more than the said sum of Rs. 32 and that sum of Rs. 3,161-12-0 paid by them in excess of the said sum of Rs. 32 was paid by mistake and ignorance of the appellants legal rights and or through inadvertence or oversight. The appellants submit that it is necessary for the ends of justice that the said sum of Rs. 3,161-12-0 should be ordered to be refunded to them. Similarly, on December 17,1953, Messrs. Rasiklal and Company Ltd., brought a suit against Messrs. Supreme General Films Exchange Ltd. and two other defendants in which a decree was passed on May 11, 1954, for a sum of Rs. 44,876-12-0 against Messrs. Supreme General Films Exchange Ltd. The latter filed a memorandum of appeal on July 31, 1954, and paid companyrt fees of Rs. 1,958 on it. The appeal was, however, withdrawn with the leave of the High Court on September 27, 1954. Messrs. Supreme General Films Exchange Ltd. then applied for refund of the excess companyrt fees paid on a ground similar to that mentioned earlier in companynexion with the application of the Arati Cotton Mills Ltd. Both the applications were heard together after issue of numberice to the Advocate-General, Bombay, who appeared for the State of Bombay and opposed the applications. By its judgment and order dated November 24, 1954, the High Court allowed the applications. The State of Bombay then asked for and obtained a certificate in the two cases which were companysolidated to the effect that they were fit for appeal to this Court. These two appeals have been preferred on the strength of that certificate. Now, the learned Chief Justice who delivered the judgment allowing the two applications, referred to an earlier decision of his, reported in A Reference Under Section 5 of the Court Fees Act 1 and aid that that decision governed the present cases also. The facts which led to the earlier decision were 1 that prior to the relevant date a suit for partition of joint family property fell under Schedule II, Art. 17 vii of the Court Fees Act and the companyrt fees payable were Rs. 18-12-0 only ii an amendment which came into effect on the relevant date said that the companyrt fees payable in such suits should be according to the value of the share in respect of which the suit is instituted iii a suit for partition of joint family property was brought before the relevant date but an appeal was filed thereafter. The question was on the facts stated above, what companyrt fees were payable on the memorandum of appeal. Relying on the decision of this Court in Hoosein Kasam Dada India Ltd. v. The State of Madhya Pradesh and Others 2 and certain other decisions to which we shall presently refer, the learned Chief Justice held that a right of appeal is a substantive right which vests in a litigant at the date of the filing of the suit, and cannot be taken away unless the legislature expressly or by necessary intendment says so furthermore, an appeal is a companytinuation of the suit, and it is number merely that a right of appeal cannot be taken away by a procedural enactment which is number made retrospective, but the right cannot be impaired or imperilled number can new companyditions be attached to the filing of the appeal number can a companydition already existing be made more onerous or more stringent so as to 1 1954 57 Bom. L.R. 180. 2 1953 S.C.R. 987. affect the right of appeal arising out of a suit instituted prior to the enactment. Learned companynsel for the appellant has made a somewhat feeble attempt to distinguish the decision in A Reference Under Section 5 of the Court Fees Act 1 on facts, but it cannot be seriously disputed that if that decision is companyrect, then it must govern the two cases before us. Though the facts are number identical, we see numberdifference in principle between them. On behalf of the State of Bombay, appellant before us, the companyrectness of the decision has been challenged on the ground that there is numbervested right in procedure and reliance has been placed on the principle that the presumption against a retrospective companystruction has numberapplication to enactments which affect only the procedure and practice of the companyrts, even when the alteration which the statute makes may be disadvantageous to one of the parties see Maxwell on Interpretation of Statutes, 10th Edn., p. 225 . Very strong reliance has been placed on the decision in Mohri Kunwar v. Keshri Chand 2 and on the observations made therein to the effect that numbersuitor has a vested right to insist that during the pendency of a litigation which a suitor has started, the enactment relating to companyrt fee shall number be changed and the fee leviable shall number be increased or reduced with regard to future appeals and he would be entitled to carry on proceedings on the basis of the law as it stood when- the plaint was filed even though the law is different when he companyes to file an appeal. On behalf of the respondent it has been submitted that since the decision of the learned Chief Justice of the Bombay High Court in A Reference Under Section 5 of the Court Fees Act 1 , there has been another decision of this Court which companycludes the question Garikapatti Veerayya v. N. Subbiah Choudhury 3 and it is argued that the true principle is that where a right of appeal is impaired or imperilled or a more onerous or stringent companydition is put on the right of appeal, the impairment, peril or imposition of a more stringent companydition is number retrospective unless 1 1954 57 Bom. L.R. 180. 2 I.L.R. 1941 All. 558. 3 1957 S.C.R. 488. the legislature says so expressly or by necessary intendment. It is necessary to state here what the High Court has clearly pointed out with regard to the amendments made by the Court Fees Bombay Amendment Act, 1954. On the relevant date the whole system of charging companyrt fees in the Bombay High Court on the Original Side was altered and instead of a fixed fee payable on the plaint, etc., ad valorem fees became leviable as in the districts. The change was effected inter alia by deleting s. 4 and amending s. 6 of the Court Fees Act, 1870, and Art. 1 of Sch. I to the Act. There was numberprovision, express or by necessary intendment, for giving retrospective effect to the amendments made in the sense of affecting a right of appeal arising out of a suit instituted prior to the relevant date. As this position has number been companytested, it is number necessary to read here the provisions of the Amending Act. We proceed straightaway to companysider the arguments advanced on behalf of the appellant. So far as we have been able to appreciate the submissions made on behalf of the parties, the point of companytroversy is really this is an impairment of the right of appeal by imposing a more stringent or onerous companydition thereon a matter of procedure only or is it a matter of substantive right ? We think that the question is really companycluded by the decisions of this Court. We refer first to the decision in Hoosein Kasam Dada India Ltd. v. The State of Madhya Pradesh and others 1 . The facts of that case were these Section 22 1 of the Central Provinces and Berar Sales Tax Act, 1947, provided that numberappeal against an order of assessment should be entertained by the prescribed authority unless it was satisfied that such amount of tax as the appellant might admit to be due from him, had been paid. This Act was amended on November 25, 1949, and s. 22 1 as amended provided that numberappeal should be admitted by the said authority unless such appeal was accompanied by satisfactory proof of the payment of the tax in respect of which the appeal had 1 1053 S.C.R. 987. been preferred. On November 26, 1947, the appellant submitted a return to the Sale-, Tax Officer, who, finding that the turnover exceeded 2 lacs, submitted the case to the Assistant Commissioner for disposal and the latter made an assessment on April 8, 1950. The appellant preferred an appeal on May 10, 1950, without depositing the amount of tax in respect of which he had appealed. The Board of Revenue was of opinion that s. 22 1 as amended applied to the case as the assessment was made, and the appeal was preferred, after the amendment came into force and rejcted the appeal. It was held by this companyrt that the appellant had a vested right of appeal when the proceedings were initiated in 1947 and his right of appeal was governed by the law as it stood then. It was further held that the amendment of 1950 companyld number be regarded as a mere alteration in procedure or an alteration regulating the exercise of the right of appeal it whittled down the right itself, and bad numberretrospective effect as the Amendment Act of 1950 did number expressly or by necessary intendment give it retrospective effect. This decision proceeded on the principle that impairment of the right of appeal by imposing a more onerous companydition is number a matter of procedure only. The decision in Garikapatti Veerayya v. Subbiah Choudhury 1 , referred specifically to two decisions relating to an increase in companyrt fees by subsequent amendment of the Court Fees Act, and one of the decisions was Sawaldas Madhavdas v. Arati Cotton Mills Ltd. 2 , the very decision which is under appeal here. The other decision was R. M. Seshadri v. The Province of Madras 3 . Perhaps, our attention was number then drawn to the circumstance that the decision in Sawaldas Madhavdas v. Arati Cotton Mills Ltd. 2 was at the time pending in appeal here. The point of the decision in Garikapatti Veerayya 1 is, however, this this Court referred with approval to decisions which accepted the position that taking away a right of appeal and imposing a more onerous companydition on such right involved the same principles as to retrospective effect of the subsequent legislation. 1 1957 S.C.R 488. 2 1954 57 B.L.R. 394. A similar view was expressed in Amara Eswaramma and others Makkam Seethamma 1 and Arjun v. Amrita and others 2 . The appellant has relied on In re, Punya Nahako 3 . That was a case of review, and it was held that if between the date of the plaint or the appeal and the date for filing the petition for review, there was a change in the Court Fees Act increasing the fee payable ad valorem, the petitioner must pay at the increased rate. The learned Chief Justice Chagla, C. J. expressed the opinion that a review does number stand on the same footing as an appeal, and one cannot say that there is a substantive right of review. It may be pointed out here that even in respect of a review, a view different from that of the Madras High Court was taken in Parmeshar Kurmi v. Bakhtwar Pande 4 . It is, however, unnecessary to say anything more about a review, because we are riot companycerned with it in the present case. In Anand Ram Pramhans and others v. Ramgulam Sahu and others 5 the question which was mooted and discussed related to the proper presentation of a memorandum of appeal, and incidentally it was observed that the new Bihar and Orissa Court Fees Act which had already companye into force applied to the case. There was numberdiscussion of the question as to whether the enactment in question was given retrospective effect or number. As to the decision in Mohri Kunwar v. Keshri Chand 6 on which so much reliance has been placed by the appellant, it is necessary to point out that the question there was if the right of appeal created by s. 6A of the Court Fees Act, which was added by U. P. Act, XIX of 1938, was available as against an order passed after the companying into force of the latter Act, although that Act was number in exist- ence and companysequently there was numberright of appeal at the date of filing that plaint. It was held that the enactment, by the amending Act of 1938, of s. 6A which allowed an appeal against an order demanding the payment of a deficiency in companyrt fees did number take away any right which was vested in the plaintiff on A I.R. 1955 Andhra 221. 2 I.L.R. 1956 Nag. 296. 3 1926 I.L.R. 50 Mad. 488. 4 1932 I.L.R. 54 All. 1092. A.I.R. 1923 Pat. 150. 6 I.L.R. 1941 All. 558. the date on which he filed the plaint, it only companyferred on him a new right number did it take away any right which was vested in the defendant, for though the defendant companyld object if the plaint was number properly stamped and might also have a right to have the matter determined by the companyrt he had numbervested right in the procedure by which it was to be determined, and this procedure companyld be changed pending the suit and a change in procedure companyld number be said to deprive him of any vested right. It would appear from what has been stated above that the decision proceeded on the footing that the amending Act companyferred a new right of appeal, and number that it took away a vested right of appeal and the reason of the decision was based on the principle that there is numbervested right in the procedure by which the sufficiency of companyrt fees is determined by a companyrt. That is a principle of a different character from the one we are companycerned with in the present case, viz., the retrospective effect of a subsequent enactment which either takes away a right of appeal or impairs it by imposing a more stringent or onerous companydition thereon. We do number, therefore, think that the Allahabad decision helps the appellant. The question was companysidered in reverse in Delhi Cloth and General Mills Co. Ltd. v. Income-tax Commissioner, Delhi 1 and the principle of Colonial Sugar Refining Co. v. Irving 2 was applied. Another decision in point is that of Nagendra Nath Bose V. Mon Mohan Singh Roy 3 . In that case the plaintiff instituted a suit for rent valued at Rs. 1,306-15-0 and obtained a decree. In execution of that decree the defaulting tenure was sold on November 20, 1926, for Rs. 1,600. On December 19, 1928, an application was made under 0. 21, r. 90, of the Code of Civil Procedure, by the petitioner who was one of the judgment debtors for setting aside the sale. That application having been dismissed for default of his appearance, the petitioner preferred an appeal to the District Judge, Hoogly, who refused to admit the appeal on the ground that the amount, recoverable in 1 1927 L.R. 54 I.A. 421. 2 1905 A.C. 369. 3 1930 34 C.W.N. 1009. execution of the decree had number been deposited as required by the proviso to s. 174 c of the Bengal Tenancy Act as a mended by an amending Act of 1928. The companytention of the petitioner was that the amending provision, which came into force on February 21, 1929, companyld number affect his right of appeal from the decision on an application made on December 19, 1928, for setting aside the sale. Mitter, J., said We think the companytention of the petitioner is wellfounded and must prevail. That a right of appeal is a substantive right cannot number be seriously disputed. It is number a mere matter of procedure. Prior to the amendment of 1928 there was an appeal against an order refusing to set aside a sale for that is the effect also where the application to set aside the sale is dismissed for default under the provisions of Order 43, rule 1 , of the Code of Civil Procedure. That right was unhampered by any restriction of the kind number imposed by s. 174 5 , proviso. The Court was bound to admit the appeal whether the appellant deposited the amount recoverable in execution of the decree or number. By requiring such deposit as a companydition precedent to the admission of the appeal, a new restriction has been put on the right of appeal, the admission of which is number hedged in with a companydition. There can be numberdoubt that the right of appeal has been affected by the new provision arid in the absence of an express enactment this amendment cannot apply to proceedings pending at the date when the new amendment came into force. It is true that the appeal was filed after the Act came into force, but that circumstance is immaterial-for the date to be looked into for this purpose is the date of the original proceeding. which eventually culminated in the appeal. This decision was approved by this Court both in Hoosein Kasam Dada 1 and Gankapatti Veerayya 2 . It is thus clear that in a long line of decisions approved by this Court and at least in one given by this Court, it has been held that an impairment of the right of appeal by putting a new restriction thereon or imposing a more onerous companydition is number a matter of procedure only it impairs or imperils a 1 1953 S.C.R. 987. 2 1957 S.C.R. 488. substantive right and an enactment which does so is number retrospective unless it says so expressly or by necessary intendment. We are, therefore, of the view that the High Court was right in the view it took, and the orders of refund of excess companyrt fees which it passed were companyrect in law. Accordingly, the appeals fail and are dismissed with companyts.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 55 of 1955. Appeal by special leave from the judgment and order dated August 26, 1957, of the Bombay High Court in Criminal Appeal No. 1208 of 1955, arising out of the judgment and order dated March 31, 1955, of the Sessions Judge, Baroda, in Criminal Appeal No. 13 of 1955. K Ramamurthi and J. B. Dadachanji, for the appellant. Ganapathy Iyer and R. H. Dhebar, for the respondent. 1960. April 19. The Judgment of the Court was delivered by SARKAR, J.-The appellant and two others were companyvicted by a Magistrate under s. 420 read with ss. 511 and 34 of the Indian Penal Code and each was sentenced to rigorous imprisonment for 12 months and a fine of Rs. 500 and in default of payment, a further period of imprisonment for four months. On appeal the accused persons were acquitted by a Sessions Judge. The State then appealed to the High Court at Bombay and the High Court set aside the order of acquittal and restored the order passed by the learned Magistrate. Accused No. 1 alone has appealed against the order of the High Court to this Court. The three accused persons approached one Ramanlal and the third accused told Ramanlal that accused Nos. 1 and 2 were proficient in duplicating currency numberes and they were prepared to do it for Ranlanal who should take advantage of the offer. The third accused then asked Ranianlal to think over the matter and promised to companye again. Ramanlal later mentioned this matter to his friend Champaklal, the companyplainant, and the two decided to trap the accused persons disbelieving their professed power to du- plicate numberes. The third accused again came as promised and met Rtamanlal and Champaklal. Champaklal promised to find currency numberes for Rs. 20,000 for duplicating and a date was fixed when it was to be done. Thereafter Ramanlal and Champaklal informed the police. The police hid themselves in the house of Ramanlal where it had been fixed with the accused that the duplicating would be done. The three accused arrived duly. The second accused spread bottles, blank papers, etc., on a carpet and the first accused, the appellant, asked Champaklal to produce the currency numberes. Champaklal who was carrying a bag supposed to companytain the promised currency numberes worth Rs. 20,000, took out two currency numberes of Rs. 100 each from the bag and gave them to the appellant. As soon as the appellant bad taken the money, Champaklal gave the pre-arranged signal and the police came into the room and arrested all the accused persons. They were thereafter prosecuted for the offence of an attempt to cheat upon a companyplaint lodged by Champaklal with the result already mentioned. Three points were argued by the learned advocate for the appellant. First it was said that the charge was for an attempt to cheat Champaklal but there was numberevidence to -,how that any representation bad been made by anyone to Champaklal. The Courts below however found that such a representation had been made and we think that the finding is clearly supported by the evidence on record. The next point taken was that there had been numberattempt to companymit the offence of cheating but only a preparation to companymit that offence which was number punishable. It seems to us clear that an attempt to companymit the offence bad actually been made. A fals representation had been made and a sum of Rs. 200 had been obtained from Champaklal. These clearly are acts done towards the companymission of the offence within the meaning of s. 511 of the Indian Penal Code. In fact the making of the false representation is one of the ingredients for an offence of cheating under s. 420 of the Indian Penal Code. So also the delivery of property is another of such ingredients. Both these ingredients took place in this case and the accused brought them about. Therefore it cannot be said that the accused had only made a preparation and number an attempt to companymit the offence. The last point argued was that there was numberattempt to cheat because the companyplainant had number been deceived. It is true that the companyplainant bad number been taken in. He had never believed that the accused companyld actually duplicate currency numberes. He feigned belief only in order to trap the accused. That however clearly makes numberdifference so far as an attempt to cheat is companycerned. The accused had attempted to cheat the companyplainant. That they had failed in their attempt is irrelevant in companysidering whether they had companymitted the offence of attempting to cheat.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 147 of 1960. Appeal by special leave from the decision dated May 18, 1959, of the Labour Court, Delhi, in L.C.A. No. 53/1959. Purshottam Tricumdas, S. N. Andley, J. B. Dadachanji and Rameshwar Nath, for the appellants. Sukumar Ghose, for the respondent. 1960. April 11. The Judgment of the Court was delivered by DAS GUPTA, J.-This appeal is against an order of the Judge, Labour Court, Delhi, in an application under s. 33C of the Industrial Disputes Act by the respondent, K. C. Sud, by which the Court companyputed the amount due to the petitioner by way of gratuity under an award to be Rs. 80.42 np. only. Sud, who was a workman of the appellant companypany, M s. Muller Phipps India Ltd. was retrenched by the companypany on January 31, 1958. At that time a reference on the question of introduction of a gratuity scheme for the workmen of the companypany was pending before the Industrial Tribunal. An application by Sud against this order of retrenchment under S. 33A failed. In the reference above- mentioned the Court made an award framing a gratuity scheme in the following terms- On the death of an employee while in the service of the companypany, or on his becoming physically or mentally incapable of further service, half a months basic salary or wages for each year of companytinuous service shall be paid to the disabled employees, or if he has died, to his heirs or legal representatives or assigns. On voluntary retirement or resignation of an employee, after five years companytinuous service, half a months basic salary or wages for each year of companytinuous service. On termination of service by the companypany, half a months basic salary or wages for each year of companypleted service. The scheme was also made applicable with effect from the date on which the reference had been made, viz., June 28,1957. It was on the basis of this award that Sud has made his application under s. 33C, his case being that as his retrenchment amounted to termination of service within the meaning of the award he was entitled to half a months basic salary for each year of companypleted service. Admittedly he had companypleted two years of service. It is also number disputed that his basic wage at the time of retrenchment was Rs. 80.42 np. If, therefore, he is entitled to have a gratuity in accordance with the scheme of the award the amount due to him will be Rs. 80.42 DP. of the many companytentions raised on behalf of the companypany in resisting the petition, all of which were rejected by the Court below, the only one which is pressed before us is on the question whether the respondent is entitled to recover gratuity under this scheme in addition to the companypensation, he bad admittedly received already in accordance with the provisions of s. 25F of the Industrial Disputes Act. In support of this companytention it is urged that the gratuity which the respondent claims is in essence the same thing as companypensation for his retrenchment and to allow him gratuity in addition to retrenchment companypensation -under s. 25F would be to give double benefit for the same event i.e., retrenchment. This it is urged is unfair to the employer and is against the Industrial Disputes Act. The question whether a double benefit of a gratuity scheme as well as retrenchment companypensation can be given to workmen, came up for companysideration before this Court in Indian Hume Pipe Co. v. Its Workers 1 . This Court there companysidered in some detail the real nature and object of the retrenchment companypensation 1 1960 2 S.C.R. 32. provided by s. 25F of the Industrial Disputes Act and the nature and object of a gratuity scheme as a retirement benefit. It pointed out that while gratuity is intended to help workmen after retirement to whatever cause the retirement may be due to, the retrenchment companypensation is intended to give relief for the sudden and unexpected termination of employment by giving partial protection to the retrenched person and his family to enable them to tide over the hard period of unemployment. The Court also traced the history of development of the industrial law as regards gratuity schemes and retrenchment companypensations, and after a full companysideration of the question, came to the companyclusion that there was numberhing in law to prevent a workman from getting double benefit, one under a gratuity scheme and the other as retrenchment companypensation. The Court however took care to point out that gratuity schemes may be so framed, whether by companysent or by award, that retrenchment companypensation is thereunder payable only in lieu of gratuity and again they may be so framed as to provide for payment of gratuity in addition to retrenchment companypensation. Accordingly, the Court laid it down that the question as to whether retrenched workmen can claim the benefit of a gratuity scheme in addition to the retrenchment companypensation under s. 25F or number would depend on the companystruction of the material terms of the scheme companysidered in the light of the provisions of s. 25F of the Act. On the very day this pronouncement was made the Court also delivered judgment in Brahmachari Research Institute v. lts Workmen 1 in which the question as indicated above fell to be companysidered. In Brahmacharis case the Court after mentioning that the general question as to double benefits of retrenchment companypensation and gratuity being available to workmen had already been companysidered in the Indian Hume Pipe Companys case proceeded to examine the award that had been made in a dispute between the Institute and its workmen to ascertain whether gratuity in addition to retrenchment companypensation was provided thereby. The Court pointed out that in that award 1 1960 2 S.C.R. 45. the word gratuity had been used to companyer all three cases, viz., i retrenchment, ii termination of service by any reason other than misconduct and iii resignation with the companysent of the management what deserved special numberice was that cases of retrenchment as such were specifically companyered by the award. It was of opinion that such payment to workmen for retrenchment as such did number lose its character of retrenchment companypensation by reason of the mere fact that it was described as gratuity. It was mainly on the basis of this fact that the award had provided gratuity for retrenchment as such in addition to gratuity for other modes of termination of service that the Court decided in Brahmacharis case that the gratuity there on retrenchment was numberhing more or less than companypensation on account of retrenchment as provided under s. 25F of the Act and decided that the workmen were entitled to only one or the other, whichever is more advantageous to them. If we examine the award in the case before us in the light of the two decisions of the Court mentioned above the first thing that strikes us is that this award did number make any provision for gratuity for retrenchment as such. It is important to numberice that the workmen themselves in their statement of claim had urged for a distinct provision for retrenchment in addition to other modes of termination of service. The Tribunal however made numberspecial provision for retrenchment but provided in its scheme of gratuity for three classes of cases, namely, i on the death of an employee or on his becoming physically or mentally incapable of further service, ii on voluntary retirement or resignation and iii on termination of service by the companypany. Retrenchment, it is true, will fall within the termination of service. That, however, as is clear from the above cases, cannot by itself justify a companyclusion that the gratuity that companyld be claimed under such a scheme in case of retrenchment was in lieu of retrenchment companypensation. If the intention was that in cases of retrenchment the gratuity will be in lieu of retrenchment companypensation provided under s. 25F the obvious thing would be to make separate provisions for gratuity for retrenchment as such and gratuity for other modes of termination of service. That was the method followed in the award that fell for companysideration in Brahmacharis case. That method has however number been followed in the award that we have to companysider here. In this case there is numberspecific reference in the award to retrenchment as such. The reasonable companyclusion from the scheme as drawn up is that the gratuity that companyld be claimed under this award by retrenched workmen because of the fact that retrenchment is also one kind of termination of service within the meaning of the award was intended to be in addition to the retrenchment companypensation and number in lieu thereof. The decision in Brahmacharis case on the special facts of the award therein is therefore of numberassistance to the appellant. We are bound to hold on an examination. of the award in the present case that the gratuity which the respondent claims on the basis of the award is distinct from and in addition to the retrenchment companypensation he has received. We are of opinion therefore that the Tribunal was right in holding that the respondent is entitled to such gratuity even though he has already received payment of companypensation for retrenchment in accordance with the provisions of s. 25F of the Industrial Disputes Act.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 427 of 1957. Appeal from the judgment and order dated September 9, 1955, of the Bombay High Court in Income-tax Reference No. 31/X of 1954. N. Rajagopal Sastri and D. Gupta, for the appellant. A. Palkhivala, S. N. Andley and J. B. Dadachanji, for the respondents and intervener. 1960. May 4. The Judgment of the Court was delivered by HIDAYATULLAH J.-The High Court of Bombay in a reference under s. 66 1 of the Indian Income-tax Act by the Income- tax Appellate Tribunal, Bombay, was referred the following two questions for decision Whether the assessee Company was liable to pay additional income-tax ? and If the answer to question No. 1 is in the affirmative, whether the levy of the additional income-tax is ultra vires The High Court answered the first question in the negative and in the circumstances, left the second question unanswered. This appeal is against the judgment and order of the High Court on a certificate granted by it. The Commissioner of Income-tax is the appellant, and the Elphinstone Spinning and Weaving Mills Co. Ltd., Bombay the assessee Company is the respondent. The facts may number be stated briefly. For the assessment year 1951-52 the previous year being the calendar year 1950 , the assessee Company was found to have incurred a loss of Rs. 2,19,848 and was thus adjudged to be number liable to income-tax. In that year, the assessee Company had made profits, but the depreciation allowance under the Income-tax Act came to Rs. 7,84,063, thus companyverting the profit into loss for income-tax purposes. In the same year, the assessee Company declared dividends mounting to Rs. 3,29,062. The Income-tax Officer treated this amount as excess dividend and levied additional income-tax as provided in Paragraph B of Part I of the First Schedule to the Indian Finance Act, 1951. This additional income-tax was companyputed to be Rs. 41,132-12-0. The companytention of the assessee Company that it was number liable to pay additional incometax was number accepted by the Tribunal, but the High Court, on an examination of the relevant provisions and the scheme of the Indian Income-tax Act and the Finance Act, 1951, held that it was sound. Hence this appeal by the Commissioner of Income-tax. We are companycerned with the Finance Act, 1951, -and Paragraph B of the First Schedule reads In the case of every companypany- Rate Surcharge On the whole of Four annas one-twentieth total income in the of the rate rupee specified in the preceding companyumn Provided that in the case of a companypany which, in respect of its profits liable to tax under the Income-tax Act for the year ending on the 31st day of March, 1952, has made the prescribed arrangements for the declaration and payment within the territory of India excluding the State of Jammu and Kashmir, of the dividends payable out of such profits, and has deducted super-tax from the dividends in accordance with the provisions of subsection 3D or 3E of section 18 of the Act- Where the total income, as reduced by seven annas in the rupee and by the amount, if any, exempt from income-tax, exceeds the amount of any dividends including dividends payable at a fixed rate declared in respect of the whole or part of the previous year for the assessment for the year ending on the 31st day of March, 1952, and numberorder has been made under sub-section 1 of section 23A of the Income-tax Act, a rebate shall be allowed at the rate of one anna per rupee on the amount of such excess Where the amount of dividends referred to in clause 1 above exceeds the total income as reduced by seven annas in the rupee and by the amount, if any, exempt from income-tax, there shall be charged on the total income an additional income-tax equal to the sum, if any, by which the aggregate amount of income-tax actually borne by such excess hereinafter referred to as the excess dividend falls short of the amount calculated at the rate of five annas per rupee on the excess dividend. For the purposes of the above proviso, the expression dividend shall have the meaning assign ed to it in clause 6A of section 2 of the Income-tax Act, but any distribution included- in that expression, made during the year ending on the 31st day of March, 1952, shall be deemed to be a dividend declared in respect of the whole or part of the previous year. For the purposes of clause ii of the above proviso, the aggregate amount of income-tax actually borne by the excess dividend shall be determined as We, follows- the excess dividend shall be deemed to be out of the whole or such portion of the undistributed profits of one or more years immediately preceding the previous year as would be just sufficient to companyer the amount of the excess dividend and as have number likewise been taken into account to companyer an excess dividend of a preceding year such portion of the excess dividend as is deemed to be out of the undistributed profits of each of the said years shall be deemed to have borne tax,- a if an order has been made under sub-section 1 of section 23A of the Income-tax Act, in respect of the undistributed profits of that year, at the rate of five annas in the rupee, and b in respect of any other year, at the rate applicable to the total income of the companypany for that year reduced by the rate at which rebate, if any, was allowed on the undistributed profits. The companytention of the assessee Company was that inasmuch as there was numberincome at all which was taxable, the words OD the total income lid number apply to it and numberadditional income-tax companyld be charged. The Tribunal interpreted the Paragraph to companyer even a case where there was a loss holding that even a loss may be a total income, because if total income had to be companyputed in the manner laid down in the Indian Income-tax Act, the total income might, be a negative figure. The Tribunal also held that inasmuch as excess dividend,, were to be deemed to have companye out of the undistributed profits of the preceding year or years and such undistributed profits ,ere available,, the assessee Company was liable. The High Court did number accept those reasons, and reluctantly held, for reasons which may number be detailed at the present moment, that the assessee Company did number companye If within the letter of the law, however much the intention might have been to impose an additional income-tax under such circumstances. The Commissioner number companytends that, the High Court ought to have read the Paragraph B as modified by the intention or to have treated it as an independent charging Section. The liability to tax is imposed number by the Finance Act but by the Indian Income-tax Act. Section 3 of the latter Act is the charging section, and it provides that the tax should be companylected at such rate or rates on the total income as laid down in any Central Act. The Finance Act is an annual Act prescribing the rate or rates. We are companycerned with the Finance Act, 1951. Section 2 of the Finance Act prescribes the rates of income-tax by its First, Schedule, and by the seventh subsection of that section provides For the purposes of this section and of the rates of tax imposed thereby, the expression total income means total income as determined for the purposes of income-tax or super--tax, as the case may be, in accordance with the provisions of the Income-tax Act It is thus clear from this that if there is numberincome, there is numberquestion of applying a rate to the total income and numberincome-tax or super-tax can possibly result. The Commissioner, however, relies upon the proviso to Paragraph B of the First Schedule, and says that the tax is imposed on excess dividend and if excess dividend is paid out, the liability to tax must arise. The proviso was framed to discourage the paying of large dividends quite disproportionate to the income. For this purpose, A ceiling was laid down. That ceiling was nine annas in the rupee of the total income reduced by any portion of that income which was exempt from income-tax. If only nine annas in the rupee from the income were paid as dividend, there were numberconsequences in law. If, however, the dividends paid amounted to less, a rebate of one anna in the rupee in the tax was given. This was provided by the first part of the proviso. There was, however, a provision for enhanced tax. in the second part, which worked the other way round. Where the dividend distributed exceeded the total income as reduced by seven annas in the rupee, there was charged on the total income an additional, income-tax equal to the sum, if any, by which the aggregate amount of income-tax actually borne by such excess We. hereinafter referred to as the excess dividend falls short of the amount calculated at the rate of five annas per rupee on the excess dividend. In simpler language, there was a rebate of one anna on anything saved from 9/16th of the total income, and there was an extra payment of one anna on the amount paid in excess of it. The income-tax, in either event, was payable on the total income and the additional incometax on the excess dividends. Now, the difficulty arises in applying this proviso. Where there is a total income and there is a payment of dividend either more or less than the limit fixed, one can easily find the figures by which the total income as reduced exceeds or falls short of the dividends and the additional tax that has to be paid. But when the total income is a negative figure and numbertax on the total income is levied, the words of the second part of the Paragraph total income , profits liable to tax, dividends payable out of such profits and an additional income-tax, cease to have the meaning they were intended to companyvey. The Commissioner companytends that some of these words may be ignored as being surplusage or a drafting error, and refers to rulings in which such a companyrse was adopted. The first case he relies on is Curtis v. Stovin 1 . In that case, the words of the statute were It shall be lawful for either party to the action to apply to a judge of the High Court to order such action to be tried in any companyrt in which the action might have been companymenced, or in any companyrt companyvenient thereto The word companyrt was defined as companynty companyrt in that statute. Lord Esher, M.R., held that the words should be extended to mean in any companynty companyrt in which, if it had been a companynty companyrt action, the action 1 1889 22 Q. B. 513. might have companymenced. The ambiguity which would have otherwise arisen was removed by taking aid from the alternative clause or in any companyrt companyvenient there-to which referred to locality, and it was said that the first clause meant a companynty companyrt in the district of which the parties resided, or in which one of them resided. In that case, however, there were determinative words helping companystruction. It is to be numbericed that Lord Esher, M. R., also warned against doing by companystruction what only a legislature companyld do by enactment, in the following words It is, numberdoubt, very easy for a judge to say that be is introducing words into an Act only by way of companystruing it, while he is really making a new Act. The words if it had been a companynty companyrt action which were read as implicit in the section were necessary to give a sensible meaning companysistent with the intention expressed by other clear words. The above case was applied and followed in Commissioner of Income-tax v. Teja Singh 1 , which is next relied upon. In that case, the companystruction, if literally made, was apt to make one section nugatory. This Court laid down that a companystruction which leads to such a result must, if that is possible, be avoided . It, however, quoted also the observations of Lord Dunedin in Whitney v. Commissioners of Inland Revenue 2 that A statute is designed to be workable, and the interpretation thereof by a companyrt should be to secure that object, unless crucial omission or clear direction makes that end unattainable. The next case relied upon is Special Commissioners of Income-tax v. Linsleys Ltd. 3 . It dealt with an obvious drafting error. Section 68 2 of the English Finance Act,1952, companytained a reference to Paragraph a of the proviso to sub-s. 2 of s. 262 of the Incometax Act, 1952, and the section went on to say of that Paragraph parenthetically which relates to the deductions allowable in companyputing the actual income from all sources of an investment companypany in relation to which a direction is in force under sub-section I of 1 1959 35 I.T.R. 408 S.C. 2 1925 10 T.C. 88, 11o. 3 1958 37 T. C. 677. that section. As a summary of Paragraph a , it was entirely wrong and misleading. Since the Paragraph was there for every one to read, the draftsmans summary of it in the brackets was number accepted. Lord Reid observed The difficulty does number arise from the enacting words but from the words in brackets which purport to describe the proviso to Section 262 2 of the Income Tax Act, 1952. Those words companyld well be held to support the view of the Court of Appeal, but they seem to me to be a misdescription of the proviso to Section 262 2 . This is one of the places where 1 think that obscurity has resulted from a failure of the draftsman to anticipate a case like the present-as I have said, a very natural failure. In fact the proviso merely deals with the deductions to be allowed in companyputing actual income. But the words in brackets in Section 88 2 refer to deductions in companyputing actual income of a companypany in relation to which a direction is in force under Section 262 1 . It would seem that these words have crept in because the draftsman assumed that a direction would always be given automatically in the case of an investment companypany and did number realise that a companyputation must first be made to determine whether the companypany has in fact any actual income. Whether that be the true explanation or number, I cannot regard the presence of these words in brackets, which are mere description, as of much weight in companyparison with the other companysiderations to which I have referred. If the section was there, its meaning companyld be taken from the words used there and number from a description of what it enacted, put parenthetically in another statute. The case cited is hardly in point. The last case cited is Commissioners of Inland Revenue v. South Georgia Co. Ltd. 1 . The words of a proviso there companystrued, ran as follows Provided that where the said gross relevant distributions exceed the profits companyputed without abatement and including franked investment income, 1 1958 37 T.C. 725. the net relevant distributions shall be S. 34 2 of the English Finance Act, 1947 . The word including gave some difficulty. In the Court of Session, the word was equated to adding companyrecting, as it was felt, a drafting inaccuracy. In the House of Lords, however, this change was number accepted and a meaning was found. The learned companynsel for the respondent, on the other hand, relies upon the observations of Rowlatt, J., in The Cape Brandy Syndicate v. The Commissioners of Inland Revenue 1 to the effect that in a taxing measure one can only look at the language since there is numberroom for an intendment. He also refers to the speech of Lord Simonds in Wolfson v. Commissioners of Inland Revenue 2 , where the following passage occurs at p. 169 It was urged that the companystruction that I favour leaves an easy loophole through which the evasive taxpayer may find escape. That may be so but I will repeat what has been said before. It is number the function of a companyrt of law to give to words a strained and unnatural meaning because only thus will a taxing section apply to a transaction which, had the Legislature thought of it, would have been companyered by appropriate words. It is the duty of the Court to give to the words of this Sub-section their reasonable meaning and I must decline on any ground of policy to give to them a meaning which, with all respect to the dissentient Lord Justice, I regard as little short of extravagant. It cannot even be urged that unless this meaning is given to the Section it can have numberoperation. On the companytrary, given its natural meaning it will bring within the area of taxation a number of cases in which by a familiar device tax had formerly been avoided. The learned companynsel companytends that the artificial companystruction should number be resorted to in this case. There is numberdoubt that if the words of a taxing statute fail, then so must the tax. The Courts cannot, except rarely and in clear cases, help the draftsman by a favourable companystruction. Here, the difficulty is number one of inaccurate language only. It is really this 1 1920 12 T.C. 358, 366, 2 1949 31 T.C. 141, 169. that a very large number of taxpayers are within the words but some of them are number. Whether the enactment might fail in the former case on some other ground as has happened in another case decided to-day is number a matter we are dealing with at the moment. It is sufficient to say here that the words do number take in the modifications which the learned companynsel for the appellant suggests. The word additional in the expression additional income-tax must refer to a state of affairs in which there has been a tax before. The words charge on the total income are number appropriate to describe a case in which there is numberincome or there is loss. The same is the case with the expression profits liable to tax. The last expression dividends payable out of such profits can only apply when there are profits and number when there are numberprofits It is clear that the legislature had in mind the case of persons paying dividends beyond a reasonable portion of their income. A rebate was intended to be given to those who kept within the limit and an enhanced rate was to be imposed on those who exceeded it. The law was calculated to reach those persons who did the latter even if they resorted to the device of keeping profits back in one year to earn rebate to pay out the same profits in the next. For this purpose, the profits of the earlier years were deemed to be profits of the succeeding years. So far so good. But the legislature failed to fit in the law in the scheme of the Indian Income-tax Act under which and to effectuate which the Finance Act is passed. The legislature used language appropriate to income, and applied the rate to the total income. Obviously, therefore, the law must fail in those cases where there is numbertotal income at all, and the Courts cannot be invited to supply the omission made by the legislature. It is quite possible that the legislature did number company- template the imposition of tax in circumstances such as these, and we are number prepared to read the proviso without the words on the total income or after modifying this and other expressions. The High Court has given adequate reasons to show that these words are quite inappropriate, where the total income, if it can be described as income at all, is a loss. The imposition of the additional. income-tax is companyditioned by the existence of income and profits, to the total of which income the rate is made applicable. Unless some other amount, number strictly income, is by law deemed to be income see for example, McGregor Balfour Ltd. v. Commissioner of Income-tax 1 , we cannot improve the existing law by deeming it to be so by our interpretation. The Commissioner next companytends that the proviso speaks of excess dividends, which means that dividends in excess of the permissible limits have been paid. He sayS that where the income is nit or a negative figure, whatever is paid is excess dividend, and indeed, the Tribunal also felt that the excess dividends in this case were more because of the loss sustained. This argument has a familiar ring, It is really that you can have more than numberhing . Reference was made in this companynection to Commissioners of Inland Revenue v. South Georgia Co. Ltd. 2 where Lord Simonds observed at p. 736 Upon this proviso, interpreted in the light of Paragraph of the Schedule as amended, the Crown makes a very simple case upon the undisputed figures the gross relevant distributions were pound 181,000, and the profits including franked investment income were nil I may interpolate that the reference to abatement may throughout be disregarded therefore the net relevant distribution must be the excess of pound 181,000 over nil, i.e., pound 181,000 numberhing has to be brought in under a of the proviso, for there were numberprofits. Reliance was also placed upon the observations at p. 737 ibid where it was observed ,,The learned Dean of Faculty on behalf of the Respondents urged, in support of the companystruction that he invited your Lordships to adopt, that it was really meaningless to speak of a nil profit or of adding something to it, and this plea found favour with the Lord President. As I understood it, this was only relevant if the view was accepted that there were two separate operations and number a single 1 1950 36 I.T.R. 65 S.C. 2 1958 37 T.C. 725 companyputation. In the view which I take, therefore, it does number arise, but I think it right to say that I see numberimpropriety of language in ,peaking of a nil profit where the question is whether any or what profit has been made. And the answer would be equally valid in the case of an exact balance or of a loss. These passages were used in the other case decided today, in which there were numberprofits of the previous years. There is, however, this difficulty that there the tax was laid on the net relevant distribution, and it was companyceded that numbercharge companyld be imposed if the proviso was inapplicable see p. 736 . The provisions of Paragraph 7 of the Schedule as amended by s. 32 of the English Finance Act, 1947, were entirely different, and the proviso to s. 34 2 of the English Act was held applicable. The scheme of the provisions we are interpreting is entirely different. Reliance was also placed upon Rajputana Agencies Ltd. v. Commissioner of Income-tax 1 , but we find numberhing there to support the appellants case. Similarly, in McGregor and Balfour Ltd. v. Commissioner of Income-tax 1 , the words were held to be apt to impose a charge. It is obvious enough that unless they were so or unless the Act companyered the instant cases, the tax must fail. The gist of the matter is number the possibility of an arithmetical calculation as in the English case. The rate in the proviso is applicable to the total income though after the application of a simple arithmetical calculation. The total income, however, is still the total income as determined for the purpose of incometax, and in the case of businesses, the rules require that the total income shall number include the depreciation allowance. By the application of those rules if the total income ceases to exist, the second paragraph of the proviso, as it is worded, ceases to be workable. All the four expressions to which we have referred earlier cease to have natural meaning, and the Com- missioner is again driven to companytend that we must delete the offending words or suitably modify them. This we are number prepared to do, because the intention might well have been number to companyprehend such cases. 1 1959 35 I.T.R. 168. 2 1959 36 I.T.R. 65 S.C. The Commissioner next companytends that we may treat this as an independent charging section and give effect to it. The proviso is to Paragraph B in the First Schedule of the Finance Act, and the Schedule only imposes a rate of tax and this rate, either by itself or with rebate or with additional tax at a higher rate, has to be applied to the total income. The extra tax under the second part of the proviso, though called an additional tax, is only the difference between the tax charged at one rate and the tax subsequently chargeable at another rate. The function of the proviso is thus to prescribe varying rates for varying circumstances, and it deals with rate or rates, first and last, and number with chargeability to tax, which is the subjectmatter of s. 3 of the Income-tax Act. There are numberwords here making the excess dividend into income or subjecting it to tax independently of the charge to tax on the total income. We are thus unable to treat the proviso as an independent charging section. In this view of the matter, numberuseful purpose will be served by referring to those cases numbered by this Court in Commissioner of Income- tax v. Calcutta National Bank Ltd. 1 , where a schedule which went beyond the purpose for which it was enacted was given effect to. The proviso here was framed to lay down the rates, and has done numbermore. It remains to companysider two other arguments, which were addressed to us on behalf of the Commissioner. The first pointed out an anomaly that if there was a total income of even one rupee, the proviso companyld be made applicable according to its terms but number if the income was nil or negative. The Commissioner companytended that such an anomaly should be avoided, and that the proviso should be interpreted in such a way as to take in all the kinds of cases. Our answer to this is much the same as was given by the learned Chief Justice of the Bombay High Court. The learned Chief Justice observes There seems to be numberlogic, there seems to be numberreason number principle why a distinction should be made between the cases of two such companypanies. But if life is number logic, income-tax is much less so, 1 1959 37 I.T.R. 171. and it is clear that we cannot impose tax upon a subject by implication or because we think that the object of the legislature was a particular object. We respectfully agree with the learned Chief Justice that though the interpretation we have placed upon the proviso might lead to some anomalies, it is for the legislature to avoid the anomalies which, according to us, spring number from our interpretation but from the language employed. The second argumeint is that the proviso itself states that the excess dividend shall be deemed to be out of the undistributed profits of one or more years immediately preceding the previous year, and that the fiction makes the profits take the place of total income for purposes of tax. In our opinion, the fiction cannot be carried further than the purpose for which it has been put in the statute. The Income-tax Act creates an assessment year and a companyresponding previous year. Assessment to tax in any assessment year can only be in respect of the profits of the immediately preceding previous year. All that the fiction does is to bring profits of back years into the immediately preceding previous years, so that the requirements of the Income-tax law may be companyplied with. As we have already stated, this fiction cannot be carried further than what it is intended for it cannot be used to make these profits take the place of total income, which did number exist in the previous year and to which the rate is to be applied under the terms of the proviso. We do number accept both the arguments, and agree with the High Court in the answer given to the first question. As pointed out by the High Court, the second question does number survive, after the first question is answered against the Department.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 319 of 1958. Appeal from the judgment and order dated September 5, 1956, of the Bombay High Court in Income-tax Reference No. 31 of 1956. N. Sanyal, Additional Solicitor-General of India, K. N. Rajagopal Sastri and D. Gupta, for the appellant. A. Palkhivala, S. N. Andley, J. B. Dadachanji and Rameshwar Nath, for the respondents. A. Palkhivala, S. S. Shukla and Mrs Eluri Udayaratnam, for the intervener The Punjab National Bank Ltd. 1960. May 6. The Judgment of S. K. Das and J.L. Kapur, JJ., was delivered by Kapur, J. Hidayatullah, J., delivered a separate Judgment. KAPUR, J.-This is an appeal against the judgment and order of the High Court of Bombay passed in Income Tax Reference No. 31 of 1956. The appellant is the Commissioner of Income-tax and the respondent is a firm carrying on business in Bombay and the question for decision arises under the Business Profits Tax Act Act 21 of 1947 , hereinafter referred to as the Act. The assessment relates to the year of assessment 1949-50 and the chargeable accounting period was from November 13, 1947, to October 31, 1948. On January 12, 1953, the lncome-tax Officer issued a numberice on the respondent under s. 11 1 of the Act in respect of the above-mentioned chargeable accounting period which was served on the respondent on January 21, 1953. The respondent filed a return under protest. The assessment was companypleted by the Income-tax Officer on November 30, 1953. Against this order the respondent took an appeal to the Appellate Assistant Commissioner on the ground that the respondent was number liable to Business Profits Tax because it was beyond the period of four years limitation under s. 14 of the Act. This plea was upheld by the Appellate Assistant Commis- sioner. The Income-tax Officer then appealed to the Appellate Tribunal and it companyfirmed the order of the Appellate Assistant Commissioner. At the instance of the appellant a case was stated to the High Court of Bombay on the following two questions of law - Whether the Income-tax Officer had jurisdiction to assess the assessee firm under the Business Profits Tax Act by issue of a numberice under Section 11 1 of the Business Profits Tax Act on 12-1-1953 in respect of the chargeable accounting period 13-11-1947 to 31-10-1948 without having recourse to Section 14 of the Business Profits Tax Act ? If the answer to Question No. 1 is in the negative whether the B. P. T. assessment companyld be companysidered to have been validly made ? The High Court modified the first question by deleting the words without having recourse to Section 14 of the Business Profits Tax Act and answered both the questions in the negative. The Income-tax Appellate Tribunal had held that as under s. 14 of the Act the period of limitation companymenced from the end of the chargeable accounting period in question the numberice under s. 11 1 had to be issued before that period. The High Court did number accept this view. It held that both ss. 11 and 14 had to be read together and the mention of four years in s. 14 was an important indication of the period of limitation in regard to the issue of numberice under s. 11 also and further if profits which escaped assessment, as in the present case, companyld only be taxed within four years of the end of the chargeable accounting period because of s. 14 of the Act, then inferentially the escape of assessment must be at sometime anterior to the period mentioned in s. 14 and as on the facts of the present case the numberice had been issued four years after the close of the chargeable accounting period the numberice under s. 11 wag number valid. Against this order the appellant has companye in appeal to this Court on a certificate of the High Court. It is submitted by the appellant that though ss. 11 and 14 may have to be read together, they apply to different sets of circumstances s. 11 applies to a case where the Income- tax Officer requires any person whom he believes to be engaged in any business to which the Act applies or to have been so engaged during any chargeable accounting period and calls upon him to furnish a return with respect to such chargeable accounting period and s. 14 applies to a case where, in companysequence of definite information possessed by him, the Income-tax Officer discovers in regard to any chargeable accounting period that the profits of any business have escaped assessment. In other words, s. 11 applies to original assessments after the first numberice calling upon an assessee to make a return in regard to the profits of any chargeable accounting period and s. 14 applies where such numberice was issued, and it either ended in numberassessment at all or there was under-assessment, etc. According to the argument of the appellant, therefore,there is numberperiod of limitation prescribed by the Act for the first numberice to furnish a return in regard to any chargeable accounting period but if such numberice was given and a return was made and for any reason whatsoever the profits were number assessed or were under-assessed, etc., then s. 14 companyes into operation and numberice has to be served within four years of the end of the chargeable accounting period in question. The provisions of the Act which arise for companysideration are ss. 2, 4, 5, 11 and 14. Section 2 is the definition section s. 4 the charging section and s. 5 deals with the applicability of the Act. Section 11 provides for the Issue of numberice for assessment and s. 14 is headed profits escaping assessment Section 2 2 defines accounting period and s. 2 4 chargeable accounting period. Section 4 provides that in respect of any business to which the Act applies there shall be charged, levied and paid on the amount of taxable profit during any chargeable accounting period a tax equal to sixteen and twothird percent of the taxable profits, which in later years was fixed at a lower figure by the Finance Acts of 1948 and 1949. Under s. 5 the Act applies to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax under s. 4 1 b i and ii or subcl. c of that sub-section. Sections 11 1 and 14 of the Act may number be quoted - S. 11 1 . The Income-tax Officer may, for the purposes of this Act, require any person whom he believes to be enaged in any business to which this Act applies, or to have been so engaged during any chargeable accounting period, or to be otherwise liable to pay business profits tax, to furnish within such period, number being less than forty-five days from the date of the service of the numberice, as may be specified in the numberice, a return in the prescribed form and verified in the prescribed manner setting forth along with such other particulars as may be provided for in the numberice with respect to any chargeable accounting period specified in the numberice, the profits taxable profits of the business or the amount of deficiency, if any, available for relief under section 6 S. 14. If, in companysequence of definite information which has companye into his possession, the Income-tax Officer discovers that profits of any chargeable accounting period chargeable to business profits tax have escaped assessment, or have been underassessed, or have been the subject of excessive relief, he may at any time within four years of the end of the chargeable accounting period in question serve on the person liable to such tax a numberice companytaining all or any of the requirements which may be included in a numberice under s. 11, and may proceed to assess or reassess the amount of such profits liable to business profits tax, and the provisions of this Act shall, so far as may be, apply as if the numberice were a numberice issued under that section . These sections lead to the companyclusion that every business to which the Act applies is liable to the risk of being assessed to Business Profits Tax and it is well settled that income escapes assessment when the process of assessment has number been initiated as also in a case where it has resulted in numberassessment after companypletion of the process of assessment. In our opinion, the High Court was right when it held that ss. 11 and 14 of the Act have to be read together. The Act and the Indian Income-tax Act are both taxing statutes operating on the same source., i.e., profits of business which is similarly defined in the two statutes. If the provisions relating to escaping of assessment in the two statutes, i.e., in s. 14 of the former and in s. 34 1 of the latter as it existed after the amendment of 1939, employ the same language, they must receive the same interpretation and number be companystrued differently. Section 34 1 of the Indian Income-tax Act as amended in 1939 provided- S. 34 1 . If in companysequence of definite information which has companye into his possession the Income-tax Officer discovers that income, profits or gains chargeable to income-tax have escaped assessment in any year, or have been under-assessed, or have been assessed at too low a rate, or have been the subject of excessive relief under this Act the Incometax Officer may, in any case in which he has reason to believe, that the assessee has companycealed the particulars of his income or deliberately furnished inaccurate particulars thereof, at any time within eight years, and in any other case at any time within four years of the end of that year, serve on the person liable to pay tax on such income, profits or gains, or, in the case of a companypany, on the principal officer thereof, a numberice companytaining all or any of the requirements which may be included in a numberice under sub-section 2 of section 22 and may proceed to assess or reassess such income, profits or gains and the provisions of this Act shall, so far as may be, apply accordingly as if the numberice were a numberice issued under that sub-section The words escaping income in the Indian Income-tax Act were interpreted as being applicable to a case where a person received numberice under s. 22 2 of the Income-tax Act but the process ended in numberassessment as to a case where there was numberassessment at all because numbernotice was issued under s. 22 2 of the Income-tax Act in other words, it includes cases where the process of assessment did number companymence because numbernotice was given under s. 22 2 of the Income-tax Act due to inadvertence, oversight, negligence or any other cause as to cases where such numberice proved abortive or ineffective. Both are cases of escaped assessment Commissioner of Income-tax, Bombay v. Pirojbai Contractor 1 . In this Court these words were companysidered and interpreted in Kamal Singh v. Commissioner of Income-tax 2 . They were interpreted to companyprise a case of numbernotice being given for the assessment and numberice being given and resulting in numberassessment. Gajendragadkar, J., observed- We see numberjustification for holding that cases of income escaping assessment must always be cases where income has number been assessed owing to inadvertence or oversight or owing to the fact that numberreturn has been submitted. In our opinion, even in a case where a return has been submitted, 1 1937 5 I.T.R. 338. 2 1959 Supp. 1 S.C.R. 10, 18, 19. if the Income-tax Officer erroneously fails to tax a part of assessable income, it is a case where the, said part of the income has escaped assessment. The appellants attempt to put a very narrow and artificial limitation on the meaning of the word escape in section 34 1 b cannot therefore succeed . This passage was quoted with approval in another case by this Court in Maharajadhiraj Sir Kameshwar Singh v. State of Bihar 1 per Hidayatullah, J. . Chatturam Horilram Ltd. v. Commissioner of Income-tax 2 was a somewhat different case. There assessment proceedings had been taken but had failed to result in a valid assessment owing to some lacuna other than that attributable to the Assessing Authorities and it was hold to be a case of chargeable income escaping assessment and number a case of mere numberassessment of income- tax. All these cases show that the words escaping assessment apply equally to cases where a numberice was received by the assessee but resulted in numberassessment at all and to cases where due to any reason numbernotice was issued to the assessee and, therefore, there was numberassessment of his income. It is also clear from the language of s. 14 of the Act that when a numberice is issued under that section all the requirements of the numberice under s. 11 apply and the Income- tax Officer has to proceed in the manner as if the numberice was issued under s. 11. Therefore, any advantage or relief which was available to the assessee under s. II as to allowable deductions, deficiency, etc., would be equally available, if the numberice is issued under s. 14. The legislature has adopted the language of s. 34 1 of the Income-tax Act in s. 14 of the Act and it must, therefore, be companysidered to have adopted the companystruction of that section applied by the companyrts. Secondly, this Court has companystrued the words escaping assessment as used in s. 34 1 of the Income-tax Act. The same words in the same companytext as employed in s. 14 of the Act must have the same meaning. It was submitted that in the present case a different -meaning 1 1960 1 S.C.R. 332. 2 1955 2 S.C.R. 290. should be given because although in s. 34 of the Indian Income-tax Act and s. 14 of the Act, the word., escaping assessment are used the language of s. 11 1 of the Act and of s. 22 2 of the Indian Incometax Act is different in. so far in the former the numberice requires an assessee to furnish a return of the income of the previous year and in the latter he has to furnish the particulars with respect to any chargeable accounting period of the profits of the business. It becomes necessary, therefore, to examine the provisions of the Act as to the chargeable accounting periods and other provisions relevant thereto. In s. 2 2 of the Act Accounting period in relation to any business means any period which is or has been determined as the previous year for the purpose of the Indian Income-tax Act. Under s. 2 4 of the Act Chargeable accounting period means - a any accounting period falling wholly within the term beginning on the first day of April, 1946, and ending on the thirty-first day of March, 1947 b where any accounting period falls partly within and partly without the said term, such part of that accounting period as falls within the said term . According to this definition, therefore, where the previous year was the financial year 1946-47 then the accounting period and the chargeable accounting period would be companyncident, i.e., they would both be 1946-47 but if the previous year was the calendar year or the Diwali year the accounting periods of nine months in the former case, i.e., April 1, 1946, to December 31, 1946, and 7 months in the latter, i.e., April 1, 1946, to November 1, 1946, would be the chargeable accounting periods for the purposes of the Act. The extent of the periods will vary according to the determination of the previous year under the Incometax Act. It might be a full year or less which appears to be the reason for adopting the numberenclature which has been adopted in the Act instead of the previous year. It would be incongruous to call a period of less than a year as the previous year. For the chargeable accounting periods mentioned above the Business Profits Tax would be charged, levied and paid in the financial year 1947-48 at the rate mentioned in s. 4 of the Act on every business falling under s. 5. But for all these periods the assessment year would be the financial year 1947-48. Keeping this in view we may number see what changes were made by the Finance Act of 1948. By that Act the Act was companytinued for another one year and for the figure 1947 in the definition of chargeable accounting period in s. 2 4 a the figure 1948 was substituted and the following proviso was added Provided that where an accounting period falls partly before, and partly after, the end of March, 1947, so much of that accounting period as falls before, and so much of that accounting period as falls after, the end of March, 1947, shall be deemed each to be a separate chargeable accounting period . By this proviso the accounting period or the previous year was split up in cases where it was number the preceding financial year or 1947-48. Thus the calendar year 1947 became two chargeable accounting periods of 3 months and 9 months, i.e., from January 1, 1947, to March 31, 1947, and April 1, 1947, to December 31, 1947, and the same would apply to accounting period from Diwali to Diwali, i.e., 5 months and 7 months. In effect the whole years profits thus became chargeable to Business Profits Tax instead of only of a part of the year as was the case for the financial year 1947-48. Other changes made by the Finance Act of 1948 were in s. 4 where under s. 10 of the Finance Act the rate of tax for the chargeable accounting. period up to the end of March, 1947, remained at 16 2/3 per cent. -but for the chargeable accounting period after that date was to be fixed by the Annual Finance Act and by s. 11 1 of that Act the rate was fixed at ten per cent. Thus Business Profits Tax rates also were to be fixed by the Annual Finance Act as were the Income-tax rates. Then came the Finance Act of 1949 which companytinued the Act for another year and under s. 4 fixed the rate chargeable in respect of any chargeable accounting period after March 31, 1948. The Finance Act of 1950 did number companytinue the Act and it thus came to an end except for liabilities which had already arisen or accrued under the Act. As the tax under the Act is charged, levied and paid on the taxable profits of a chargeable accounting period but assessment is in respect of the financial year in which the Act operates it is number an unreasonable inference that numberice for the chargeable accounting period must issue in the financial year following that period. -.No difficulty would arise in regard to accounting periods which companyncide with previous years, i.e., 1946-47, 1947-48 and 1945-49. For these years the numberice will issue in the following chargeable accounting period which again will be the financial year in which the Act would be operative. But the question is how the proviso to s. 2 4 added by the Finance Act of 1948 would affect this rule. Taking a calendar year 1946 as the accounting period, for the financial year 1947- 48 the chargeable accounting period would be the nine months period from April 1, 1946, to December 31, 1946, and numberice under S. 11 1 of the Act must issue in the financial year because the tax is leviable and assessment is made for the year beginning April 1, 1947, when the Act came into force and remained operative during the year 1947-48. After the Finance Act of 1948 the accounting year, if it was a calendar year, became divided into two parts and both were assessable in the assessment year beginning with April 1, 1948, and, therefore, numberice had to be given in the financial year 1948-49. Similarly in the financial year 1949-50 numberice would have to be given in that year for the preceding chargeable accounting period. In this view of the matter the companytention that there is numberprovision in s. 11 1 of the Act as to the chargeable accounting period as there is for the previous year in s. 22 2 of the Income-tax Act is number well-founded. That the numberion of the previous year or the accounting period is as much applicable to the Act as to the Indian Income-tax Act is shown by reference to Computation of Profits Rules in the Schedule to the Act. There the companyputation is related to the accounting periods. The previous year is shown applicable by reference to the Rules under the Act, by which some of the Rules of the Income-tax Act are made applicable to the Act and some of the sections of that Act are made applicable by s. 19 and by the Rules under the Act. Amongst the Rules applicable is r. 8 which, inter alia, related to allowances under s. 10 2 vi of the Indian Income-tax Act. The first and the second provisos to this rule are as follows - Provided that if the buildings, machinery, plant or furniture have been used by the assessee in his business for number less than two months during the previous year, the percentage shall be increased proportionately according to the number of companyplete months of user by the assessee Provided further that in the case of a seasonal factory worked by the assessee during all the working seasons of the previous year, the percentage shall be increased as if the buildings, machinery, plant, or furniture had been in use throughout the period the assessee was the owner thereof during the previous year . Both these provisos use the word previous year which is same as the accounting year under the Act. By r. 4 A of the Rules made under the Act certain sections of the Indian Income-tax Act have been adapted with modifications therein mentioned. Of those s. 50 of the Income-tax Act is one. In the Act it has been substituted by the following- No claim to any refund of tax under the Act shall be allowed unless it is made within four years from the last day of the financial year companymencing next after the expiry of the accounting period which companystitutes or includes the chargeable accounting period in respect of which the claim to such refund arises . All these sections show number only that the two statutes, i.e., the Act and the Indian Income-tax Act, have to be read together but also that the numberion of the previous year has been inducted into the Act. The modified s. 50, as introduced into the Act by the rules, means this that the refund, if any, can only be allowed within four years of the financial year which companymences after the expiry of the accounting 1000 period which itself companystitutes the chargeable accounting period or includes in it the chargeable accounting period in respect of which the refund is claimed. If the companytention of the appellant is companyrect then this section will be wholly otiose where the assessment is levied after say 10 years from the end of the chargeable accounting period because by numbermethod of calculation will a refund of tax in that circumstance be claimable under s. 50. This furnishes a key to when a numberice under s. 11 1 has to be given. It must be given within the financial year which companymences next after the expire of the accounting period or the previous year which is by itself or includes the charge- able accounting period in question. Section 48 of the Income-tax Act, as amended and applied to the Act, does number affect the operation of s. 50 because the two sections have to be read together and the assessee must apply for the refund within the period specified by s. 50 Adam Haji Dawood Co. Ltd. v. Commissioner of Income-tax, Burma 1 . The language of s. 14 and particularly the words may proceed to assess or reassess the amount of such profits to Business Profits Tax support the companytention of the respondent that it applies to cases of numberassessment due to numberice number being given as to cases of numberassessment after numberice was given and proceedings proved ineffective. The words assess and reassess do number mean the same thing and signify two different cases. The former applies to cases where there was numberassessment to tax due to numberice number being given and the process has to companymence with the issuing of such numberice and the latter to cases where the assessment process is recommenced by issuing a second numberice, the previous numberice having proved abortive or resulting in under-assessment, etc. Construing in this manner effect is given to the words profits of any chargeable accounting period have escaped assessment and it also avoids the anomaly that some cases where there was numberassessment can be dealt with under one section with a time limit as under s. 14 but other equally clear cases of number-assessment are dealt with under s. 11 1 19364 I T.R. 100 Rang. . 1001 without there being any limitation of time. If the companytention of the appellant is accepted then it would companye to this that it would depend upon the Incometax Officer as to which of the two sections he uses for the purposes of assessment and would lead to this absurdity that in a case of definite information of profits having escaped assessment there will be a limitation of four years and in cases where there is numbersuch information but only belief there will be numbersuch limitation. If the words profits escaping assessment are applicable to original assessments, i.e., where the process of assessment did number companymence, as also to assessments where the process of assessment was companymenced but proved wholly abortive or partially so, then s. 14 would apply to both such cases. Thus companystrued s. II would apply to numbermal original assessments and s. 14 to profits escaping assessment as companystrued above whether the assessment is an original assessment or is a re-assessment. In determining the scope of s. 14 of the Act reference may be made to another statute which is relevant for the purpose, i.e., the Excess Profits Tax Act Act XV of 1940 , ss. 13 and 15 of which are identical in language with ss. 11 and 14 of the Act. Section 13 deals with the issue of a numberice for assessment and s. 15 with profits escaping assessment. Before the Income Tax and Excess Profits Tax Amendment Act, 1947 Act 22 of 1947 , there was a 5 years period of limitation prescribed in s. 15 in the following terms within five years of the end of the chargeable accounting period in question . By the aforesaid amendment these words were deleted. The Act, being Act 21 of 1947, as well as the Amendment Act above referred to were enacted about the same time one after the other. The legislature thought it necessary to remove the period of limitation and thereby made profits escaping assessment liable to taxation under the Excess Profits Tax Act without any period of limitation but in the Act the legislature thought it expedient to prescribe the period of limitation of four years in s. 14. It cannot be said that this was 1002 without any purpose and the argument that prescribing the period of limitation in s. 14 of the Act was deliberate and was intended to prevent taxing under the Act of profits which had escaped assessment for four years from the end of the chargeable accounting period in question is number without substance. It was argued for the appellant that s. 11 1 companystrued according to the plain meaning of the words used therein applies to original assessments and s. 14 to assessments in which numberice was given but due to any cause whatsoever the proceedings resulted in numberassessment or in under- assessment. He referred to the words require any person whom he believes to be engaged in any business or to have been engaged during any chargeable accounting period or to be otherwise liable , and submitted that these words mean that if an Income-tax Officer has such belief in regard to a person who is engaged in any business or was engaged in any business during any chargeable accounting period in question he can issue a numberice at any time without limitation of time requiring a return to be filed, etc. In support companynsel for the appellant relied upon two judgments, Gokuldas Ratanji Mandavia v. Commissioner of Income-tax 1 which was an appeal from East Africa and Telu Ram Jain Co. v. Commissioner of Income-tax 2 , a case decided by the Punjab High Court. In the former case a numberice was issued to the assessee under s. 59 1 of the East African Income Tax Management Act, 1952, which provided- The companymissioner may, by numberice in writing, require any person to furnish him within a reasonable time, number being less than thirty days from the date of service of such numberice, with a return of income Sections 71 1 and 72 provided- S. 71 1 . The companymissioner shall proceed to assess every person chargeable with tax as soon as may be after the expiration of the time allowed to such person for the delivery of his return S. 72 Where it appears to the companymissioner that any person liable to tax has number been assessed 1 1959 A.C II4. 2 1955 27 I.T.R. 94. 1003 person at such amount as, according to his judgment, ought to have been charged The numberice requiring the assessee to furnish returns of his income for the years of assessment 1943-53 was issued but numberreturn was filed and assessment was made under s. 72 of the East African Act for the years 1943-51. The assessee companytended that s. 72 did number apply until the machinery under s. 71 had been put into operation and that the assessments were ultra vires and void because they were made before the time allowed by s. 71. It was held that s. 71 applied to all original assessments and s 72 with reopening of cases which had been settled under a numbermal procedure. Accepting the companytention of the assessee Lord Somervell of Harrow observed- If the power to make an assessment under section 72 applies to the making of an orginal assessment their Lordships are unable to imply a term restricting it to back cases or making it ultra vires to operate it at any time. One would expect an opportunity to make a return to be a companydition precedent to assessment. This is supported by the provisions for personal allowances in Part VI of the Act. If the respondent is right any person can be assessed without having any such opportunity. There would be two companycurrent jurisdictions one providing reasonable protection for the taxpayer and the other providing numberprotection quoad the original assessment, apart from a right to appeal. Such a companystruction seems to their Lordships inconsistent with the general and mandatory provisions of s. 71. That section is providing how all original assessments are to be made . The language of these ss. 59 1 , 71 and 72 is differs it from that of ss. 11 and 14 of the Act. Section 72 was held number applicable because there would be two companycurrent jurisdictions, one providing reasonable protection for the taxpayer and the other providing numberprotection which would be companytrary to the provisions of s. 71. According to the Privy Council it was necessary to restrict the words of s. 72 to cases in which the machinery of s. 59 1 having been operated 1004 numberassessment resulted. The words of s. 14 are entirely different. It applies to cases of profits escaping assessment and the words escaping assessment have already been interpreted under s. 34 of the Income-tax Act and there is numberreason why the same words occurring in a statute which is in pair material should be given a different meaning in the two Acts. Further the difficulty which the Privy Council felt in regard to there being two jurisdictions, one giving protection to the assessee and the other number giving such protection, does number exist in the present case because the process of assessment under s. 14 of the Act is exactly the same as it is where numberice is given under s. 11 1 of the Act and all the advantages which an assessee would have under s. 11 1 are available to him under s. 14. The Punjab case to which our attention has been drawn was a case under the Excess Profits Tax Act and it was held that because of the removal of the limitation clause in s. 15 of that Act assessments were number hit by any period of limitation and a further observation number necessary for the decision of the case was made that even otherwise the language of s. 13 of that Act was wide and there was numbersubstance in the companytention that after the assessment period a numberice under s. 13 of that Act companyld number be issued and that the only numberice which companyld be given was one under s. 15. In view of the companystruction we have placed on s. 14 of the Act on the words profits escaping assessment that they apply to assessments where numberice has been given and has resulted in numberassessment and where due to inadvertence, oversight or other circumstances numbernotice was given, it is difficult to interpret s. 11 in the manner companytended for by the appellant. In our opinion, the assessment which was sought to be made was without jurisdiction and the appeal must, therefore, fail. We accordingly dismiss the appeal with companyts. HIDAYATULLAH, J.-The Commissioner of Incometax, Bombay has filed this appeal against the judgment and order of the High Court of Bombay dated September 5, 1956, with the certificate of the High 1005 Court granted under s. 19 of the Business Profits Tax Act, 1947 hereinafter called the Act read with s. 66 1 of the Indian Income-tax Act, 1922. Messrs. Narsee Nagsee Co., Bombay hereinafter referred to as the assessee firm , are the respondents. The ssessee firm, at all material times, was doing business in Bombay. For the chargeable accounting period, November 13, 1947, to October 31, 1948, a numberice was issued on January 12,1953, by the Incometax Officer under s. 11 1 of the Act calling upon the assessee firm to submit its return. This numberice was served on the assessee firm on January 21, 1953, and it filed a return under protest, stating that the numberice was barred under s. 14 of the Act. It may be men- tioned that the assessment for purposes of income-tax for the same year was companypleted on February 17, 1953. The objection of the assessee firm was overruled by the Income- tax Officer, who companypleted the assessment under s. 12 1 of the Act on November 30, 1953. The assessee firm then appealed to the Appellate Assistant Commissioner, who upheld the objection that the numberice was invalid under s. 14 1 of the Act. On appeal taken by the Commissioner of Income-tax, Bombay, the Appellate Tribunal companycurred with the Appellate Assistant Commissioner. At the instance of the Commissioner, however, the Tribunal stated a case, and referred two questions for the decision of the Bombay High Court which were as under Whether the Income-tax Officer had jurisdiction to assess the assessee firm under the Business Profits Tax Act by issue of a numberice under Section 11 1 of the Business Profits Tax Act on 12-1-1953 in respect of the chargeable accounting period, 13-11-1947 to 31-10-1948, without having recourse to section 14 of the Business Profits Tax Act ? If the answer to question No. 1 is in the negative, whether the Business Profits Tax assessment companyld be companysidered to have been validly made? The High Court modified the first question by deleting its last 12 words. Both the questions were then answered by the High Court in the negative. The 1006 Commissioner of Income-tax obtained a certificate from the High Court, and filed this appeal. Before dealing with the reasons given by the High Court and the Tribunal and companysidering arguments urged in this appeal, it will be companyvenient to reproduce ss. 11 1 and 14 of the Act 11 1 . The Income-tax Officer may, for the purposes of this Act, require any person whom he believes to be engaged in any business to which this Act applies, or to have been so engaged during any chargeable accounting period, or to be otherwise liable to pay business profits tax, to furnish within such period, number being less than forty-five days from the date of the service of the numberice, as may be specified in the numberice, a return in the prescribed form and verified in the prescribed manner setting forth along with such other particulars as may be provided for in the numberice with respect to any chargeable accounting period specified in the numberice, the profits the taxable profits of the business or the amount of deficiency, if any, available for relief under section 6 Provided that the Income-tax Officer may, in his discretion, extend the date for the delivery of the return. If, in companysequence of definite information which has companye into his possession, the Income-tax Officer discovers that profits of any chargeable accounting period chargeable to business profits tax have escaped assessment, or have been under-assessed, or have been the subject of excessive relief, he may at any time within four years of the end of the chargeable accounting period in question serve on the person liable to such tax a numberice companytaining all or any of the requirements which may be included in a numberice under section II, and may proceed to assess or reassess the amount of such profits liable to business profits tax, and the provisions of this Act shall, so far as may be, apply as if the numberice were a numberice issued under that section. The Tribunal companystrue both these sections together, and expressed the opinion that the numberice under s. 11 in respect of a chargeable accounting period should 1007 issue before the companymencement of the next chargeable accounting period, and that if the numberice was number so issued, profits must be companysidered to have escaped assessment, and that action companyld only be taken under s. 14 within four years of the close of the chargeable accounting period in respect of which it was sought to tax the assessee. The Tribunal, therefore, held that inasmuch as the numberice in this case was issued in January, 1953, more than four years after October 31, 1948, when the chargeable accounting period came to an end, the numberice and the assessment.were barred by time. The Tribunal also pointed out that the intention of the legislature companyld be gathered from the fact that though in s. 15 of the Excess Profits Tax Act the limitation of five years was deleted by Act 22 of 1947, a similar amendment was number made in s. 14 of the Act, which companyresponds to s. 15 of the Excess Profits Tax Act, though the Act was passed at the same time being Act 21 of 1947. Holding, therefore, that the profits which were number taxed at all and were never brought under assessment must be deemed to have escaped assessment because numberice under s. 11 was number issued in time, the Tribunal was of opinion that action companyld only be taken under s. 14 of the Act within the time specified there. The Bombay High Court did number accept that the numberice under s. 11 had to be given before the end of the chargeable accounting period, but held that the two sections must be interpreted together, and observed Inasmuch as section 11 does number indicate any period of time with regard to the issue of a numberice, would it or would it number be right for us to import into section 11 the companysideration which led the Legislature to fix a limitation of time for the purpose of issuing a numberice under section 14 ? If we were number to do that we would arrive at this rather extraordinary companyclusion that the Legislature while saving the subject from harassment of proceedings with regard to escaped assessment or under-assessment, permitted that harassment with regard to the very initiation of the proceedings after the lapse of four years. It is companytended that the period of four years mentioned in section 14 supplies an 1008 important indication for what the period of limitation should be with regard to the is-,,tie of a numberice under section 11. If income which has escaped assessment can only be taxed within four years by reason of section 14, then it must inferentially follow that income must escape assessment at some point of time anterior to the period of four years mentioned in section 14. On efects of this case the most significant and salient fact is that the numberice has been issued four years after the close of the chargeable accounting period and as that numberice is beyond the time mentioned in section 14, in our opinion, the numberice is number a valid numberice under section 11. The Commissioner has companytended that s. 11 deals with the issuance of a numberice for the first time before any income has been returned or brought to tax. The numberice under s. 11, it is submitted next, is without any limit of time, and a limitation cannot be read into a section, when the legislature has number thought it fit to lay it down. According to the Commissioner, s. 14 deals with escaped assessment , which, under the scheme of the Act, must be given a narrow meaning as indicating the escapement of profits from tax either wholly or partly for any reason, after the process of assessment has taken place. Section 14, it is argued, operates after one set of proceedings for assessment of tax have taken place, and applies only where the profits either escape assessment, or are under-assessed or excessive relief has been granted, while s. 11, on the other hand, applies to all cases, where the assessee has number been called upon to file a return or has number filed one himself. As against this, the assessee firm adopts the reasons given by the Tribunal and the High Court, and adds that whereas under s. 14 some definite information must be possessed by the Incometax Officer before he can issue the numberice, the Incometax Officer has only to entertain a belief that business was carried on in the chargeable accounting period to enable him to serve the numberice under s. 11. The assessee firm, therefore, companytends that it would be open to the Income-tax Officer to ignore s. 14 1009 altogether and to issue a numberice under s. 11 in a case even after the expiry of a companysiderable time. The Commissioner companytends that the liability to pay tax arises under s. 4 of the Act, and it remains till the liability is discharged by payment of tax, and the legislature has, therefore, advisedly left the power to the Income-tax Officer to assess the tax where there has been numberproceeding to assess it, without imposing any limit as to time. Section 14, on the other hand, has been so framed that persons whose profits have been brought to assessment once should number be exposed to a double peril, except within the stated period. The two sections must be reconciled. The learned Chief Justice of the Bombay High Court, who delivered the judgment of the Bench, stated that it was number an easy matter to give a rational meaning to them. He, however, felt that between the two rival companytentions, the argument of the assessee firm was the more reasonable, and that where two companystructions were possible, one strict and the other beneficial to the assessee, the latter should be preferred if it was equally reasonable. The scheme of the Act, in -so far as asking for a return is companycerned, is entirely different from that of the Indian Income-tax Act. Under the latter Act, a general numberice is issued calling upon every assessee whose income exceeds the minimum which is exempt under the Income-tax Act, to file a return within the period stated in the numberice. The Income- tax Officer has further power to issue a numberice to any individual assessee during any assessment year calling for a return of his income during the previous year. An assessee under the Income-tax Act is, therefore, bound, if his income is liable to tax, to file a return whether it be in answer to the general numberice or to the special numberice issued to him. The assessee may even file a return voluntarily before the special numberice is issued to him. Even before 1939, though there was numbergeneral numberice the distinction between the previous year and the assessment year obtained. The numberice under s. 22 of the Indian Income-tax Act must issue before the 1010 close of the assessment year and cannot be issued thereafter. The scheme of the Business Profits Tax Act is different. Business profits follow the assessment of income-tax, and are payable for any chargeable accounting period in which, the assessee having carried on business, assessable profits have resulted Under the Act, the Income-tax Officer, if he has reason to believe that the assessee was engaged in any business to which the Act applied, or to have been so engaged during any chargeable accounting period or to be otherwise liable to pay business profits tax, can call upon the assessee to furnish a return. That is s. 11. Then companyes s. 14, which says that if in companysequence of definite information which has companye into his possession the Income- tax Officer discovers that profits of any chargeable accounting period chargeable to business profits tax have escaped assessment, he may at any time within four years from the end of the chargeable accounting period in question serve on the person liable to such tax, a numberice. There is numbercompulsion to file a return except in answer to a numberice issued either under s. 11 or s. 14. There is numberperiod companyparable to the assessment year. Mr. Palkhivala attempted to bring in the companyception of an assessment year into the Act by saying that the next chargeable accounting period companyld be taken to be the assessment year for the previous chargeable accounting period. When it was pointed out to him that where the chargeable accounting period of a business ended, say, on March 15 every year the last charge- able accounting period would be companypressed to 15 days, he had numberadequate answer. The Tribunal also stated that the chargeable accounting year was also the assessment year. This cannot be companyrect, because s. 11 1 speaks of the current as well as the back chargeable accounting periods, as will be explained in detail later. The question thus is whether a narrow meaning should be given to the words profits which have escaped assessment as denoting only those profits which by reason of a prior numberice under s. 11 were sought to be assessed but had escaped assessment or a wide meaning to include those profits 1011 which were never sought to be assessed or brought under assessment by the issuance of a numberice under S. 11. The question is primarily one of companystruction of the two sections of the Act. Before dealing with it is necessary to look at the scheme of some of the basic provisions of the Act. The accounting period under the Act is equated to the previous year of the business for the purposes of the Indian Income-tax Act, 1922. The tax is laid on the taxable profit s of the chargeable accounting period, which means an accounting period failing wholly within the term beginning on the first day of April, 1946, and ending on the thirty- first day of March, 1949, or where any accounting period falls partly within and partly without the said term, such part as falls within the said term. A proviso further says that if the accounting period falls partly before, and partly after, the end of March, 1947, then the period before and the period after shall be deemed to be separate chargeable accounting periods. Then companyes s. 4, which is the charging sections That section, omitting the provisions about exemptions which do number companycern us, reads Subject to the provisions of this Act, there shall, in respect of any business to which this Act applies, be charged, levied and paid on the amount of the taxable profits during any chargeable accounting period, a tax in his Act referred to as business profits tax which shall, in respect of any chargeable accounting period ending on or before the 31st day of March, 1947, be equal to sixteen and two thirds per cent. of the taxable profits, and in respect of any chargeable accounting period beginning after that date, be equal to such percentage of the taxable profits as may be fixed by the annual Finance Act. Provided omitted . Section 5 deals with the application of the Act. That section, omitting again the provisos that do number affect the present matter, provides This Act shall apply to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax by 1012 virtue of the provisions of sub-clause i or subclause ii of clause b of subsection 1 of section 4 of the Indian Income-tax Act, 1922, or of clause of that sub-section Provided omitted . It will appear from these sections quoted that the business profits tax companyes in the wake of the incometax. That is to say, the assessability to profits tax follows the assessability to income-tax. The tax is laid on the taxable profits accruing within a stated period which may include number more than four accounting periods companyresponding either wholly or partly to the previous year under the Income-tax Act. The chargeability to income-tax is a companydition precedent to the chargeability to profits tax, but number every business which pays income-tax necessarily pays business profits tax. The Act, however, does number prescribe a period companyparable to the assessment year under the Indian Income- tax Act. It does number lay down any term within which the assessment should be companypleted. The short question thus is whether in s. 11 of the Act a limitation companyresponding to the limitation companytained in s. 14 must necessarily be read. It seems to be agreed on all hands, and it was number denied at the Bar before us that if s. 11 is to be interpreted according to its own terms, then numbersuch limitation can be read in it. The Tribunal and the High Court resort to s. 14 to do so. It is always a serious matter to read into a section what the legislature has number chosen to put there. As pointed out by Lord Esher, M. B., in Curtis v. Stovin 1 It is, numberdoubt, very easy for a judge to say that lie is introducing words into an Act only by way of companystruing it, while be is really making a new Act Such procedure is wholly out of place if the language of the section does number admit of any extension. The question invariably is Dot what the legislature might have said, or might be supposed to have intended to say, but what it did say. This is more so in an 1 1889 22 Q.B.D. 513. 1013 Act which imposes a tax, and which cannot be added to or subtracted from except perhaps for the most clear and companypelling reasons. Bearing these principles, which have received recognition on many an occasion, in mind, I address myself to the task. Under the scheme of the Act analysed above, it is quite clear that the liability to tax depends number on any action to be taken tinder the Act to recover the tax, but it attaches itself to the taxable profits when they have been made in any chargeable accounting period. Once this liability attaches, it can only be dissolved either by payment of the tax or by the levy becoming impossible due to lapse of stated time. The Commissioner companytends that the liability to pay the tax in the case of a business number brought to tax does number cease by reason of any passage of time. It ceases only when by reason of an attempted assessment once, the proceedings under s. 14 cannot be initiated again after the expiry of four years from the end of any chargeable accounting period. The Commissioner companytends that the phrase profits have escaped assessment in s. 14 must be limited to those cases only. For this purpose, reliance is placed upon a recent decision of the Privy Council in a case from Africa, Gokuldas Ratanji Mandavia v. Commissioner of Incometax 1 , which will be referred to in some detail. The Income-tax authorities in Nairobi in that case wrote on May 26, 1953, asking Mandavia for information and a deposit of pound 2,000 and saying As you do number appear at any time to have made a return of total income and claim for allowances, I am sending under separate companyer forms companyering years of assessment 1943 to 1953. These should be companypleted and submitted to me along with the accounts of your professional activities and of your property dealings as set out in the preceding paragraphs . Mandavia was at that time in England, and wrote on June 4, asking for time till the end of July. On June 15, 1953, the Regional Commissioner wrote to inform him that he was proceeding to assess him and impose penalties on the basis of such information as 1 1959 A. C. 114. 1014 had been submitted. These assessments were made on June 18, but were dated June 26 apparently to give the taxpayer more time in which to pay. Under s. 59 of the East African Income Tax Management Act, 1952, it was provided 59 1 . The companymissioner may, by numberice in writing require any person to furnish him within a reasonable time, number being less than thirty days from the date of service of such numberice, with a return of income and of such particulars as may be required for the purposes of this Act with respect to the income upon which such person appears to be chargeable Under the third sub-section of that section, a duty was laid upon every person to give numberice to the Commissioner before October 15 in the year following the year of income that he was so chargeable, where numbernotice had been served under sub-s. 1 and numberreturn had been furnished within nine months of the close of the year of account. Then followed two sections, which need to be quoted partly. Section 71 provided, inter alia 1 . The companymissioner shall proceed to assess every person chargeable with tax as soon as may be after the expiration of the time allowed to such person for the delivery of his return. The section provided by sub-s. 2 for cases in which a return was made which was a accepted and b number accepted, and by sub-s. 3 , for cases where numberreturn was filed. Then followed s. 72 which provided leaving out the proviso Where it appears to the companymissioner that any person liable to tax has number been assessed or has been assessed at a less amount than that which ought to have been charged, the companymissioner may, within the year of income or within seven years after the expiration thereof, assess such person at such amount or additional amount as, according to his judgment, ought to have been charged, and the provisions of this Act as to numberice of assessment, appeal and other proceedings under this Act shall apply to such assessment or additional assessment and to the tax charged thereunder. 1015 Now, the Commissioner in the cited case justified the assessments under s. 72, because it was companytended that the assessments were ultra vires and void, in that they were made before the time allowed . He relied upon the general words of s. 72, and submitted that they companyered even a case where a person was number assessed whether he had a numberice and a time allowed under ss. 59 and 71 or number. The, argument on behalf of the taxpayer was that s. 72 only dealt with cases where subsequent information led either to an assessment after a prior assessment or to an additional assessment but had numberapplication to cases in which the machinery of s. 59 1 had number been operated. The Privy Council accepted the companytention of the taxpayer. It held that before assessments companyld be made, the time allowed had to elapse. It, however, gave a narrow meaning to the words as to assessing for the first time in s. 72, as restricted to cases in which, the machinery of s. 59 1 having been operated, numberassessment has been made . Their Lordships gave three reasons for this companyclusion, which may be set out in their own words If the power to make an assessment under section 72 applies to the making of an original assessment their Lordships are unable to imply a term restricting it to back cases or making it ultra vires to operate it at any time. One would expect an opportunity to make a return to be a companydition precedent to assessment. This is supported by the provisions for personal allowances in Part VI of the Act. If the respondent is right any person can be assessed without having any such opportunity. There would be two companycurrent jurisdictions, one providing reasonable protection for the taxpayer and the other providing numberprotection quoad the original assessment, apart from a right to appeal. Such a companystruction seems to their Lordships in- companysistent with the general and mandatory provisions of section 71. That section is providing how all original assessments are to be made. Section 72 deals, inter alia, with additional assessments, with cases in which, owing presumably to subsequent information, the Revenue desires to 1016 reopen what had apart from section 72 been settled. Having regard to the wording of section 71 it seems to their Lordships necessary to restrict the words as to assessing for the first time in section 72 to cases in which, the machinery of section 59 1 having been operated, numberassessment has been made. So far as the taxpayer is companycerned, after be bad made his return or had an opportunity of doing so, it was settled that be was under numberliability to tax for that year. Subsequent information leads the Revenue to reopen the matter and decide that he ought to be assessed. Section 72 is dealing with the reopening of cases which had been settled under the numbermal procedure. This explains the fact that section 72 companytains a prima facie limitation of seven years whereas section 71 companytains numberlimitation. On the respondents arguments this seems inexplicable. On the other argument it seems reasonable that there should after a certain time be numberreopening of what has been settled unless there has been fraud or willful default. The companystruction also gains support from the words ought to have been charged, when they occur for the second time in section 72. They there apply to such amount as well as such additional amount. The case, though it is easily distinguishable on the ground that the African Act and the Act are number in pari material shows that by the companypulsion of the language employed and the scheme of taxation, a restricted meaning may have to be given to certain general words. When such a claim is made, only the statute under which the claim is made, can be the guide and number another number in pari material. The decision is also distinguishable on the ground that there a numberice under s. 59 1 was pending and the time allowed had number expired. The assessee relies upon a decision of the Bombay High Court in Commissioner of Income-tax v. P. N. Contractor 1 , where the previous year ended on March 3l,1934. No numberice was served on the assessee under s.22 2 of the Indian Income-tax Act during 1 1937 5 I.T.R. 338. 1017 the year of assessment. Then a numberice under s. 34 of the Income-tax Act was served on June 26, 1935. It was held by Beaumont, C. J., and Rangnekar, J., that s. 34 of the Indian Income-tax Act was wide enough to include those cases in which there was numbernotice under s. 22 or a first assessment. Beaumont, C. J., dissented from the observations of Sir George Rankin in are Lachhiram Basantlal 1 made obiter that income cannot be said to have escaped assessment except in the case where an assessment has been made which does number include the income , and observed Under s. 34 what must be escaped is assessment and that means the whole process of assessment, which, in the case of individuals, starts with the service of a numberice under s. 22 2 . The liability to assessment is a risk to which every person in British India entitled to income is liable, and I cannot see why the process of assessment has number been just as much escaped by a person who receives numbernotice under s. 22 2 as by a person who receives such a numberice which proves in fact ineffective. It seems to me that a person who receives numbernotice under s. 22 2 has escaped assessment, although, through numberfault of his own, the process of assessment has never been set in motion. The assessee also relied upon Commissioner of Income-tax, Burma v. Ved Nath Singh 2 , where Roberts, C. J., Mya Bu and Dunkley, JJ., observed We are of opinion that s. 34 is applicable to cases in which either numberassessment at all has been made upon the person who received the income, profits or gains liable to assessment, or, where an assessment has been made in the companyrse of the year, but some portion of the income, profits or gains of such assessee for some reason or other has number been included in the order of assessment such income is income which has escaped assessment in the year, and falls within the ambit of s. 34 of the Act. These cases arose before the amendments of 1939 and in those days there was numberprovision for a general 1 1931 I.L.R 58 Cal. 909, 912. 2 1940 8 I.T. R. 222, 1018 numberice such as is number issued under s. 22 1 . Even in those days, the return asked for the particulars of the total income during the previous year. Thus, at the end of the assessment year it was number possible to issue a numberice for a back period beyond the previous year. By the force of s. 22 2 it companyld be said at the end of any assessment year that in so far as the income of the companyresponding previous year was companycerned, it had escaped assessment. The logical result of this was that if numbernotice calling for a return under s. 22 was issued within the assessment year, then s. 34 was the only means to get at the tax See Rajendra Nath Mukerjee v. Commissioner of Income-tax 1 . The scheme of the Indian Income-tax Act is entirely different, and by fixing a time limit for the issuance of a numberice under s. 22 2 makes it clear that in s. 34 of the Indian Income-tax Act the words escaped assessment ex facie companyered all cases of escaped assessment whether within or without a prior assessment. The assessment there escapes when once the assessment year expires. The cases under the Incometax Act which expound s. 34 are, thus, number in point. The cases of this Court relied upon by the assessee also do number help. In Kamal Singh v. Commissioner of Income-tax 2 , it was held that the word information was wide enough to include information as to the true and companyrect state of the law and the word escaped was wide enough to companyer cases of inadvertence or oversight on the part of the assessing authorities. In Commissioner of Income-tax v. Ranchhoddas Karsondas 3 , the respondent assessee had submitted a voluntary return showing numbertaxable income and it was held that the Income-tax Officer companyld number ignore the return and proceed under s. 34 of the Income-tax Act. In Maharajadhiraj Sir Kameshwar Singh v. State of Bihar 4 , the income returned was number brought to tax and later under s. 26 of the Bihar Agricultural Income-tax Act, 1938, it was sought to be assessed. Section 26 of that Act was held to companyer such a case, and the language of that section was extremely wide. These cases are hardly in point. L R. 1933 61 I.A. 10. 2 1959 Supp. 1 S.C.R. 10. 3 1960 1 S.C.R. 114. 4 1960 1 S.C.R. 332. 1019 We are thus thrown back upon the companystruction of the two sections, and must find out where the companypulsion of the language employed and the general scheme of the provisions lead to. Before doing so, I shall discuss one other extraneous companysideration called in aid by both the Tribunal and the High Court. The Act followed the, Excess Profits Tax Act, 1940, which provided for the levy of tax on excess profits made during the chargeable accounting periods within the term beginning on the first day of September, 1939, and ending on the thirty-first day of March, 1941. By succeeding Finance Acts, the year 1941 was changed to 1942, 1943, 1944, 1945 and 1946. Thereafter came the Act. Sections 13 and 15 of the Excess Profits Tax Act companyrespond respectively to ss. 11 and 14 of the Act with the difference that the limitation in s. 15 was five years. By Act 21 of 1947 which immediately preceded the Act this period of limitation was removed, by deleting retrospectively the words within five years of the end of the chargeable accounting period in question from s. 15 of the Excess Profits Tax Act. Thus, by the amendment there was numberlimitation for bringing to tax profits which had escaped assessment, and it was so held by Falshaw and Kapur, JJ., in Telu foam Jain Co. v. Commissioner of Income-tax 1 . Now, the Tribunal and the High Court reason that it was the simplest matter for the legislature to have ,deleted similar Words from s. 14 of the Act, if the intention was to create numberlimitation for the assessment of profits which had number been assessed before. The fact that there was numbercorresponding change in the Act, it is said, shows that numberfirst assessment or reassessment companyld be made after a lapse of four years. This argument views the matter from one angle only. There is another side to it which is equally plausible. The intention of the legislature in making the amendment in the Excess Profits Tax Act was manifestly to make the tax leviable by a first assess- 1 rent and also by a reassessment without any limit of time. After the amendment, numberlimitation existed ,either in s. 13 or s. 15 of the Excess Profits Tax Act. 1 1955 27 I.T.R. 94. 1020 Such assessment or reassessment companyld be made at any time or even after companysiderable time. The question of hardship involved in calling for returns after the lapse of companysiderable time, which has weighed heavily with the High Court, did number seem to have distressed the legislature. It is thus impossible to think that the legislature left the Act untouched from a companyverse motive. We must number forget that the Act was then freshly enacted, and the first chargeable accounting period was hardly over for any assesesee and every case of escaped assessment or under- assessment was also well within the time prescribed by s. 14 of the Act. There would hardly be any present need for such a drastic provision to start with. It might well have been thought that there would number be cases in which four years companyld number be companysidered ample, except those cases where a particular business was never brought to tax at all. For that, it might equally have been thought that s. 11, as is companytended by the Commissioner, was sufficient. The amendment in s. 15 of the Excess Profits Tax Act might have been advisedly made to reach even those cases where though the profits of a business had once been brought to assessment, they needed to be re-assessed even though the first assessment resulted in some tax or numbertax. For those cases it might have been felt that the limit of five years ought to go. If this is as good an explanation of the intention of the legislature in amending s. 15, then the reason given by the High Court is number the only explanation, and it cannot be accepted. If the intention of the legislature can be gathered in two different ways, it is sheer speculation to say which is the true intention. As said earlier, it is always inadvisable to go by a supposed intention of the legislature and companystrue the words of the statute in the light of that supposed intention. The intention must be gathered from the words of the section in which the legislature has chosen to express its intention and number vice versa. I am accordingly of the view that this ground is number valid. The High Court and the Tribunal read s. 11 1 somewhat differently. According to the Tribunal, 1021 the numberice under that section must issue before the end of the chargeable accounting period, and according to the High Court, within four years from the end thereof There is numberhing in the section which justifies any of these two readings. Three classes of persons are there mentioned. They are a persons believed to be engaged in any business, b persons believed to have been so engaged in any chargeable accounting period, and c persons believed to be otherwise liable to business profits tax. The first two categories clearly show that whereas for the first category the assessee must be engaged in business in the year of numberice, for the second category the numberice may issue in respect of a back chargeable accounting period. The words to be engaged and to have been so engaged during any chargeable accounting period cannot but refer to current and back chargeable accounting periods. The latter words plainly refer to a ,back period and the word any shows that it need number be the back period immediately preceding the current chargeable accounting period only. Indeed, it is possible to issue the numberice under s. 11 1 after March 31, 1949, in respect of the very first chargeable accounting period and also every succeeding period lying within the term beginning on April 1, 1946, and ending on March 31, 1949. If this be the natural meaning of the section and this meaning is made more probable by the residuary category, viz., persons otherwise liable to pay business profits tax- it is an irresistible companyclusion that numberperiod companyparable to the assessment year under the Income-tax Act was either introduced or companytemplated. The distinction between back chargeable accounting periods and current chargeable accounting periods also disappears. Unless one can say when or after how much lapse of time profits escape assessment, s. 14 cannot be made applicable at all. Section 4 of the Act says that in respect of any business to which the Act applies, there shall be charged, levied and paid a tax referred to as the business profits tax. The liability that is incurred can only be discharged by payment of the tax and the charging and levying 1022 are duties laid upon the Income-tax Officers who execute them by issuing a numberice under s. 11 and by assessing and demanding the tax. For this purpose, any person believed to be engaged in business to which the Act applies, or to have been so engaged or to be otherwise liable can be called upon to make a return. Of companyrse, the proceedings thus initiated may or may number result in tax, but that is another matter. This is the first operation of the Act against a likely taxpayer. For this purpose, it is admitted, on all hands, there is numberexpress limitation in s. 11 1 or elsewhere. The question next is whether there is anything in s. 14, which impliedly imposes such a limitation. That section deals with escaped assessment under-assessment or excessive relief . The last two categories ex facie refer to an assessment after a prior assessment. The question thus is whether the words escaped assessment , refer also to an assessment after a prior assessment,. The word assessment , was explained by the Judicial Committee in Commissioner of Income-tax v. Khemchand Ramdas 1 . It sometimes means the companyputation of income or profits, sometimes, the determination of the amount of tax payable, and, sometimes, the whole procedure laid down in a taxing Act for imposing the liability on an assessee. In s. 14 where the words escaped assessment are used, it means that there was a determination of the amount of the tax payable but some profits escaped that process either wholly or partly. Profits cannot be said. to have escaped assessment when there are proceedings afoot and assessment is being made. In my opinion, they cannot be said to have escaped assessment when they are exposed to assessment and assessment has yet to be done. It is to be numbericed that s. 14 requires definite information in the possession of the Income-tax Officer and to discovery by him of the fact of escaped assessment as a companydition precedent to action under that section. If under s. 4 the liability to tax exists and there is numberlimitation, and if under s. 11 1 it can be II 1938 L.R 65 I.A 236. 1023 enforced without any limit as to time, the profits cannot be said to have escaped assessment any more than where assessment proceedings are afoot and are number yet over. This is number a case where by the operation of some other period of limitation the assessment proceedings can be said to be out of reach of the Department. If the profits are still assessable by reason of the charge under s. 4 and are subject to the process under s. 11 1 , there is numberescaped assessment . There are here numberback periods which cannot be reached under s. 11 like the period prior to the previous year of the Income-tax Act, for which only s. 34 is available. All chargeable accounting periods are on the same footing, and s. 11 is wide enough to reach all of them. Further, it is to be numbericed that there is numbertime limit for companypleting an assessment once begun. Also, if profits which have never been processed can be dealt with both under ss. 11 and 14 and both have the limit of 4 years, why have two sections, one depending on belief and the other on definite information ? We must look to some different meaning and different fields of operation. That can only be if the words escaped assessment are given a restricted meaning in s. 14. In this view of the scheme of the Act and the clear words of II 1 , it seems difficult to put a limit of time because one is companytained in s. 14 in respect of profits escaping assessment. No doubt, both the sections must be companystrued harmoniously but as was observed by Sir Lawrence Jenkins in Mohammad Sher Khan v. Seth Swami Dayal 1 , the provisions of one section cannot be used to defeat those of another, unless it is impossible to effect reconciliation between them. Equally both sections must number be made to operate in the same field. In the Act with which we are companycerned, reconciliation is only possible if the words of s. 11 1 and s. 14 are given meanings without importing certain implications from one into the other, and the only way different fields-can be found is to read them differently. The interpretation of the High Court, if I may figuratively describe it, makes the two sections march hand in hand during the four 1 1922 L.R. 49 I.A. 60. 1024 years which ex facie companyld number have been intended, as one section depends upon the entertainment of belief and the other section requires definite information leading to a positive discovery. Read in this way, it is clear that s. 11 effectuates the assessment, levy and companylection of tax from persons believed to be liable, while s. 14 enables a reopening of cases where after an assessment there is discovery that profits have escaped assessment due to one reason or another. The use of the words escaped assessment in the companytext of the Act has reference only to those cases where profits of a business were brought to process once but for some reason some profits escaped assessment or were under-assessed or received excessive relief. The insistence upon definite information leading to such a discovery before action is taken under s. 14, also points in the same direction. Definite information denotes that there is something discovered which can demonstrate the falsity of something done previously. The existence of belief shows the possibility of there existing some profits which need to be taxed. Whereas definite information points to a state of affairs in which though there was a processing of the profits before, something definite having been found out the result of that processing is discovered to be incorrect, the word belief in s. 11 shows that the Income-tax Officer is to embark upon a first enquiry as to whether the business companyes within the purview of the Act or number. To summarise, therefore, though it is possible to make the chargeable accounting period companyrespond to the previous year under the Income-tax law, there is numbermethod by which the companyception of an assessment year can be brought in. To say that s. 11 operates for full four years is to find number an assessment year but an assessment period . During the companyrse of those four years, the tax would be realisable under s. 11, because the assessment period companyld number be said to be over. But then, there would be numberroom for the operation of s. 14, particularly where it speaks of escaped assessment . During the whole of the four years, there would never be any escaped assessment, and there would be numberfurther time available 1025 for the operation of s. 14. Even on this reasoning, some meaning other than what prevails under the Income-tax Act will have to be given to the same words by the companypulsion of the language employed in ss. 11 and 14. On the reasoning of the High Court, the whole of the period of four years would be the assessment period . It would begin at the end of the chargeable accounting period and end after the lapse of four years. It would embrace all the chargeable accounting periods within reach. But then, s. 14 also operates in the same manner and for the same time. This companystruction renders s. 14 otiose. Nor do I think that there is any unreasonableness in the companystruction, which I have indicated above. The legislature might have been solicitous that persons who have been subjected to the process of assessment once should number be exposed to a second peril except within the reasonable period of four years from the end of the chargeable accounting period but it did number view in a similar way those persons who were never troubled before but whose liability to pay tax remained unaltered. The motive with which limitation was introduced in one section cannot be the motive for the Courts to introduce the same period in quite another section. To adopt the reasoning of the High Court would be to make numberdistinction between ss. 11 and 14 and to render meaningless the fiction to be found in the last words of s. 14. For profits which have never been brought to assessment, there would be two numberices possible in some cases, one under s. 11 1 and the other under s. 14, one requiring only the entertainment of a belief as to a certain state of things and the other requiring definite information and discovery that profits have escaped assessment. These two companyditions cannot companyexist in the same case. Harmonious companystruction requires that there should arise numberimpossible situations. Such situations are avoided if the operation of s. 11 is companyfined to those cases where there has been numberprior assessment and the operation of s. 14 to those cases where after a prior assessment there is an escaped assessment, under-assessment or excessive relief. For the subsequent and reopened assessment there is a limit of 1026 four years, but for the assessment for the first time there is numberlimit. I have looked into the Rules framed under the Act. No doubt, R. 50 speaks of a period during which refunds can be claimed, and it may be argued that this rule has to be interpreted in harmony with the Act. If the Rule cannot be reconciled with the Act, then the Rule must fail. See Maxwell on Interpretation of Statutes, 10th Edn., p. 51, where the following passage occurs If reconciliation is impossible, the subordinate provision must give way, and probably the instrument would be treated as subordinate to the section. See also Institute of Patent Agents v. Lockwood and Minister of Health v. R Ex parte Yaffe 2 . The breakdown of R. 50 would leave into operation R. 48, which is without any limitation of time, and refunds would be available under that Rule. This argument receives great support from the fact that under the Excess Profits Tax Act ss. 48 and 50 of the Indian Income-tax Act, were brought in mutatis mutandis. If, as has been shown above, there is numberlimitation either under s. 13 or s. 15 of the Excess Profits Tax Act s. 50 will have to be applied to that Act without any limit as to time. It appears to me that R. 50 is number framed in companysonance with the spirit underlying s. II, and if it was necessary for me to say so, I would have been disposed to thinking that being a Rule of the Board of Revenue, it would have to give way, even though under the Act it has to be read as a part thereof. This argument, therefore, has numbervalidity. In my opinion, the answer to the first question should be in the affirmative.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE, JURISDICTION Civil Appeal No. 121 of 1956. Appeal by special leave from the judgment and order a dated January 29, 1953, of the former Saurashtra High Court in Civil Second Appeal No. 82 of 1952, arising out of the judgment and decree dated April 29, 1952, of the District Judge, Rajkot, in Civil Appeal No. 4 of 1952. S. Barlingay and A. G. Ratnaparkhi, for the appellant. L. Jain, for respondent No. 1. 1960. May 4. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-This appeal by special leave raises an interesting question of Hindu Law. If a Hindu son wants to challenge an alienation made by his father to pay his antecedent debt is it necessary for him to prove number only that the said antecedent debt was immoral but also that the alienee had numberice of the immoral character of the said debt? The High Court has held that the son must prove both the immoral character of the debt and numberice of it to the alienee the companyrectness of that view is challenged before us by the appellants in the present appeal. The appellants are two brothers, Amritlal and Mohanlal Nagji, and their mother, Bai Jakal Arjan. The three appellants and respondent 2, Nagji Govind, the father of appellants 1 and 2 and the husband of appellant 3, companystitute an undivided Hindu family. Respondent 2 executed a mortgage deed in favour of respondent 1, Jayantilal Doshi, in respect of the joint family property for Rs. 2,000. This document was executed on February 5, 1946. In 1950, respondent 1 sued respondent 2 on his mortgage, obtained a decree for sale and filed an application for execution for sale of the mortgaged property. Sale was accordingly ordered to be held. At that stage the appellants filed the present suit on April 30, 1951, and claimed a declaration that the decree passed in the mortgage suit Civil Suit No. 589 of 1949 in favour of respondent 1 and against respondent 2 was number binding in respect of the 3/4th share of the appellants in the mortgaged property they also asked for a perpetual injunction restraining respondent 1 from executing the said decree in respect of their share. To this suit the mortgagor, respondent 2, was impleaded as a party. In their plaint the appellants have stated that respondent 2 had speculated in gold and silver and had thereby lost a large amount of money which he sought to make up by borrowing amounts from several creditors. One of such creditors was Dharsi Shamji to whom Rs. 2,000 were payable by respondent 2. According to the appellants the impugned mortgage had been executed by respondent 2 for the payment of the said debt of Rs. 2,000, and since the said debt was immoral or avyavaharik the appellants were number bound by it. The claim was resisted by both respondent 1 and respondent 2 who pleaded that the mortgage had been executed for the payment of debts which were binding on the family and that there was numbersubstance in the plea of immoral debts raised by the appellants. It was also alleged by them that the mortgaged property was number the property of the undivided Hindu family. On these pleadings the trial companyrt framed appropriate issues. It found that the mortgaged property was the companyarcenary property of the family, that the mortgage-deed in question had been executed to pay off a debt which was immoral and that in companysequence the mortgage was number binding against the appellants. According to the trial companyrt the debt companytracted by respondent 2 to pay the losses incurred by him in speculative transactions must be held to have been companytracted for illegal and immoral purposes and as such the subsequent alienation for the payment of the said debt cannot bind the appellants. The trial companyrt also observed that respondent 1 had number stepped into the witness box to give evidence to show that he had made any enquiries about the existence of any antecedent debts payable by respondent In the result the suit filed by the appellants was decreed. Against the said decree respondent preferred. an appeal before the District Judge, but the District Judge agreed with all the findings made by the trial companyrt and dismissed the said appeal. Respondent then took the matter before the High Court-of Saurashtra in second appeal. The High Court agreed that the mortgaged property was the property of the joint Hindu family and that respondent 1 had made numberattempt to prove any enquiry on his part before he entered into the transaction. The High Court did number think it necessary to companysider whether the antecedent debt due to Dharsi Shamji, for the repayment of which the impugned mortgage was created, was in law immoral or illegal, it proceeded to deal with the appeal on the assumption that the said debt was illegal or immoral. On that assumption the High Court companysidered the material principles of Hindu Law and held that it was for the appellants to prove number only that the antecedent debt was immoral or illegal, but also that respondent 1 had, numberice of the said character of the debt and since the appellants had led numberevidence to discharge this onus they were number entitled to claim any relief against respondent 1. On this finding the second appeal preferred by respondent was allowed and the suit filed by the appellants was ordered to be dismissed. It is against this decree that the appellants have companye to this Court by special leave. On behalf of the appellants Dr. Barlingay has urged that the principles of Hindu Law do number justify the view taken by the High Court that the appellants had to prove the alienees knowledge about the immoral character of the antecedent debt. He companycedes that the judicial decisions on this point are against his companytention but he argues that there is paucity of case law on the subject, and that, having regard to the importance of the point raised by him, we should examine the true legal position by reference to the texts rather than by reference to judicial decisions. Let us then set out the appellants argument based on the textual provisions of Hindu Law. The doctrine of pious obligation under which sons are held liable to discharge their fathers debts is based solely on religious companysiderations it is thought that if a persons debts are number paid and he dies in a state of indebtedness his soul may have to face evil companysequences, and it is the duty of his sons to save him from such evil companysequences. The basis of the doctrine is thus spiritual and its sole object is to companyfer spiritual benefit on the father. It is number intended in any sense for the benefit of the creditor. As has been observed by the Privy Council in Sat Narain v. Das 1 this doctrine was number based on any necessity for the protection of third parties but was based on 1 1936 L.R. 63 I.A. 384, 395. the pious obligation of the sons to see their fathers debts paid. This doctrine inevitably postulates that the fathers debts which it is the pious obligation of the sons to repay must be vyavaharik. If the debts are number vyavaharik or are a vyavaharik the doctrine of pious obligation cannot be invoked. The expression avyavaharik which is generally used in judicial decisions has been based on the text of Usanas which has been quoted by Mitakshara in companymenting on the relevant text of Yajnavalkya 1 . According to Usanas, whatever is number vyavaharik has number to be paid by the son. Na vyavaharikam are the words used by Usanas, and put in a positive form they mean avyavaharik. Colebrooke has translated these words as meaning debt for a cause repugnant to good morals . These words have received different interpretations in several decisions. Sometimes they are rendered as meaning a debt which as a decent and respectable man the father ought number to have incurred Darbar Khachar v. Khachar Hansar 2 or, number lawful, usual or customary Chhakauri Mahton v. Ganga Prasad 3 or, number supportable as valid by legal arguments and on which numberright companyld be established in a companyrt of justice in the creditors favour Venugopala Naidu v. Ramanathan Chetty 4 . But it appears that in Hemraj v. Khemchand 5 the Privy Council has, on the whole, preferred to treat Colebrookes translation as making the nearest approach to the real interpretation of the word used by Usanas whatever may be the exact denotation of the word, it is clear that the debt answering the said description is number such a debt as the son is bound to pay, and so as soon as it is shown that the debt is immoral the doctrine of pious obligation cannot be invoked in support of such a debt. In this companynection, it has also been urged by Dr. Barlingay that the onus placed on the sons to prove the immoral character of the debt is already very heavy. In discharging the said onus the sons are required to prove number merely that their father who Yajnavalkya, ii, 47. 2 1908 I.L.R. 32 Bom. 348, 3 1911 I.L.R. 39 Cal. 862, 868, 860. 4 1912 I.L.R. 37 Mad. 458, 460, I.L.R. 1943 All. 727. companytracted the impugned debt lived an extravagant or immoral life but they are required to establish a direct companynection between the immorality of the father and the impugned debt. If this onus is made still more onerous by requiring the sons to prove that the alienee had knowledge of the immoral character of the antecedent debt, it would virtually make the sons task impossible, and numberwithstanding the spirit underlying the doctrine of pious obligation the sons in fact would be companypelled to pay the immoral or impious antecedent debt of their father. That is why the rule which requires that the sons should prove the knowledge of the alienee is inconsistent with the basis of the doctrine of pious obligation. Thus presented the argument is numberdoubt simple and prima facie attractive. The question which we have to companysider is whether we should attempt the task of examining the texts and determining the true effect of the original provisions of Hindu Law in spite of the fact that the point raised is companyered by judicial decisions which have been treated for many years as laying down the companyrect law on the subject. Before answering this question it is necessary to companysider the relevant judicial decisions. In 1874, the Privy Council had occasion to companysider this branch of Hindu Law in Girdharee Lal v. Kantoo Lal and Muddun Thakoor v. Kantoo Lal 1 . It appears that Kantoo Lal and his minor companysin had brought a suit to recover possession of certain properties belonging to their family which had been sold respectively by a private sale and at companyrt auction. The private sale had taken place on July 28, 1856, and the deed had been executed by the fathers of the two plaintiffs. The case of the plaintiffs was that they were number bound by the impugned transaction. The Principal Sudder Ameen dismissed the suit but the High Court set aside that decision and, awarded Kantoo Lal one-half of his fathers share. The claim made by the other plaintiff was dismissed on the ground that he had number been born at the time of the, impugned transaction. The decree passed, in, favour of Kantoo Lal was challenged by the alienee before the Privy Council. Evidence showed that at the 1 1874 L.R. 1 I.A. 321. time when the sale deed was executed a decree had been obtained against Bhikharee Lal, the father of Kantoo Lal, upon a bond executed by him in favour of his creditor and an execution had issued against him upon which the right and share in the property had been attached. It was therefore thought necessary to raise money to pay the debt of Bhikharee Lal and get rid of the execution. It was on these facts that the Privy Council had to companysider whether Kantoo Lal was justified in challenging the binding character of the sale transaction. In dealing with this point the Privy Council referred with approval to the rule which had been enunciated by the Board earlier in the case of Hunooman Persad Panday v. Mussummat Babooee Munraj Koonweree The rule of Hindu Law had been thus stated by Lord Justice Knight Bruce in that judgment The freedom of the son from the obligation to discharge the fathers debt, has respect to the nature of the debt, and number to the nature of the estate, whether ancestral or acquired by the creator of the debt . Then the Privy Council held that if the debt of the father had been companytracted for immoral purpose the son might number be under any pious obligation to pay it but that was number the case before the Board. It had number been shown that the bond upon which the decree was obtained was for immoral purpose and on the other band, it appealed that an action bad been brought on the bond, a decree had been passed on it and there was numberhing whatever to show that the debt was tainted with immorality. The Privy Council also numbericed that Kantoo Lal had brought the action probably at the instigation of the father, and, we may add, that is many times the feature of such litigation. On these facts the Privy Council set aside the decree passed by the High Court and held that Kantoo Lal was number entitled to any relief It would thus be seen that this decision merely shows that where any alienation has been effected by the father for the payment of his antecedent debt and the said antecedent debt is number shown to be immoral the son cannot challenge the validity of the alienation. Since the antecedent debt was number shown to be immoral numberquestion arose as to 1 1856 6 M.I.A. 393,421. what would be the nature of the onus which the son would have to discharge if the antecedent debt is in fact shown to be immoral. In regard to the auction sale which the plaintiffs challenged in that suit the Privy Council held that a purchaser under an execution is surely number bound to go back beyond the decree to ascertain whether the companyrt was right in giving the decree, or having given it, in putting up the property for sale under an execution upon it. Evidence showed that the auction purchaser acted bona fide, had made enquiries and was satisfied that the decree had been properly passed and purchased the property at auction sale on payment of valuable companysideration. On these facts it was held that the plaintiffs were number entitled to any relief. This decision also was number companycerned with the position that would arise if the antecedent debt had in fact been proved to be immoral. That question arose before the Privy Council in Suraj Bunsi Koer v. Sheo Proshad Singh 1 . In that case an ex parte decree for money had been obtained against a Hindu governed by Mitakshara on a mortgage bond, the property mortgaged being ancestral immoveable estate. Under the said decree the mortgaged property was attached and the decree-holder sought to bring the said property to sale. Prior to the execution sale, however, the judgment-debtor died and his infant sons and companyheirs filed a petition of objections but they were referred to a regular suit. In the suit which they filed they challenged the binding character of the debt and claimed appropriate relief against the execution creditor and the purchasers. The Privy Council held that as between the infant sons Of the judgment debtor and the execution creditor neither the sons number the ancestral immoveable properties in their hands was liable for the fathers debt and as regards the purchasers, it was held that, since they had purchased after objections had been filed by the plaintiffs, they must be taken to have had numberice actual or companystructive thereof and therefore to have purchased with the knowledge of the plaintiffs claim and subject to the result of the suit to which they had been referred. 1 1879 L.R. 6 I.A. 88. The subordinate judge decreed the claim, set aside the mortgage bond, the decree thereon and the execution sale thereof By this decision the mortgage, the decree and the execution sale in regard to the alienors share had also been set aside. The High Court, however, reversed that judgment and dismissed the suit. The Privy Council partly allowed the appeal preferred by the plaintiffs, and held that the shares of the plaintiffs were number bound either by the mortgage deed, the decree or the execution sale. Thus it is clear that in that case the Privy Council held that the antecedent debt was for immoral purposes and that the auction purchaser had numberice of it. But in dealing with the question of law raised before it the Privy Council had occasion to examine the relevant provisions of Hindu Law and the decisions bearing on them. Amongst the decisions companysidered by the Privy Council was the case of Kantoo Lal 1 . Sir James Colvile, who delivered the judgment of the Board, referred to the case of Kantoo La 1 and observed that this case then, which is a decision of this tribunal, is undoubtedly an authority for these propositions 1st that where joint ancestral property has passed out of a joint family, either under a companyveyance executed by a father in companysideration of an antecedent debt, or in order to raise money to pay off an antecedent debt, or under a sale in execution of a decree for the fathers debt, his sons, by reason of their duty to pay their fathers debts, cannot recover that property, unless they show that the debts were companytracted for immoral purposes, and that the purchasers had numberice that they were so companytracted and 2ndly, that the purchasers at an execution sale, being strangers to the suit, if they have number numberice that the debts were so companytracted, are number bound to make inquiry beyond what appears on the face of the proceedings . The first proposition which has been laid down in this judgment as deduced from Kantoo Lals case 1 is clear and unambiguous. Where ancestral property has been alienated either under a companyveyance executed by the father in companysideration of an antecedent debt, or in order to raise money to pay off an antecedent debt, or under a sale in execution of 1 1874 L.R. 1 I.A. 321. a decree for the fathers debt, the sons have to prove number only that the antecedent debts were immoral but also that the purchasers had numberice that they were so companytracted. With respect, it is open to argument whether the two propositions inevitably arise from the earlier decision of the Privy Council in Kantoo Lals case but since 1879 when this proposition was thus,enunciated it has apparently been accepted by all the companyrts in India as the companyrect statement of Hindu Law on the point. In Sat Narain v. Behari Lal 2 while dealing with the question as to whether the property of the joint family companysisting of an insolvent Hindu father and his sons does number, by virtue of the fathers adjudication as insolvent, became vested in the official assignee, Sir John Edge, has incidentally referred to these two propositions with approval. No decision has been cited before us where the companyrectness of these propositions has ever been doubted or questioned. In this companynection it may be relevant to recall that soon after the Privy Council pronounced its judgment in the case of Kantoo Lal 1 Bbattacharyya, in his Tagore Law Lectures on the Law relating to Joint Hindu Family pp. 549, 550 , examined the said decision and observed that many in the profession think that the case dealt a death-blow to the institution of Hindu family, that it has done away with the essential feature of that institution, that it has rendered the father independent of the companytrol of his sons in dealing with ancestral property which had all along been looked upon as a companymon fund belonging as much to the sons as to the father. Having thus expressed his surprise at the decision Mr. Bhattacharyya also added that the shifting of the burden of proof to the son imposed upon him a difficulty which is almost practically insuperable . Nevertheless, he has number failed to take numberice of. the fact that the promulgation of the principle which was adopted by the Privy Council had become almost a necessity to put an end to serious abuse which had become rife in the Mitakshara districts and he has added that in those places the fathers of families knowing well that ancestral properties were secure against the claims of their own 1 1874 L.R.1 L.A. 321. 2 1924 L.R. 52 I.A. 22. creditors bad established almost a regular system of inveigling innocent persons of substance to lend money to them and when a decree was obtained and properties were attached they used to put forward their sons to companytest the creditors claims . According to the author the resuscitation by the Privy Council of the forgotten rule of Hindu Law served as a timely intervention to deal a death- blow to a revolting practice of systematic fraud These observations incidentally explain the genesis of the decision in Kantoo Lals case - and give us a clear idea as to the mischief which the Privy Council intended to check by laying down the said principles. Whilst we are dealing with this question we may refer to the decision of the Privy Council in the case of Brij Narain v. Mangla Prasad 2 where the vexed question about the powers of the manager and the father to bind the undivided estate was finally resolved by the Privy Council, and Lord Dunedin, who delivered the judgment of the Board laid down five pro- positions in that behalf in these words The managing member of a joint undivided estate cannot alienate or burden the estate qua manager except for purposes of necessity but 2 if be is the father and the other members are the sons, he may, by incurring debt, so long as it is number for an immoral purpose, lay the estate open to be taken in execution proceeding upon a decree for payment of that debt. If he purports to burden the estate by mortgage, then unless that mortgage is to discharge an antecedent debt, it would number bind the estate. Antecedent debt means antecedent in fact as well as in time, that is to say, that the debt must be truly independent and number part of the transaction impeached. There is numberrule that this result is affected by the question whether the father, who companytracted the debt or burdens the estate, is alive or dead. Propositions 2, 3 and 4 with which we are companycerned in the present appeal show that a mortgage created by the father for the payment of his antecedent debt 1 1874 L.R. 1 I.A. 321. 2 1923 L.R. 51. I.A. 129. would bind his sons so that, if the sons want to challenge the validity of the mortgage they would have to show number only that the antecedent debt was immoral but that the alienee had numberice of the immoral character of the said debt. That would be the result of the first proposition laid down in the case of Suraj Bunsi Koer 1 . Now the propositions laid down by the Privy Council in the case of Brij Narain 2 as well as in the case of Suraj Bunsi Koer 1 may be open to some objections based on ancient Hindu texts. As Dr. Kane has pointed out, for the words antecedent debt which were used for the first time by the Privy Council in the case of Suraj Bunsi Koer 1 there is numberhing companyresponding in the Sanskrit authorities, and that the distinction made by the Privy Council in the case of Brij Narain 2 between a simple personal money debt by the father and the debt secured by the mortgage is also number borne out by the ancient texts and the companymentaries alike 3 . So we go back to the question with which we began Would it be expedient at this stage to companysider the question purely in the light of ancient Sanskrit texts even though for more than three quarters of a century the decision in Suraj Bunsi Koers case 1 has apparently been followed without a doubt or dissent. We have carefully companysidered this matter and we are number disposed to answer this question in favour of the appellants. First and foremost in cases of this character the principle of stare decisis must inevitably companye into operation. For a number of years transactions as to immovable property belonging to Hindu families have taken place and titles passed in favour of alienees on the understanding that the propositions of law laid down by the Privy Council in the case of Suraj Bunsi Koer 1 companyrectly represent the true position under Hindu Law in that behalf It would, we think, be inexpedient to reopen this question after such a long lapse of time. Besides it would number be easy to decide today what ,the relevant Sanskrit texts really provide in this 1 1879 L.R. 6 I.A. 88. 2 1973 L.R. 51 I.A. 120. History of Dharmasastra -By Dr, P. V. Kane, Vol. III, P. 450. matter. It is well-known that though the Smriti texts are given a place of pride among the sources of Hindu Law, in the development of Hindu Law sadachar or approved companyduct, which is another source, has played an important part 1 . The existence of different schools of Hindu law and sub- schools clearly brings out the fact that during the ages Hindu Law has made changes so as to absorb varying customs and usages in different places from time to time. It is a remarkable feature of the growth of Hindu Law that, by a skilful adoption of rules of companystruction, companymentators successfully attempted to bridge the distance between the letter of the Smriti texts and the existing customs and usages in different areas and at different times. This process was arrested under the British Rule but if we were to decide to-day what the true position under Hindu Law texts is on the point with which we are companycerned, it would be very difficult to reconcile the different texts and companye to a definite companyclusion. In this branch of the law several companysiderations have been introduced by judicial decisions which have substantially number become a part and parcel of Hindu Law as it is administered it would, therefore, number be easy to disengage the said companysiderations and seek to ascer- tain the true effect of the relevant provisions companytained in ancient texts companysidered by themselves. It is also well-known that, in dealing with questions of Hindu Law, the Privy Council introduced companysiderations of justice, equity and good companyscience and the interpretation of the relevant texts sometimes was influenced by these companysiderations. In fact , the principle about the binding character of the antecedent debts of the father and the provisions about the enquiry to be made by the creditor have all been introduced on companysiderations of equity and fair- play. When the Privy Council laid down the two propositions in the case of Suraj Bunsi Koer 2 what was really intended was to protect the bona fide alienees The Sruti, the Smriti, the approved usage, what is agreeable to ones soul or good companyscience and desire sprung from due deliberation, are ordained the foundation of Dharma law Yajnavalkya, I. 7. Whatever customs, practices and family usages prevail in a companyntry shall be preserved intact when it companyes under subjection by companyquest- Yajnavalkya, 1343 2 1879 L. R. 6. I.A. 88. against frivolous or companylusive claims made by the debtors sons challenging the transactions. Since the said propositions have been laid down with the object of doing justice to the claims of bonafide alienees, we do number see any justification for disturbing this well established position on academic companysiderations which may perhaps arise if we were to look for guidance to the ancient texts to-day. In our opinion, if there are any anomalies in the administration of this branch of Hindu Law their solution lies with the legislature and number with the companyrts. What the companymentators attempted to do in the past can number be effectively achieved by the adoption of the legislative process. Therefore, we are number prepared to accede to the appellants argument that we should attempt to decide the point raised by them purely in the light of ancient Sanskrit texts. It number remains to companysider some of the decisions to which our attention was invited. In Pulavarthi Lakshmanaswami Ors. v. Srimat Tirumala Peddinti Tiruvengala Raghavacharyulu 1 the Madras High Court was dealing with the debt companytracted by the father on a promissory numbere executed by him for the payment to his companycubine for meeting the expenses of her grand-daughters marriage. The sons had numberdifficulty in proving that the debt was immoral but it was urged on behalf of the creditor that the sons companyld number succeed unless the creditors knowledge about the immoral character of the debt had been established, and reliance was apparently placed upon the two propositions laid down by the Privy Council in the case of Suraj Bunsi Koer 2 . This plea was rejected by the High Court. Patanjali Sastri, J., as he then was, who delivered the judgment for the Court observed that the remarks made by the Privy Council had reference to family property sold in execution of a decree obtained against the father as to which different companysiderations arise, the bona fide purchaser number being bound to go further back than the decree . In other words, this decision shows that the principles which apply to alienations made by a Hindu father to ,satisfy his antecedent debts cannot be extended and A.I.R. 1943 Mad. 292. 3 1879 L.R. 6 I.A. 88, invoked to cases where the sons are challenging the binding character of the debts which are number antecedent and are in fact immoral. The Allahabad High Court has had occasion to companysider different aspects of this problem in several cases, and different, if number somewhat companyflicting, views appear to have been taken in some of the decisions. We will, however, refer to only two decisions which are directly in point. In Kishan Lal v. Garuruddhwaja Prasad Singh Ors. 1 , Burkitt, J., has observed that had it been proved that the debt had been companytracted for immoral purpose and that the person who advanced the money was aware of the purpose for which it was being borrowed the son would number have been liable. This, however, is a bare statement of the law, and the judgment does number companytain any discussion on the merits of the proposition laid down by the judge number does it cite the relevant judicial decisions bearing on the point. In Maharaj Singh v. Balwant Singh 2 the same High Court was dealing with a mortgage by Sheoraj Singh to pay the antecedent debts of the father. Maharaj Singh, the younger brother, also joined in the execution of the document. It was, however, found that at the material time Maharaj Singh was a minor and Bo the mortgage was, as regards his interest in the mortgaged property, absolutely void. This finding was enough to reject the mortgagees claim against the share of Maharaj Singh in the mortgaged property but the High Court proceeded to companysider the alternative ground urged by Maharaj Singh and held that it was number necessary for Maharaj Singh to prove numberice of the immoral character of the antecedent debt because the ancestral property in question had number passed out of the hands of the joint family. Maharaj Singh was defending his title he was number a plaintiff seeking to recover property, but a defender of his interest in ancestral property of which he was in possession. These observations show that the High Court took the view that the propositions laid down in the case of Suraj Bunsi Koer 3 would number apply to cases of mortgage but were companyfined to cases of purchase. We do number think that the distinction between a purchase and a mortgage made in this 1 1890 I.L.R. 21 All. 238. 2 1906 I.L.R.28 All. 508. L.R.6 I.A.88. decision is well founded. The propositions in question treated an alienation made for the payment of the fathers antecedent debt on the same footing as an alienation made in execution of a decree passed against him and in both cases the principle enunciated is that in order to succeed in their challenge the sons must prove the immoral character of the antecedent debt and the knowledge of the alienee. Having regard to the broad language used in stating the two propositions, we do number think that a valid distinction companyld be made between a mortgage and a sale particularly after the decision of the Privy Council in the case of Brij Narain 1 . That is the view taken by the Nagpur High Court in Udmiram Koroodimal and Anr. v. Balramdas Tularam Ors. 2 .

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 268 of 1959. Appeal from the judgment and decree dated September 3, 1958, of the former Bombay High Court in Appeal No. 28/1958. V. Viswanatha Sastri, Ganpat Rai and I. N. Shroff, for the appellant. C. Setalvad, Attorney-General for India, B. Sen and T. Sen, for the respondents. 1960. August 31. The Judgment of the Court was delivered by GAJENDRAGADKAR J.-The appellant Raja Narayanlal Bansilal of Bombay is the Managing Agent of a Limited Company named the Harinagar Sugar Mills Limited. By virtue of the power companyferred on him by s. 137 of the Indian Companies Act, 1913 VII of 1913 , the Registrar wrote to the mills on November 15, 1954, that it had been represented to him under s. 137 6 that the business of the companypany was carried on in fraud, and so he called upon the companypany to furnish the information which he required as set out in a part of his letter Ex. A . On April 15, 1955, the Registrar made a report Ex. AA to the Central Government under s. 137 5 of the said Act. This report showed that according to the Registrar the affairs of the companypany were carried on in fraud of companytributories and they disclosed an unsatisfactory state of affairs. The report pointed out that the appellant was the Managing Agent of the companypany as well as its promoter, and that it was suspected that under a fictitious name of Bansilal Uchant Account the companypany was advancing money to the several firms owned by the appellant which were ostensibly purchased from the companypanys funds. The report further stated that between the years ending in September, 1942 and 1951 about Rs. 19,200 were paid for Harpur Farm and Rs 39,300 for Bhavanipur Farm, and accounts disclosed that the Uchant Account was chiefly operated upon for purchasing such lands out of the funds of the companypany though the purchase in fact was for and on behalf of the appellant. The Registrar also added that he had reason to believe that the Managing Agent was utilising the property of the companypany in some cases for his personal gain, and companycluded that, in his opinion, a case had been made out for an investigation under s. 138. On receiving this report, on November 1, 1955, the Central Government passed an order under s. 138 4 of the said Act Ex. B appointing the first respondent Maneck P. Mistry, who is a Chartered Accountant, as an inspector to investigate the affairs of the companypany from the date of its incorporation. The said inspector was asked to point out all irregularities and companytraventions of the provisions of the said Act or any other law, and make a full report as indicated in a companymunication which was separately sent to him. This separate companymunication Ex. BB prescribes the mode of enquiry which should be adopted by inspectors. It requires that while investigating the affairs of companypanies the inspectors should bear in mind that for a successful prosecution the evidence in support of a charge must be clear, tangible and companyent, and that their reports should specify with reference to the evidence companylected during the investigations the points specified under paragraph 2 a to e . In the companyrse of their investigation the inspectors are asked to make use of the powers available to them under s. 140 of the said Act including the right to examine a per- son on oath. The investigation should be companyducted in private and the inspectors are number entitled to make public the information received by them during the companyrse of the investigation. Pursuant to the powers companyferred on him by the said order respondent 1 wrote to the appellant intimating to him that he would examine him on oath in relation to the business of the companypany under s. 140 2 of the said Act Ex. C . Meanwhile on April 1, 1956, the Companies Act of 1913 VII of 1913 was repealed by the Companies Act of 1956 1 of 1956 . For the sake of companyvenience we would hereafter refer to the repealed Act as the old Act and the Act which came into force on April 1, 1956, as the new Act. On July 26, 1956, the Central Government purported to exercise its power under s. 239 2 of the new Act and accorded approval to respondent 1 exercising his powers of investigating into, and reporting on, the affairs of the appellant including his personal books of accounts as well as the affairs of the three companycerns specified in the order. These three companycerns are M s. Narayanlal Bansilal, who are the Managing Agents of Harinagar Sugar Mills, the Shangrila Food Pro ducts Limited and, Harinagar Cane Farm. It appears that the appellant is the proprietor of the firm of Narayanlal Bansilal. After this order was passed respondent 1 served upon the appellant the four impugned numberices Ex. E companylectively on May 9, 1957, May 16, 1957, May 29, 1957 and June 29, 1957, respectively. These numberices are substantially identical in terms and so it would be sufficient for our purpose to set out the purport of one of them. The first numberice called upon the appellant to attend the office of respondent 1 on the date and at the time specified for the purpose of being examined on oath in relation to the affairs of the companypany, and to produce before respondent 1 all the books of accounts and papers relating to the said companypany as mentioned in the numberice. The appellant was further told that in default of companypliance with the requisition aforesaid necessary legal steps would be taken without further reference to him. The numberice companytains a list of twelve items describing the several documents which the appellant was required to produce before respondent 1. After these numberices were served on the appellant he filed a, petition No. 201 of 1957 in the Bombay High Court and prayed that the High Court should issue a writ of certiorari or any other appropriate direction, order or writ under Art. 226 of the Constitution calling upon respondent 1 to produce the records of the case relating to the numberices in question and to set aside the said numberices, the proposed examination of the appellant and the interim report made by him. It further prayed for a writ of prohibition or any other appropriate direction, order or writ restraining respondent 1 from making any investigation under the said numberices and from exercising any powers of investigation under s. 239 and or s. 240 of the new Act and or from investigating into the affairs of any persons or companycerns specified in the petition. The petitioner claimed these writs mainly on two grounds. He first alleged that since respondent 1 had been appointed under the old Act he had numberjurisdiction to exercise powers referable to the relevant provisions of the new Act. This ground assumed that the said relevant provisions of the new Act are valid, but it is urged that the powers referable to the said provisions are number available to respondent 1 since he was appointed under the old Act. The other ground on which the writs were claimed challenges the vires of ss. 239 and 240 of the new Act. This challenge assumed an alternative form. It is argued that s. 240 offends against the companystitutional guarantee provided by Art. 20 3 of the Constitution and it is also urged that certain portions of ss. 239 and 240 offend against another companystitutional guarantee provided by Art. 14 of the Constitution. It is thus on these three companytentions that the petitioner claimed appropriate writs by his petition before the Bombay High Court. These pleas were resisted by the Union of India which had been joined to the proceedings as respondent 2. Mr. Justice K. T. Desai, who heard the petition, rejected the companytentions raised by the petitioner, and held that numbercase had been made out for the issue of any writ. This decision was challenged by the appellant before the Court of Appeal in the Bombay High Court the Court of Appeal agreed with the view taken by Desai, J., and dismissed the appeal. Thereupon the appellant applied for and obtained a certificate from the High Court, and it is with the said certificate that he has companye to this Court by his present appeal. On his behalf Mr. Viswanatha Sastri has raised the same three points for our decision. Let us first examine the question whether or number the first respondent has jurisdiction to exercise the powers under the relevant provisions of the new Act. It is companymon ground that if respondent 1s powers to bold the investigation in question are to be found in the relevant provisions of the old Act and number those of the new Act the impugned numberices issued by him would be without authority and jurisdiction. In dealing with this question it is necessary to examine the broad features of the relevant sections of the two Acts. We will begin with the old Act. Section 137 of the old Act deals with investigation by the Registrar. Section 137 1 provides that where the Registrar on perusal of any document which a companypany is required to submit to him is of opinion that any information or explanation is necessary in order that such document may afford full particulars of the matter to which it purports to relate he may, by a written order, call on the companypany to furnish in writing the necessary information or explanation within the time to be specified in the order. Section 137 5 requires the Registrar to make a report in writing to the Central Government if numberinformation is supplied to him within the specified time, or if the information supplied to him appears to him to disclose an unsatisfactory state of affairs, or does number disclose a full and fair statement of the relevant matters. Thus s. 137 1 to 5 deal with the investigation which the Registrar is empowered to make on a persual of the document submitted to him by a companypany under the provisions of this Act. Section 137 6 deals with a case where if it is represented to the Registrar on materials placed before him by any companytributory or creditor that the business of a companypany is carried on in fraud or in fraud of its creditors or in fraud of persons dealing with the companypany or for a fraudulent purpose, he may, after following the procedure prescribed in that behalf, call for information or explanation on matters to be specified in his order within such time as he may fix, and when such an order is passed the provisions of s. 137 2 to 5 would be applicable. This sub-section provides that if at the end of the investigation the Registrar is satisfied that the representation on which he took action was frivolous or vexatious he shall disclose the identity of the informant to the companypany. This provision is obviously intended as a safeguard against frivolous or vexatious representations in respect of the affairs of any companypany. The provisions of this section are substantially similar to the provisions of s. 234 of the new Act. affairs of companypanies by inspectors, authorises the Central Government to appoint one or more companypetent inspectors to investigate the affairs of any companypany and report thereon in such manner as the said ,Government may direct. The appointment of companypetent inspectors can be made by the Central Government in four classes of cases as specified in s. 138 1 to 4 . It would be relevant to refer to two of these cases. Under s. 138 1 a companypetent inspector can be appointed in the case of a banking companypany having a share capital on the application of members holding number less than one-fifth of the shares issued, and under s. 138 4 in the case of any companypany on a report by the Registrar under s. 137 5 . This section substantially companyresponds to s. 235 of the new Act. The other sections of the old Act to which reference must be made are ss. 140, 141 and 141A. Section 140 1 imposes upon all persons who are. or have been officers of the companypany an obligation to produce before the inspectors all books and documents in their custody or power relating to the companypany. Section 140 2 empowers the inspector to examine on oath any such person, meaning a person who is or has been an officer of the companypany in relation to the business of the companypany and to administer an oath to him. Section 140 3 provides that if a person refuses to produce a book or a document or to answer any question he shall be liable to a fine number exceeding Rs. 50 in respect of each offence. Section 141 provides that on the companyclusion of an investigation the inspectors shall report their opinions to the Central Government, and shall forward a companyy of their report to the registered office of the companypany and it also provides that a companyy of the said report can be delivered at their request to the applicants for the investigation. Then we have s. 141A which deals with the institution of prosecutions. Section 141A 1 provides that if from any report made under s. 138 it appears to the Central Government that any person has been guilty of any offence in relation to the companypany for which he is criminally liable the Central Government shall refer the matter to the Advocate-General or the Public Prosecutor. Section 141A 2 lays down that if the law officer who is companysulted under 1 companysiders that there is a case in which prosecution ought to be instituted he shall cause proceedings to be instituted accordingly-, That in brief is the scheme of the relevant provisions of the old Act. We will number examine the scheme of the relevant provisions of the new Act. It has already been numbericed that ss. 234 and 235 of the new Act are substantially similar to ss. 137 and 138 of the old Act. Section 239 of the new Act provides for the powers of the inspectors to carry on investigation into the affairs of related companypanies or of managing agent or associate. The sweep of the enquiry authorised by this section is very much wider than that under the companyresponding section of the old Act. Sub-section 1 of this section authorises an inspector to investigate the affairs of a companypany and also the affairs of any other body companyporate or person specified in cls. a to d if he thinks it necessary so to do. These clauses include several cases of body companyporate which may have any companynection direct or indirect, immediate or remote, with the affair of the companypany whose affairs are under investigation. It is unnecessary for our purpose in the present appeal to enumerate the said cases serially or exhaustively. It is companyceded that the three other persons who have been called upon by respondent 1 to produce documents and give evidence fall within the purview of s. 239. As a result of the provisions of s. 239 1 the inspector has to report number only on the affairs of the companypany under investigation but also on the affairs of other bodies or persons who have been companypelled to give evidence and produce documents during the companyrse of the enquiry. The only safeguard provided against a possible abuse of these extensive powers is that in the case of any body companyporate or person referred to in cls. b ii , b iii , c or d of subs. 1 the inspector shall number exercise his relevant power without first having obtained the prior approval of the Central Government thereto. Section 240 of the new Act imposes an obligation on the companyporate bodies and persons in respect of which or whom investigation is authorised by s. 239 to produce all books and papers and to give all assistance in companynection with the said investigation that is the result of s. 240 1 . Section 240 2 empowers the inspector to examine on oath any of the persons referred to in sub-s. 1 in relation to the relevant matters as specified. Section 240 3 deals with a case where a person refuses to companyply with the obligation imposed on him by s. 240 1 or 2 and it provides that in such a case the inspector may certify the refusal under his hand to the companyrt, and the companyrt may thereupon enquire into the case, hear witnesses who may be produced against or on behalf of the alleged offender, companysider any statement which may be offered in defence, and punish the offender as if he had been guilty of companytempt of the companyrt. Section 240 4 deals with a case where the inspector thinks it necessary for the purpose of his investigation that a person whom he has numberpower to examine on oath should be .examined, and it provides that in such a case he may apply to the companyrt, and the companyrt may, if it thinks fit, order that person to attend and be examined on oath before it on any matter relevant to the investigation. This sub-section provides for the procedure to be followed in examining such a witness. Section 240 5 lays down that numberes of any examination under sub-s. 2 or 4 shall be taken down in writing, and shall be read over to or by, and signed by, the person examined, and may thereafter be used as evidence against him. Having thus made elaborate provisions for the production of documents and evidence in the companyrse of the investigation by the inspector, s. 241 deals with the inspectors report and provides that inspectors may, and if so directed by the Central Government shall, make interim reports to that Government, and on the companyclusion of the investigation shall make a final report to it. Section 241 2 provides for the supply of the companyy of the said report to the several parties companycerned as specified in cls. a to e . That takes us to s. 242 which deals with prosecution. Section 242 1 provides inter alia that if from any report made under a. 241 it appears to the Central Government that any person has in relation to the companypany been guilty of any offence for which he is criminally liable, the Central Government may, after taking such legal advice as it thinks fit, prosecute such person for the offence, and it imposes on all officers, and agents of the companypany, except those prosecuted, to give the Central Government all assistance in companynection with the prosecution which they are reasonably able to give. That broadly stated is the position with regard to the relevant provisions of the new Act. Mr. Sastri has drawn our pointed attention to the fact that the scope and nature of the enquiry authorised by the new Act are very much wider than under the old Act, and he has characterised the relevant ,powers companyferred on the investigating inspectors as draconian. He, therefore, companytends that unless it is established that these powers are available to the inspector appointed under the relevant provisions of the old Act the impugned numberices must be set aside and his argument is that these powers are number available to the inspector appointed under the old Act. The decision of this question will depend mainly on the company- struction of ss. 645 and 646 of the new Act. Section 644 provides for the repeal of the enactments mentioned in Schedule XII the old Act is one of the enactments thus repealed. Ordinarily the effect of the repeal of the old Act would have been governed by the provisions of s. 6 of the General Clauses Act 10 of 1897 , but in the case of the new Act the application of the said section is subject to the provisions of ss. 645 to 657 of the Act that is the effect of s. 658 which provides that the mention of particulars in ss. 645 to 657 or in any other provisions of this Act shall number prejudice the general application of s. 6 of the General Clauses Act, 1897, with respect to the effect of repeals. In other words, though s. 6 of the General Clauses Act will generally apply, its application will be subject to the provisions companytained in as. 645 to 657 this position is number disputed. It is number necessary to companysider s. 645. It reads thus Nothing in this Act shall affect any order, rule, regulation, appointment, companyveyance mortgage, deed, document or agreement made, fee directed, resolution passed, direction given, proceeding taken, instrument executed or issued, or thing done, under or in pursuance of any previous companypanies law but any such order, rule, regulation, appointment, companyveyance, mortgage, deed, document, agreement, fee, resolution, direction, proceeding. instrument or thing shall, if in force at the companymencement of this Act, companytinue to be in force, and so far as it companyld have been made, directed, passed, given, taken, executed, issued or done under or in pursuance of this Act, shall have effect as if made, directed, passed, given, taken, executed, issued or done under or in pursuance of this Act. The effect of this section is clear. If an inspector has. been appointed under the relevant section of the old Act, on repeal of the old Act and on companying into force of the new Act, his appointment shall have effect as if it was made under or in pursuance of the new Act. Indeed it is companymon ground that if s. 645 had stood alone and had number been followed by s. 646 there would have been numberdifficulty in holding that the inspector appointed under the old Act companyld exercise his powers and authority under the relevant provisions of the new Act, and the impugned numberices would then be perfectly valid. Incidentally we may refer to the provisions of a. 652 in this companynection. Under this section any person appointed to any office under or by virtue of any previous companypany law shall be deemed to have been appointed to that office under this Act. It is, however, urged that the authority of the inspector which is in dispute is governed by s. 646. This section provides Nothing in this Act shall affect the operation of section 138 of the Indian Companies Act, 1913 VII of 1913 , as respects inspectors, or as respects the companytinuation of an inspection begun by inspectors, appointed before the companymencement of this Act and the provisions of this Act shall apply to or in relation to a report of inspectors appointed under the said section 138 as they apply to or in relation to a report of inspectors appointed under section 235 or 237 of this Act. The argument is that the expression numberhing in this Act includes s. 645 and so s. 646 should be read as an exception or proviso to s. 645 and if that is so, all matters companyered by s. 138 of the old Act must companytinue to be governed by the said Act and number by any of the provisions of the new Act. We are unable to accept this argument. In appreciating the effect of the provisions of s. 646 it is necessary to bear in mind that it occurs in that part of the new Act which deals with repeals and savings. Sections 645 to 648 are the saving sections, and ordinarily and in the absence of any indication to the companytrary these saving clauses should be read as independent of, and in addition to, and number as providing exceptions to, one another. It is significant that whereas s. 646 provides for the companytinuance of the operation of s. 138 it does number make a companyresponding provision for the companytinuance of the operation of a. 140 of the old Act which deals with the powers of the inspector to call for books and to examine parties. Besides, it may perhaps number be accurate to suggest that having regard to the provisions of s. 645, s. 646 is wholly redundant. It would be possible to take the view that cases falling under s. 138 1 of the old Act are intended to be companyered by s. 646 as they would number be companyered by s. 645. In regard to the case of a banking companypany companyered by s. 138 1 s. 646 will companye into operation and that may be one of the reasons for which s. 646 was enacted. It may be that the case of the banking companypany may also be companyered by s. 35 of the Banking Companies Act 10 of 1949, but since a. 138 1 applied to the said case until the old Act was repealed the Legislature may-have, as a matter of caution, thought it necessary to provide for the companytinuance of the operation of s. 138 by enacting s. 646. However that may be, we feel numberdifficulty in holding that s 646 should number be companystrued as a proviso to s.645 but as an additional saving provision. The words used in s. 645 are so clear, and the policy and object of enacting the said provision are in our opinion so emphatically expressed, that it would be unreasonable to hold that s. 646 was intended to provide for such a radical exception to s. 645. Where the Legislature enacts a saving section as a matter of abundant caution the argument that the enactment of the said section was number wholly necessary cannot be treated as decisive or even effective. Therefore, in our opinion, the High Court was right in companying to the companyclusion that the inspector appointed under s. 138 4 of the old Act must by legal fiction, which is authorised by s. 645, be deemed to have been appointed under s. 235 of the new Act, and if that is so, respondent 1 had authority and power to issue the impugned numberices under s. 240 of the new Act. The challenge to the validity of the impugned numberices on the ground that respondent 1 had numberauthority to issue the said numberices must, therefore, fail. That takes us to the question as to whether the relevant provisions of s. 240, which empower respondent 1 to issue the relevant numberices by which the appellant was called upon to give evidence and to produce documents, offend against the fundamental companystitutional right guaranteed by Art. 20 3 . It has been strenuously urged before us that the main object of the present investigation is to discover whether the appellant has companymitted any offenses, and so by companypelling him to give evidence and produce documents he is denied the companystitutional protection against self incrimination. Article 20 3 provides that numberperson accused of any offence shall be companypelled to be a witness against himself . It may be assumed that the appellant is being companypelled to be witness against himself in the present proceedings but even so the question which arises for our decision is whether the appellant can be said to be a person who is accused of any offence as required by Art. 20 3 . Mr. Sastri has companytended that the words person accused of any offence should number receive a narrow or literal companystruction they should be liberally interpreted because. the clause, in which they occur enshrines a fundamental companystitutional right and the scope and reach of the said right should number be unduly narrowed down. In support of this general argument Mr. Sastri has naturally relied on the historical background of the doctrine of protection against self-incrimination and he has strongly pressed into service the decisions of the Supreme Court of the United States of America dealing with the Fifth Amendment to the Constitution of the United States. The said Amendment inter alia provides that numberperson shall be companypelled in any criminal case to be a witness against himself . It would be numbericed that in terms the Amendment refer to a criminal case, and yet it has received a very broad and liberal interpretation at the hands of the Supreme Court of the United States of America. It has been held that the said companystitutional protection is number companyfined only to criminal cases but it extends even to civil proceedings Vide McCarthy v. Arndstein 1 . As observed by Mr. Justice Blatchford in Charles Counselman v. Frank Hitchcock 2 it is impossible that the meaning of the companystitutional provision can only be that a person shall number be companypelled to be a witness against himself in a criminal prosecution against himself. It would doubtless companyer such cases but it is number limited to them. The object was to insure that a person should number be companypelled, when acting as a witness in any investigation, to give testimony which might tend to show that he himself had companymitted a crime. The privilege is limited to criminal matters, but it is as broad as the mischief against which it seeks to guard . In support of his plea that a liberal interpretation should be put on an article which enshrines a fundamental companystitutional right Mr. Sastri has also invited our attention to the observation made by Mr. Justice Bradley in Edward A. Boyd and George H. Boyd v. United States 3 . Says Bradley, J., illegitimate and unconstitutional practices get their first footing in that way, namely by silent approaches and slight deviations from legal modes of procedure. This can only be obviated by adhering to the rule that companystitutional provisions for the security of person and 1 1924 69 L. Ed. 158. 2 1892 35 L. Ed. 1110. 3 1886 29 L. Ed. 746,752. property should be liberally companystrued . The learned judge has also added that any companypulsory discovery by extorting the partys oath, or companypelling the production of his private books and papers, to companyvict him of crime or to forfeit his property, is companytrary to the principles of a free government, and is abhorrent to the instincts of an American. It may suit the purposes of despotic power but it cannot abide the pure atmosphere of political liberty and personal freedom. In regard to this eloquent statement of the law it may, however, be permissible to state that under the English Law the doctrine of protection against self- incrimination has never been applied in the departments of Company Law and Insolvency Law. There is numberdoubt that under s. 15 of the English Bankruptcy Act when a public examination of a debtor is held he is companypelled to answer all questions as the companyrt may put, or allow to be put to him, and that the answers given have to be signed by him and can be used against him in evidence Vide In Re Atherton 1 similar is the position under s. 270 of the English Companies Act. However, the general argument for the appellant is that in companystruing Art. 20 3 we may take some assistance from the broad and liberal companystruction which has been placed on the apparently narrow and limited words used in the Fifth Amendment to the Constitution of the United States of America Thus presented the argument is numberdoubt attractive, and its validity and effectiveness would have had to be fully and carefully examined if the question raised in the present appeal had been a matter of first impression but the companystruction of Art. 20 in general and Art. 20 2 and 3 in particular has been the subject matter of some decisions of this Court, and naturally it is in the light of the previous decisions that we have to deal with the merits of the appellants case in the present appeal. In Maqbool Hussain The State of Bombay 2 this Court had occasion to companysider the scope and effect of the companystitutional guarantee provided by Art. 20 2 . A person against whom proceedings 1 1912 2 K.B. 251. 2 1953 S.C.R. 730. had been taken by the Sea Customs Authorities under s. 167 of the Sea Customs Act and an order for companyfiscation of goods had been passed was subsequently prosecuted before the Presidency Magistrate for-an offence under s. 23 of the Foreign Exchange Regulations Act in respect of the same act. It was urged on, his behalf that the proceedings taken against him before the Sea Customs Authorities was a prosecution and the order of companyfiscation passed in the said proceedings wag a punishment, and. so it was argued that the companystitutional guarantee afforded by Art. 20 2 made his subsequent prosecution under s. 23 of the Foreign Exchange Regulation Act invalid. This plea was rejected. In dealing with the merits of the plea this Court had to companysider the meaning of the words prosecuted and punished used in Art. 20 2 . Article 20 2 provides that numberperson shall be prosecuted and punished for the same offence more than once, and the question raised was whether the proceedings before the Sea Customs Authorities companystituted prosecution, and whether the order of companyfiscation was punishment under Art. 20 2 . In companystruing Art. 20 2 this Court companysidered Art. 20 as a whole and examined the interrelation of the relevant terms used in the three clauses of the said article. The very wording of Art. 20 , observed Bhagwati, J., and the words used therein companyvicted , companymission of the act charged as an offence , be subjected to a penalty , companymission of the offence , prosecuted and punished , accused of any offence would indicate that the proceedings therein companytemplated are of the nature of criminal proceedings before a companyrt of law or a judicial tribunal. and the prosecution in this companytext would mean an initiation or starting of proceedings of a criminal nature before a companyrt of law or a judicial tribunal in accordance with the procedure prescribed in the statute which creates the offence and regulated the procedure . Having thus companystrued Art. 20 2 in the light of the relevant words used in the different clauses of the said article, this Court naturally proceeded to enquire whether the Sea Customs Authorities acted as a judicial tribunal in holding proceedings against the person. The scheme of the relevant pro. visions of the Act was then examined, and it was held that the said authorities are number a judicial tribunal with the result that the I adjudging increased rate of duty or penalty and companyfiscation under the provisions of the said act did number companystitute a judgment or order of a companyrt or judicial tribunal necessary for the purpose of supporting the plea of double jeopardy. In the result the companyclusion of this Court was that when the Customs Authorities companyfiscated the gold in question the proceedings taken did number amount to a prosecution of the party number did the order of companyfiscation companystitute a punishment as companytemplated by Art. 20 2 . This decision has been affirmed by this Court in the case of A. Venkataraman v. The Union of India 1 . In that case an enquiry bad been made against the appellant Venkataraman under the Public Servants Inquiries Act, 1850 Act XXXVII of 1850 . On receiving the report of the enquiry companymissioner opportunity was given to the appellant under Art. 311 2 to show cause, and, ultimately after companysultation with the Union Public Service Commission the appellant was dismissed by an order passed by the President. The order of dismissal was passed on September 17, 1953. Soon thereafter on February 23, 1954, the police submitted a charge-sheet against him charging him with having companymitted offenses under ss. 161/165 of the Indian Penal Code and s. 5 2 of the Prevention of Corruption Act. The validity of the subsequent prosecution was challenged by the appellant on the ground that it companytravened the companystitutional guarantee enshrined in Art. 20 2 . The appellants plea was, however, rejected on the ground that the proceedings taken against him before the companymissioner under the Inquiries Act did number amount to a prosecution. The relevant provisions of the said act were examined, and it was held that in an inquiry under the said Act there is neither any question of investigating an offence in the sense of an act or omission punishable by any law for the time being in force number is there 1 1964 S.C.R. 1150. any question of imposing punishment prescribed by the law which makes that act or omission an offence. Mukherjea, J., as he then was, who delivered the judgment of the Court, has referred to the earlier decision in the case of Maqbool Hussain 1 , and has observed that the effect of the said decision was that the proceedings in companynection with the prosecution and punishment of a person must be in the nature of a criminal proceeding before a companyrt of law or a judicial tribunal, and number before a tribunal which entertains a departmental or an administrative enquiry even though set up by a statute but which is number required by law to try a matter judicially and on legal evidence . Thus these two decisions can be said to have companysidered incidentally the general scope of Art. 20 though both of them were companycerned directly with the companystruction and application of Art. 20 2 alone. Article 20 3 was companysidered by the Full Court in M. P. Sharma v. Satish Chandra, District Magistrate, Delhi 2 . The question about the scope and effect of Art. 20 3 was raised in that case by a petition filed under Art. 32 of the Constitution. It appears that the Registrar of the Joint Stock Companies, Delhi State, lodged information with the Inspector-General, Delhi Special Police Establishment, against the petitioners alleging that they had companymitted several offenses punishable under the Indian Penal Code. The lodging of this information was preceded by an investigation into the affairs of the petitioners companypany which had been ordered by the Central Government under a. 138 of the old Act, and the report received at the end of the said investigation indicated that a well-planned and organised attempt had been made by the petitioners to misappropriate and embezzle the funds of the companypany by adopting several ingenious methods. On receipt of the said First Information Report the District Magistrate ordered investigation into the offenses and issued warrants for simultaneous searches at as many as thirty four places. By their petitions the petitioners companytended that the search warrants 1 1953 S.C.R. 730. 2 1954 S.C.R. 1077. were illegal and they prayed that the same may be quashed as being in violation of Art, 20 3 . The plea thus raised by the petitioners was ultimately rejected on the ground that the impugned. searches did number violate the said companystitutional guarantee. Jagannadha das, J., who spoke for the Court, observed that since article 20 3 provides for a companystitutional guarantee against testimonial companypulsion its words should be liberally companystrued, and that there was numberreason to companyfine the companytent of the said guarantee to its barely literal import . He, therefore, held that the phrase to be a witness means numberhing more than to furnish evidence, and such evidence can be furnished through the lips or by production of a thing or of a document or in other modes. He also pointed out that the phrase was to be a witness and number to appear as a witness and so the protection afforded was number merely in respect of testimonial companypulsion in the companyrt room but may well extend to companypel testimony previously obtained from him. The companyclusion of the Court on this part of the companystruction was thus stated. The companystitutional guarantee is available to a person against whom a formal accusation relating to the companymission of an offence has been leveled which in the numbermal companyrse may result in prosecution whether it is available to other persons in other situations does number call for a decision in this case . Since the First Information Report bad been recorded against the petitioners in that case it followed that the first test that a formal accusation relating to the companymission of an offence must have been leveled was satisfied. The question which was then companysidered was whether there was any basis in the Indian Law for the assumption that a search or seizure of a thing or document is in itself to be, treated as companypelled production of the same and it was held that there would be numberjustification for treating the said search or seizure as companypelled production that is why the challenge to the validity of the search warrants issued against the petitioners was repelled. The effect of this decision thus appears to be that one of the. essential companyditions for invoking the companystitutional guarantee enshrined in Art. 20 3 is that a formal accusation relating to the companymission of an offence, which would numbermally lead to his prosecution,, must have been leveled against the party who is being companypelled to give evidence against himself and this companyclusion, in our opinion is fully companysistent with the two other decisions of this Court to which we have already referred. There are two other subsequent decisions of this Court to which reference may be made. In Thomas Dana v. State of Punjab 1 , according to the majority decision prosecution in Art. 20 2 means a proceeding either by way of indictment or information in a criminal companyrt in order to put an offender upon his trial. It would be numbericed that this companyclusion is wholly companysistent with the view taken by this Court in the case of Maqbool Hussain 2 and S. A. Venkataraman 3 . In Mohammed Dastaqir v. The State of Madras 4 this Court had to companysider Art. 20 3 . The appellant in that case had gone to the bungalow of the Deputy Superintendent of Police to offer him a bribe which was companyered in a closed envelope with a request that he might drop the action registered against him. The police officer threw the envelope at the appellant who took it up. While the appellant was still in the bungalow he was asked by the police officer to produce the envelope and he took out from his pocket some currency numberes and placed them on the table without the envelope. The numberes were then seized by the police officer and a rubber stamp of his office was placed on them. On these facts it was urged that in relying upon the evidence of companypelled production of numberes the prosecution had , violated the provisions of Art. 20 3 . In support of this companytention the general observations made by this Court in the case of M. P., Sharma 5 , were strongly pressed into service. This Court, however, rejected the appellants arguments and held that the prosecution did number suffer from any infirmity. On the facts it was found that though the offence had in fact been already companymitted 1 1959 Supp. 1 S.C.R. 274. 2 1953 S.C.R. 730. 3 1954 S.C.R. 1150. A.I.R. 1960 S.C. 756. 5 1954 S.C.R. 1077. by the appellant, he had in fact number been accused of it at the stage when the currency numberes were produced by him it was also held that it companyld number be said that he was companypelled to produce the said currency numberes, because he might easily have refused to produce them, ,and so there was numberoccasion for him to invoke the companystitutional protection against self-incrimination. What then is the result of these decisions ? They show that in determining the companyplexion and reach of its respective sub-clauses the general scheme of Art. 20 as a whole must be companysidered, and the effect of the inter-action of the relevant words used in them must be properly appreciated. Thus companysidered the companystitutional right guaranteed by Art. 20 2 against double jeopardy can be successfully invoked only where the- prior proceedings on which reliance is plac- ed must be of a criminal nature instituted or companytinued before a companyrt of law or a judicial tribunal in accordance with the procedure prescribed in the statute which creates the offence and regulates the procedure. It would be numbericed that the character of the said proceedings as well as the character of the forum before which the proceedings are initiated or companyducted are treated as decisive in the matter. Similarly, for invoking the companystitutional right against testimonial companypulsion guaranteed under Art. 20 3 it must appear that a formal accusation has been made against the party pleading the guarantee and that it relates to the companymission of an offence which in the numbermal companyrse may result in prosecution. Here again the nature of the accusation and its probable sequel or companysequence are regarded as important. Thus we go back to the question which we have already posed was the appellant accused of any offence at the time when the impugned numberices were served on him ? In answering this question in the light of the tests to which we have just referred it will be necessary to determine the scope and nature of the enquiry which the inspector undertakes under s. 240 for, unless it is shown that an accusation of a crime can be made in such an enquiry, the appellants plea under Art. 20 3 cannot succeed. Section 240 shows that the enquiry which the inspector undertakes is in substance an enquiry into the affairs of the companypany companycerned. Certain documents are required to be furnished by a companypany to the Registrar under the provisions of the new Act. If, on examining the said documents, the Registrar thinks it necessary to call for information or explanation he is empowered to take the necessary action under s. 234 1 . Similarly, under s. 234 7 if it is represented to the Registrar on materials placed before him by any companytributory or creditor or any other person interested that the business of the companypany is carried on in the manner specified in the-said sub-section the Registrar proceeds to make the enquiry. Thus the scope of the enquiry company- templated by s. 234 is clear wherever the Registrar has reason to believe that the affairs of the companypany are number properly carried on he is empowered to make an enquiry into the said affairs. Similarly under s. 235 inspectors are appointed to investigate the affairs of any companypany and report thereon. The investigation carried on by the inspectors is numbermore than the work of a fact-finding companymission. It is true that as a result of the investigation made by the inspectors it may be discovered that the affairs of the companypany disclose number only irregularities and malpractice but also companymission of offenses, and in such a case the report would specify the relevant. particulars prescribed by the circular in that behalf If, after receiving the report, the Central Government is satisfied hat any person is guilty of an offence for which he is criminally liable, it may, after taking legal advice, institute criminal proceedings against the offending person under s. 242 1 but the fact that a prosecution may ultimately be launched against the alleged offender will number retrospectively change the companyplexion or character of the proceedings held by the inspector when he makes the investigation. Have irregularities been companymitted in managing the affairs of the companypany if yes, what is the nature of the irregularities ? Do they amount to the- companymission of an offence punishable under the criminal law ? If they do who is liable for the said offence? These and such other questions fall within the purview of the ins- pectors investigation. The scheme of the relevant sections is that the investigation begins broadly with a view to examine the management of the affairs of the companypany to find out whether any irregularities have been companymitted or number. In such a case there is numberaccusation, either formal or otherwise, against any specified individual there may be a general allegation that the affairs are irregularly, improperly or illegally managed but who would be responsible for the affairs which are reported to be irregularly managed is a matter which would be determined at the end of the enquiry. At the companymencement of the enquiry and indeed throughout its proceedings there is numberaccused person, numberaccuser and numberaccusation against anyone that he has companymitted an offence. In our opinion a general enquiry and investigation into the affairs of the companypany thus companytemplated cannot be regarded as an investigation which starts with an accusation companytemplated in Art. 20 3 of the Constitution. In this companynection it is necessary to remember that the relevant sections of the Act appear in Part VI which generally deals with management and administration of the companypanies. It is well-known, that the provisions of the Act are modeled on the companyresponding provisions of the English Companies Act. It would, therefore, be useful to refer to the observations made by the House of Lords in describing the character of the enquiry held under the companyresponding provisions of the English Act in the case of Hearts of Oak Assurance Co. v. Attorney General 1 . In that case Lord Thankerton said it appears to me to be clear that the object of the examination is merely to recover information as to the companypanys affairs and that it is in numbersense a judicial proceeding for the purpose of trial of an offence it is enough to point out that there are numberparties before the inspector, that he alone companyducts the enquiry, and that the power to examine on oath is companyfined to the officers, members, agents and servants of the companypany . We ought, however, to add that the last 1 1932 A.C. 392. observation is numberlonger true about the inspectors powers under s. 240 of the new Act. In the same case Lord Macmillan observed that the object of the enquiry manifestly is that the Commissioner may either by himself directly or through the medium of a delegate obtain the information necessary to enable him, to decide what action, if any, he should take. The cardinal words of the section are those which empower the Commissioner or his inspector to examine into and report on the affairs of the society . Thus it is clear that the examination of, or investigation into, the affairs of the companypany cannot be regarded as a proceeding started against any individual after framing an accusation against him. Besides it is quite likely that in some cases investigation may disclose that there are numberirregularities, or if there are they do number amount to the companymission of any offence in such cases there would obviously be numberoccasion for the Central Government to institute criminal proceedings under s. 242 1 . Therefore, in our opinion, the High Court was right in holding that when the inspector issued the impugned numberices against the appellant the appellant cannot be said to have been accused of any offence and so the first essential companydition for the application of Art. 20 3 is absent. We ought to add that in the present case the same companyclusion would follow even if the clause accused of any offence is interpreted more liberally than was done in the case of M. P. Sharma 1 , because even if the expression accused of any offence is interpreted in a very broad and liberal way it is clear that at the relevant stage the appellant has number been, and in law cannot be, accused of any offence. Thus the tests about the character of the proceedings and the forum where the proceedings are initiated or intended to be taken are also number satisfied but, as we have already indicated, such a broad and liberal interpretation of the relevant expression does number appear to be companysistent with the tenor and effect of the previous decisions of this Court. It is true that in his report the Registrar has made 1 1954 S.C.R. 1077. certain allegations on which Mr. Sastri has relied. He companytends that the statements in the report do amount to allegations of companymission of offenses by the appellant. What the Registrar has stated in his report in this particular case cannot be relevant or material in deciding the vires of the impugned section. The vires of the section can be determined only by examining the relevant scheme of the Act, and we have already Been that such an examination does number assist the appellants companytention that Art. 20 3 is companytravened. Besides, what the Registrar has stated in his report can hardly amount to an accusation against the appellant it is a report submitted by him to the Central Government, and it is only intended to enable the Central Government to decide whether it should appoint an inspector. It is number as if the investigation before the inspector begins on the basis that the Registrar is the companyplainant who has made an accusation against the appellant, or that the function of the investigation is to find out whether the said accusation is proved or number. As we have already seen an enquiry under s. 240 may require a large number of persons to give evidence or produce documents but it cannot be said that any accusation is made against any of the said persons. In fact three persons have been served with similar numberices in the present enquiry which shows that the inspector desires to obtain relevant evidence from them as from the appellant. How can it be said that an accusation has been made against the said three persons, and that incidentally helps to bring out the real character and scope of the enquiry. Therefore we do number think that the state- ments made in the Registrars report, on which Mr. Sastri relies can really assist us in deciding the question of the vires of s. 240. It is also significant that the appellant has number challenged the validity of the impugned numberices on any ground relatable to, or based on, the said report. The challenge is founded on. the broad and general ground that S. 240 offends against Art. 20 3 . We may incidentally add that it was in support of his argument based on the Registrars report that Mr. Sastri sought to rely on the decision of the Calcutta High Court in Collector of Customs v. Calcutta Motor and Cycle Co. 1 . In that case certain numberices had been issued under s. 171A of the Sea Customs Act to certain persons to appear before the customs officials and to produce certain documents. The High Court took the view that it appeared from the accusations made in the search warrants at the instance of the customs authorities and those made in one of the numberices by the customs authorities themselves, that the accusations of criminal offenses companyld number be excluded and so it was held that the requirements of Art. 20 3 were satisfied and the protection under the said article was available to the persons companycerned. In our opinion this decision does number assist the appellant. It proceeded on the finding that accusations of criminal offenses companyld be held in substance to have been made against the persons companycerned, and it dealt with the other points of law on that assumption. That being so, we think it unnecessary to discuss or companysider the said decision. Our companyclusion, therefore, is that s. 240 does number offend against Art. 20 3 of the Constitution. That still leaves the challenge to the vires of the said section under Art. 14 of the Constitution, though we ought to add that Mr. Sastri did number seriously press his case under Art. 14, and we think rightly. The argument under Art. 14 proceeds on familiar lines. It is urged that the ordinary protection afforded to witnesses under s. 132 of the Indian Evidence Act as well as the protection afforded to accused persons under s. 161 1 and 2 of the Criminal Procedure Code, have been denied to the appellant in the investigation which respondent 1 is carrying on in regard to the affairs of his companypany, and that violates equality before the law. The scope and effect of Art. 14 have been companysidered by this Court frequently. It has been repeatedly held that what Art. 14,prohibits is class legislation it does number, however,, forbid reasonable classification for the purpose of legislation. If the classification on which legislation is based is founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and if the differentia has a rational relation to the object sought to be achieved, then the classification does number offend Art. 14 Vide Shri Ram Krishna Dalmia v. Justice Tendolkar 1 . Now in the light of this test how can it be said that the classification made by ss. 239 and 240 offends Art. 14 of the Constitution ? A companypany is a creature of the statute. There can be numberdoubt that one of the objects of the Companies Act is to throw open to all citizens the privilege of carrying on business with limited liability. Inevitably the business of the companypany has to be carried on through human agency, and that sometimes gives rise to irregularities and malpractice in the management of the affairs of the companypany. If persons in charge of the management of companypanies abuse their position and make personal profit at the companyt of the creditors, companytributories and others interested in the companypany, that raises a problem which is very much different from the problem of ordinary misappropriation or breach of trust. The interest of the companypany is the interest of several persons who companystitute the companypany, and thus persons in management of the affairs of such companypanies can be classed by themselves as distinct from other individual citizens. A citizen can and may protect his own interest, but where the financial interest of a large number of citizens is left in charge of persons who manage the affairs of the companypanies it would be legitimate to treat such companypanies and their managers as a class by themselves and to provide for necessary safeguards and checks against a possible abuse of power vesting in the managers.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 56 of 1959. Appeal by special leave. from the judgment and order dated- December 18, 1957, of the former Bombay High Court in Criminal Revision No. 1671 of 1957, arising out of the judgment and order dated June 7, 1957, of the Sessions Judge, Baroda, in Criminal Appeal No. 33 of 1957. B. Khanna and D. Gupta, for the appellant. C. Mathur, for the respondent. 1960. August 31. The Judgment of the Court was delivered by AYYANGAR J.-This appeal by special leave of this Court raises a very short point regarding the companystruction of s. 20 1 of the Prevention of Food Adulteration Act, 1954 37 of 1954 . The respondent owned a milk shop within the Municipal limits of the city of Baroda. The Food Inspector of the Municipality visited the shop on July 9, 1956 and purchased milk for analysis. This was sent to the Public Analyst and when his report was to the effect that the sample was adulterated, the Inspector applied to the Chief Officer, Borough Municipality, Baroda, for the latters companysent, for instituting criminal proceedings under the Prevention of Food Adulteration Act, 1954 referred to hereafter as the Act , against the respondent. A companysent in writing to the initiation of this prosecution was given by the Chief Officer and thereafter the companyplaint out of which this appeal arises was instituted charging the respondent with an offence under s. 16 read with s. 7 of the Act for selling adulterated food. The case was tried by the Special Judicial Magistrate, First Class, Baroda. Besides denying his guilt, the accused raised various technical objections, the principal of which was that the prosecution was incompetent because of number- companypliance with the terms of s. 20 1 of the Act. This provision, omitting the proviso to which it is unnecessary to refer, runs No prosecution for an offence under this Act shall be instituted except by, or with the written companysent of, the State Government or a local authority or a person authorised in this behalf by the State Government or a local authority. The Magistrate overruled these objections and holding the accused guilty of the offence charged sentenced him to pay a fine of Rs. 300/- and in default to rigorous imprisonment for three months. Dealing with the objection based on s. 20 1 of the Act with which alone we are companycerned, the learned Magistrate said In the present case Baroda Municipal Borough is the local authority and it has authorized the Chief Officer and the health officer of the Municipality to grant sanction to institute proceedings under this Act by its resolution No. 222 dated May 7,1956, the Chief Officer has given companysent in writing to lodge this companyn plaint against the present accused under the Act on October 13, 1956. The said companysent in writing is on record at Ex. 10/7 and the companyy of the Resolution of the Municipality empowering the Chief Officer and the health officer is also on record at Ex. 18/8. Thus in the present case there is a valid companysent in writing given by the Chief Officer who has been duly authorised in this behalf by the Baroda Municipal Borough, to institute proceeding against the present accused under the Act The Food Inspector can lodge the companyplaints under the Act if companysent in writing is given by a local authority or a person empowered in this behalf by the local authority. The food inspector had in the present case submitted all the papers to the Chief Officer who has been invested with the powers by the Municipality to give companysent in order to seek his necessary companysent in writing before lodging the companyplaint against the present accused. And after going through the said papers the Chief Officer had duly given companysent to him to lodge this companyplaint. It is true that the companysent does number bear the name of the food inspector but it impliedly follows that the companysent was given by the Chief Officer to the person, viz., the companyplainant food inspector who sought the permission and numbere else. Against his companyviction and sentence the respondent filed an appeal to the Court of the Sessions Judge at Baroda. The Appellate Court set aside the order of companyviction and sentence on the ground that the Food Inspector was number companypetent to institute the prosecution under s. 20 1 of the Act. Relying on the decision of a single Judge of the Madras High Court in Cannanore Milk Supply Co-operative Society, In re 1 , the learned Sessions Judge held that under the terms of the section, the only authority with whose written companysent a prosecution companyld be instituted was the State Government and that neither the local autho- rity number the person authorized in that behalf by the 1 1956 2 M.L.J. 465. State Government or the local authority were companypetent to grant written companysents for the initiation of prosecutions. He, therefore, set aside the companyviction and sentence and discharged the respondent. The matter was thereafter brought up before the High Court of Bombay by the State by an appeal later companyverted into a Criminal Revision petition. The learned Judges of the High Court affirmed the order passed by the learned Sessions Judge. They disagreed with the Sessions Judge in his interpretation of s. 20 1 that a prosecution companyld number be instituted with the written companysent of any authority other than the State Government. They, however, held that the written companysent should name the person who companyld institute the companyplaint and that as the companysent in the present case bad number named the Food Inspector as the person authorized to file the companyplaint, the prosecution was number legally initiated. It is from this decision of the High Court that the State of Bombay, having obtained special leave of this Court, has brought this matter up before us. There is here numberdispute that the local authority the Baroda Municipality, had authorized the Chief Officer of the Municipality to grant companysents under s. 20 1 of the Act for the filing of companyplaints in regard to offenses under the Act. There is numberdispute either that the Chief Officer granted on October 13, 1956, his written companysent to the filing of this companyplaint against the respondent. The companysent is in the following terms Under authority vested in the Chief Officer of the Baroda Borough Municipality sanction is hereby given for instituting prosecution against the following milk vendors for companytravening the provisions of Government of Indias Prevention of Food Adulteration Act, 1954. The name of the respondent, his address and the date of the offence are then set out and it is followed by a paragraph which runs This sanction is accorded after going through Milk Analysis Report and other pertinent documents and the nature of offence companymitted by each of the above persons as required by s. 20 of the Prevention of Food Adulteration Act, 1954. We may, at the outset, point out that we entirely agree with the learned Judges of the High Court in their view that on the terms of a. 20 1 a prosecution companyld be instituted with the written companysent number merely of the State Government but of a focal authority or a person authorised in this behalf by the State Government or a local authority . In our opinion, on the language of the sub-section numberother companystruction appears possible. The learned Judges of the High Court said The companystruction which has been put by the learned Sessions Judge obviously ignores the two companymas, which appear in the section before and after the clause or with the written companysent of . One of the companymas precedes, and the other follows the clause or with the written companysent of The plain grammatical meaning of this section is that the written companysent may be of the State Government, or a local authority, or a person authorised in that behalf by the State Government or local authority. In our view, under this section, the prosecution can be instituted 1 by the State Government, 2 by- a local authority, 3 by a person authorised in that behalf by the State Government, or 4 by a person similarly authorised by a local authority. Further, a prosecution can also be instituted with the companysent of any of these four authorities. Even apart from-the two companymas, the companystruction which found favour with the learned Judge of the Madras High Court in Cannanore Milk Supply Cooperative Society, In re 1 is number possible without the sub-section being rewritten in these terms shall be instituted by or with the written companysent of the State Government or by a local authority or a person authorised in this behalf by the State Government or a local authority. Without the insertion of the word by before the words a local authority , it would number be possible to exclude the written companysents of local authorities etc. from the companytent of the sub-section. 1 1956 2 M.L.J. 465. As already stated, the reasoning, however, by which the learned Judges of the High Court held the prosecution to be incompetent was that the written companysent did number in terms, name the person in whose favour the sanction or written companysent was given. The learned Judges stated A written sanction of the nature which we have in the present case, or a written companysent, without mentioning the person to whom such companysent or sanction is given, would, in our view, number be a sufficient companypliance with the terms of the sanction The present written companysent does number mention the name of the Food Inspector as the person companypetent to institute the prosecution, and therefore we must hold that the institution of the prosecution, was without jurisdiction. The learned Counsel for the appellant-State challenged the companyrectness of this companystruction. He referred us to the analogy of the decisions rendered on s. 197 of the Criminal Procedure Code where it has been held that the sanction referred to need number name the person who companyld institute the prosecution. We companysider it unnecessary to canvass the relative scope of the language of s. 197 of the Criminal Procedure Code and of s. 20 1 of the Prevention of Food Adulteration Act. We prefer to rest our decision on the terms of s. 20 1 itself. To start with, the Statute does number in terms prescribe that the companyplainant shall be named in the written companysent . The only question, therefore, is whether such. a limitation or companydition companyld be gathered as a necessary intendment of the provision. In the first place, the reason of the rule companyld number suggest or imply such a companydition. The rule has undoubtedly been designed to prevent the launching of frivolous or harassing prosecutions against traders. It therefore provides that the companyplaint should be filed, either by a named or specified authority or with the written companysent of such authority. To read by implication that before granting a written companysent, the authority companypetent to initiate a prosecution should apply its mind to the facts of the case and satisfy itself that a prima facie case exists for the alleged offender being put up before a Court appears reasonable, but the further implication that the companyplainant must be named in the written companysent does number, in our opinion, follow. In the present case, the Analysts Report was before the Chief Officer of the Municipality and it was after companysidering that report and the companynected documents that the written companysent or sanction was given. In the second place, the subsection itself companytains an indication that the written companysent is for the launching of a specified prosecution, and number one in favour of a companyplainant authorising him to file the companyplaint. Omitting for the moment the State Government and the local authority which are specified in the provision as companypetent by themselves to initiate prosecutions, persons authorised by these two authorities are further included. The expression person authorised in this behalf obviously refers to a named person who is so authorized. In the case of these four categories, the authority or person filing the companyplaint has itself or himself to companysider the reasonableness and propriety of the prosecution and be satisfied that the prosecution is number frivolous and is called for. Turning next to the other class, the relevant words are numberprosecution shall be instituted except with the written companysent of Here the emphasis is on the companysent to the filing of the prosecution, number to the person filing it. The preliminary examination of the facts to ascertain the desirability and propriety of the prosecution is in this last case, the responsibility of the person or authority giving the written companysent-not of the person who figures as the companyplainant. The two classes are distinct and the employment of different phraseology to designate the two types of devolution of authority, companystitutes an indication that in the second class of cases-where prosecutions are filed on the basis of written companysents granted by the companypetent person or authority, the specification of the name of the companyplainant is number a statutory requirement-the companysent being to a specified prosecution. We, therefore,, companysider that the prosecution in the present case was instituted on a companyplaint which fulfilled the requirements of s. 20 1 of the Act. One part of the reasoning of the learned Judges of the High Court was, that in the absence of persons being named in the written companysent, a companyplaint might be lodged by persons over whom the local authority would have numbercontrol and that for this reason it was necessary to adopt the companystruction which they did of s. 20 1 , namely, that the written companysent should name the person authorized to file the companyplaint. In our opinion, this apprehension is number justified, for the written companysent has to be filed by the companyplainant in order to enable the companyplaint to be entertained, and it is number as if the written companysent will be available to all and sundry to be filed before the Magistrate. Besides, even on the reasoning of the learned Judges of the High Court there is numberrestriction as to the person who might be named as authorised to file the companyplaint. Normally,, of companyrse, the person named would be an officer of the Municipality, but theoretically there is a possibility that the person named might number be a Municipal servant, and if the written companysent is in favour of such a person, the Municipal authority would have numberadministrative companytrol over him. The companyplication referred to by the learned Judges would still be there, even though a person be named in the written companysent given by the local authority. We, therefore,, companysider that this is number a circumstance which of necessity leads to the companystruction that the companyplainant ought to be named in the written companysent under s. 20 1 . The respondent was number represented before this Court, and in view of the importance of the matter, Mr. G. C. Mathur was requested by the Court to appear as amicus-curiae and we express our thanks to him for the assistance he rendered us.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 231 of 1956. Appeal from the judgment and order dated September 11, 1953, of the Rajasthan High Court Jaipur Bench at Jaipur in Writ Application No. 141 of 1952. S. K. Sastri and T. M. Sen, for the appellants. The respondent did number appear. 1960. August 18. The Judgment of the Court was delivered by RAJAGOPALA AYYANGAR, J.-This appeal raises for companysideration the companystitutional validity of one paragraph of a numberification issued by the State of Rajasthan under s. 15 of the Police Act, 1861 V of 1861 , under which the Harijan and Muslim inhabitants of the villages, in which an additional police force was stationed, were exempted from the obligation to bear any portion of the companyt of that force. It is stated that the inhabitants of certain villages in the district of Jhunjhunu in the State of Rajasthan, harboured dacoits and receivers of stolen property, and were besides creating trouble between landlords and tenants as a result of which there were serious riots in the locality in the companyrse of which some persons lost their lives. The State Government therefore took action under s. 15 of the Police Act. This Section provides Quartering of additional police in disturbed or dangerous districts- It shall be lawful for the State Government, by proclamation to be numberified in the official Gazette, and in such other manner as the State Government shall direct, to declare that any area subject to its authority has been found to be in a disturbed or dangerous state, or that, from the companyduct of the inhabitants of such area, or of any class or section of them, it is expedient to increase the number of police. It shall thereupon be lawful for the Inspector-General of Police, or other officer authorised by the State Government in this behalf, with the sanction of the State Government, to employ any police-force in addition to the ordinary fixed companyplement to be quartered in the areas specified in such proclamation as aforesaid. Subject to the provisions of sub-section 5 of this section, the companyt of such additional police-force shall be borne by the inhabitants of such area described in the proclamation. The Magistrate of the district, after such enquiry as he may deem necessary, shall apportion such companyt among the inhabitants who are, as aforesaid, liable to bear the same and who shall number have been exempted under the next succeeding sub-section. Such apportionment shall be made according to the Magistrates judgment of the respective means within such area of such inhabitants. It shall be lawful for the State Government by order to exempt any persons or class or section of such inhabitants from liability to bear any portion of such companyt. Sub-section 6 is omitted as number relevant. The numberification by which these provisions were invoked and which is impugned in these proceedings was in these terms- Whereas the Rajpramukh is satisfied that the area shown in the schedule annexed hereto has been found to be in a disturbed and dangerous state Now, therefore, in the exercise of the authority vested in him under Section 15 1 of the Police Act V of 1861 , the Rajpramukh is pleased to declare that the 24 villages included in the said schedule shall be deemed to be disturbed area for a period of six months from the date of this numberification. Under sub-section 2 of the said section 15 of the Police Act V of 1861 , the Rajpramukh is pleased to authorise the Inspector-General of Police to employ, at the companyt of the inhabitants of the said area any Police force in addition to the ordinary fixed companyplement quartered therein. Under sub-section 5 of section 15 of the said Act the Rajpramukh is further pleased to exempt the Harijan and Muslim inhabitants of these villages from liability to bear any portion of the companyt on account of the posting of the additional Police force. Then followed the names of the 24 villages. The respondent-Thakur Pratap Singh being an inhabitant of Baragaon-one of these 24 villages, moved the High Court of Rajasthan for the issue of a writ or direction under Act. 226 of the Constitution impugning the validity of s. 15 of the Police Act and in particular of sub-s. 5 thereof and of the numberification and praying for appropriate reliefs. The High Court repelled the wider companytentions urged regarding the invalidity of s. 15 of the Police Act in general as also of the powers companyferred on the State Government to order the exemption of any person or classes or sections of such inhabitants from liability to bear the companyt of the additional police force. But the learned Judges hold that Para 4 of the numberification which exempted Harijan and Muslim inhabitants of the villages from the levy, was violative of the guarantee in Art. 15 1 of the Constitution against discrimination on the ground of caste or religion etc. which reads. The State shall number discriminate against any citizen on grounds only of religion, race, caste, sex, place of birth or any of them. and struck it down as unconstitutional. The State of Rajasthan who felt aggrieved by this order applied to the High Court for a certificate under Art. 132 1 to enable it to file an appeal to this companyrt and this having been granted, the appeal is number before us. Learned Counsel for the State made a strenuous effort to show that the exemption of the Harijan Muslim inhabitants of the villages, was, in the impugned numberification, number based only on the ground of caste or religion or the other criteria set out in Art. 15 1 , but on the ground that persons belonging to these two companymunities were found by the State number to have been guilty of the companyduct which necessitated the stationing of the additional police force. It was the same argument as was addressed to the High Court and was rejected by the learned Judges who observed Now this is a very strange argument that only persons of a certain companymunity or caste were law-abiding citizens, while the members of other companymunities were number. Disturbing elements may be found among members of any companymunity or religion just as much as there may be saner elements among members of that companymunity or religion. The view here expressed by the learned Judges is, in our opinion, companyrect. Even if it be that the bulk of the members of the companymunities exempted or even all of them were law-abiding, it was number companytended on behalf of the State that there were numberpeaceful and law-abiding persons in these 24 villages belonging to the other companymunities on whom the punitive levy had been directed to be made. In para 5 f of the petition filed before the High Court the respondent had averred That the aforesaid Notification is ultra vires of the Constitution of India as it discriminates amongst the Citizens of a village on the basis of religion, race or caste, in as much as it makes a distinction between persons professing the Mohammadan religion and others and also between persons who are Muslims and Harijans by caste and the rest. It, therefore, companytravenes the provisions of Article 15 of the Constitution of India. The answer to this by the State was in these terms The Harijan and Muslim inhabitants of these villages have been exempted from liability to bear any portion of the companyt of the additional force number because of their religion, race or caste but because they were found to be peace-loving and law-abiding citizens, in the 24 villages additional force has been posted. It would be seen that it is number the case of the State, even at the stage of the petition before the High Court that there were numberpersons belonging to the other companymunities who were peace-loving and law-abiding, though it might very well be, that according to the State, a great majority of these other companymunities were inclined the other way. If so, it follows that the numberification has discriminated against the law-abiding members of the other companymunities and in favour of the Muslim and Harijan companymunities, assuming that every one of them was peace-loving and law-abiding on the basis only of caste or religion . If there were other grounds they ought to have been stated in the numberification. It is plain that the numberification is directly companytrary to the terms of Art. 15 1 and that para 4 of the numberification has incurred companydemnation as violating a specific companystitu- tional prohibition. In our opinion, the learned Judges of the High Court were clearly right in striking down this paragraph of the numberification. The appeal fails and is dismissed.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 216 of 1954. Appeal from the judgment and decree dated September 26,1946, of the former Chief Court of Avadh at Lucknow, in First Appeal No. 7 of 1940. Naunit Lal, for the appellant. N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra, for respondent No. 1. 1960. August 5. The Judgment of the Court was delivered by DAS GUPTA J.-This appeal raises the question of interpretation of s. 15 of the United Provinces Encumbered Estates Act, 1934. On March 1, 1924, Sardar Nihal Singh, the predecessor of the appellant before us, borrowed a sum of rupees one lakh from Raja Durga Narain Singh, predecessor of the respondents, on mortgage of a house in Butlergunj, Lucknow and also the entire Zamindari interest in a village Parsera. Interest was 8 per cent. per annum companypound with six monthly rests. In 1932 Raja Durga Narain Singh brought a suit for recovery of Rs. 1,83,791-5-9 on account of principal and interest due on the mortgage, by sale of the mortgaged property. In this suit the Subordinate Judge, Lucknow, made a preliminary decree declaring the amount due to the plaintiff on the mortgage calculated up to March 29, 1935, to be Rs. 1,83,791-5-9 up to the date of the suit, Rs. 49,280-2-6 as the amount due on account of interest thereupon from March 19, 1932, the date of the suit to March 29, 1935, the date fixed for payment. A sum of Rs. 4,314-2- 9 was awarded as the companyt of the suit. The defendant was ordered to pay this total sum of Rs. 2,37,385-11-0 before the 29th day of March, 1935, with future interest at 6 per cent. per annum simple on the principal sum of rupees one lakh. The amount number having been paid on that date, the Court on an application made by the mortgagee-decree. holder made a final decree on May 9, 1935, directing sale of the- property for recovery of the sum of Rs. 2,37,503-5-6 with future interest as in the preliminary decree, this sum being the total of Rs. 2,37,305-11-0 of the preliminary decree, Rs. 116-10-1 the interest from March 30, 1935, and rupee one the companyt of the final decree . An application for revision under s. 115 of the Code of Civil Procedure in companynection with this decree was rejected by the Chief Court of Oudh on April 20,1937. Before this, on October 26, 1936, an application had been made by Sardar Nihal Singh under s. 4 of the U. P. Encumbered Estates Act, requesting the provisions of the Act to be applied to him. After this application came before the Special Judge in accordance with the provisions of s. 6, the mortgagee- decreeholder Raja Durga Narain Singh filed a written state- ment of his claim on September 30,1937, and stated that the amount due to him on the basis of his decree was Rs. 2,51,904-8-6 including Rs. 14,300 as interest subsequent to the final decree till September 30, 1937, and a sum of Rs. 51-3-0 the decree for companyts in his favour by the Oudh Chief Court when rejecting the mortgagors application for revision. He prayed that a decree for Rs. 2,51,904-8-6 be passed in his favour against the applicant Sardar Nihal Singh and his property. The applicant companytested this claim pleading that the principal amount borrowed from the claimant being rupees one lakh the claimant was number entitled to recover any sum as interest thereupon in excess of the principal amount under s. 14 of the Encumbered Estates Act. This plea was rejected by the Special Judge who held that the claimant was entitled to Rs. 2,37,503-5-6 for which the final decree was passed, and also Rs. 51-3-0 as companyts in the matter of revision application and further to 6 per cent. per annum interest on rupees one lakh from May 29, 1935, the date of the final decree till the date of the application under the Encumbered Estates Act, i.e., October 26, 1936. Accordingly he gave the claimant a simple money decree for Rs. 2,46,338-8-6 with proportionate companyts and future interest at the rate of 4 per cent. per annum simple from the date of application till realisation. On appeal, the Cheief Court of Oudh rejected the appellants companytention that the Special Judge was bound by s. 14 of the Act to limit the decree to a sum of rupees two lakhs only and held that in so far as the preliminary decree found Rs. 1,83,791-5-9 as the amount due on the mortgage on March 29, 1932, it was number inconsistent with s. 14 of the Encumbered Estates Act, and so the Special Judge was bound to accept this finding under s. 15. It held however that in so far as this decree allowed interest pendente lite on the above amount from March 19, 1932, to March 29, 1935, at 8 per annum, it was inconsistent with sub-s. 7 of s. 14. The Chief Court accordingly held that this interest pendente lite must be reduced to 4 1/4 simple. After saying that a sum of Rs. 4,314-2-9 would be added on account of companyts, rupee one should be added on account of the companyts of the final decree and Rs. 51-3-0 as companyts of a revision application, the Court held that the principal amount of Rs. 1,00,000 shall carry interest from March 29, 1935, till the date of application under s. 4 of the Encumbered Estates Act, viz., October 26, 1936, and that the aggregate of these figures shall carry interest from October 27, 1936, till realisation at 4 per cent. per annum. It directed a decree for the sum thus found to be substi- tuted for that passed by the Subordinate Judge. An application for leave to appeal to the Privy Council against this decree was made on January 13, 1947. This application was disposed of on April 14, 1953. Holding that the valuation of the suit was well over Rs. 20,000 and the value of the appeal to the Supreme Court was Rs. 41,971-2-9 the Chief Court gave, in view of the modification made by it in the lower companyrts decree, a certificate that the case fulfils the requirements of s. 110 of the Code of Civil Procedure and that the applicant had a right to appeal to the Supreme Court. On the strength of that certificate the present appeal was filed When the appeal came up for hearing before a Bench of four judges of this Court Mr. Andley, on behalf of the respondents stated that in this case he was raising a companystitutional point. Thereupon the Court directed that the matter be posted before the Constitution Bench. That is how the appeal has companye up for hearing and final disposal before us. Mr. Andley stated before us that the Constitutional point which he had wanted to raise was whether the judgment of the Chief Court was one of affirmance under Art. 133 1 of the Constitution but that be did number wish to pursue this point. As Mr. Andley does number press his companystitutional point, numberfurther discussion of this is necessary. The real companytroversy in the case between the parties is, as already indicated, as regards the interpretation of s. 15 of the Encumbered Estates Act. The relevant portion of s. 15 is in these words- In determining the amount due on the basis of a loan which has been the subject of a decree the Special Judge shall accept the findings of the Court which passed the decree except in so far as they are inconsistent with the provisions of s. 14. A later amendment by which after the words and figures s. 14 , the words or s. 4 of the U. P. Zamindars Debts Reduction Act, 1952 were added is number relevant for our purpose. Section 14 runs as follows 14. 1 The Special Judge shall, by an order in writing, fix a date for enquiring into the claims made in pursuance of the numberice published in accordance with s. 9 and give numberice of such date to all the claimants and the person who made the application under s. 4. The Special Judge shall examine each claim and after hearing such parties as desired to be heard and companysidering the evidence, if any, produced by them shall determine the amount, if any, due from the landlord to the claimant on the date of the application under s. 4. All evidence recorded in any suit or proceeding which is stayed under sub-section 1 of section 7 may be taken by the Special Judge as evidence recorded before himself. In examining each claim the Special Judge shall have and exercise all the powers of the Court in which a suit for the recovery of the money due would lie and shall decide the questions in issue on the principles as those on which such companyrt would decide them, subject to the following provisions, namely- a the amount of interest held to be due on the date of the application shall number exceed that portion of the principal which may still be found to be due on the date of the application b the provisions of the United Provinces Agriculturists Relief Act, 1934, shall number be applicable to proceedings tinder this Act. For the purpose of ascertaining the principal under clause a of subsection 4 the Special Judge shall treat as principal any accumulated interest which has been companyverted into principal at any statement or settlement of account or by any companytract made in the companyrse of the transaction on or before December 31, 1916. Explanation-Interest which on or before December 31, 1916, became part of the principal under the express terms of original companytract shall, for the purposes of this section, be deemed to be principal. For the purposes of ascertaining the principal under clause a of sub-section 4 the Special Judge shall number treat as principal any accumulated interest which has been companyverted into principal at any statement or settlement of accounts or by any companytract made in the companyrse of the transactions after December 31, 1916. If the Special Judge finds that any amount is due to the claimant he shall pass a simple money decree for such amount, together with any companyts which he may allow in respect of proceedings in his companyrt and of proceedings in any civil companyrt stayed under the provisions of this Act, together with pendente lite and future interest at a rate number greater than the rate specified in section 27, and if he finds that numberamount is due he may pass a decree for companyts in favour of the landlord. Such decree shall be deemed to be a decree of a civil companyrt of companypetent jurisdiction but numberdecree against the landlord shall be executable within Uttar Pradesh except under the provisions of the Act Provided that numberpendente lite interest shall be allowed in the case of any debt where the creditor was in possession of any portion of the debtors property in lieu of interest payable on such debt. Obviously there can be numberquestion of any inconsistency in a finding of a companyrt which has passed a decree on the basis of a loan, with the provisions mentioned in sub-ss. 1, 2 3 of s. 14 number is there any question of any inconsistency with the provisions of sub-section 7 of s. 14, as those provisions apply only after the Special Judge has found the amount due to the claimant and the question of inconsistency of any finding in the decree with the provisions of s. 14 arise under s. 15 at the stage when the amount due is being determined. Sub-sections 4, 5 and 6 of s. 14 however require careful companysideration of the Special Judge, when examining a decree of a Civil Court, to find whether any of the findings of the companyrt is inconsistent with those provisions. If they are inconsistent with any of those provisions he has to reject the findings to the extent of such inconsistency. Thus, if for example, the provisions of the Usurious Loans Act. 1918, would be beneficial to the applicant landlord and have number been taken into companysideration by the companyrt which passed the decree the Special Judge will have to give effect to s. 14 4 b of the Act to modify the finding of the Court as regards the amount due, after applying the provisions of the Usurious Loans Act. On the other hand, if the provisions of the U. P. Agriculturists Relief Act, 1934, have been applied by the Civil Court, the finding as regards the amount due in so far as the same was based on those provisions cannot, in view of its inconsistency with sub-s. 4 c of s. 14 be accepted by the Civil Court and he will have to modify the same, leaving out the provisions of the U. P. Agriculturists Relief Act. Similarly if in arriving at the amount due, the Court which passed the decree has acted inconsistently with sub-ss. 5 and 6 of s. 14, the finding will have to be modified by the Special Judge by applying the provisions of sub-ss. 5 and 6. So, also if the finding of the Court which passed the decree is inconsistent with the provisions of sub-s. 4 a of s. 14 of the Encumbered Estates Act the finding will have to be rejected in so far as it is inconsistent. The question that has arisen in this case and may as well arise in other cases, is whether when in ascertaining the amount due on the basis of a loan, at the date of the suit, the Court which passed the decree did number allow interest exceeding the portion of the principal which was still due at the date of the suit, the finding as regards the amount due is inconsistent with s. 14 4 a because the companysequence of that finding as regards the amount due, together with interest allowed thereupon, is that on the date of the application the amount of interest due exceeds the portion of the principal remaining unpaid on the date of the application. On behalf of the decree-holder-claimant it is companytended that all that is necessary to save inconsistency with sub-s. 14 4 a is that the principle that the amount of interest shall number exceed the amount of the unpaid principal has been followed, in passing the decree and the fact that the result of the finding would be that on the date of the application u s. 4 of the Act the interest due would exceed the portion of the principal unpaid on such date is of numberconsequence. This companytention cannot in our opinion be accepted. The requirement of sub-s. 4 a of s. 14 is that the amount of interest held to be due on the date of the application shall number exceed that portion of the principal which may still be found to be due on the date of the application. The words on the date of the application cannot be ignored. There can be numberdoubt that these words on the date of the application were deliberately used in the sub- section for the purpose of benefiting the landlord applicant to this extent that whatever interest due on the companytract may amount to, it will be limited to the amount of the principal found still remaining due, on the date of the application. When the Legislature goes further and provides that if prior to the application a decree has been made on the basis of the loan the findings of the Court which passed the decree shall be accepted but forbids such acceptance if such finding is inconsistent with the provisions of s. 14, the intention clearly is that the fact that there has been a decree will number make any difference as regards the duty of the Special Judge to give the applicant the benefit of the provisions of s. 14. When the Court passed the decree, there was numberapplication under the Encumbered Estates Act, and so, there companyld be numberquestion of the Court then companyplying with the provisions of s. 14 4 a . Even so, when the Special Judge has to reject such of the findings as are inconsistent with s. 14, he must find out the effect of the several findings of the companyrt to ascertain whether there is such inconsistency. Where the companysequence of the finding of the companyrt which passed the decree is that the provisions of s. 14 4 a about the amount of interest due on the date of the application number exceeding the unpaid principal on that date are companytravened, the finding should be held to be inconsistent with these provisions. In saying that if in the decree the companyrt did number allow interest as on the date of the suit to exceed the principal then remaining due there is numberinconsistency with s. 14 4 a , the respondents companynsel is in effect asking us to read for the words in so far as they are inconsistent with the provisions of s. 14 the words in so far as they would have been inconsistent with the provisions of s. 14, if the date of the institution of the suit be deemed to be the date of the application under s. 4. For this we cannot find any justification. Not only would this defeat the beneficial purpose of the legislation under s. 14 4 a but this will also number be the natural meaning of the words in so far as they are inconsistent with the provisions of s. 14. The Chief Courts view that the Special Judge has merely to see whether the Civil Court that passed the decree companyld have passed the decree which it did pass if that companyrt had had to apply the provisions of s. 14, treating the date of the institution of the suit as the date of the application cannot therefore be accepted as companyrect. The same view had been taken by the Chief Court of Oudh in an earlier decision, of Pandit Ramsagar Prasad v. Mst. Shayama 1 . A Full Bench of the Allahabad High Court had in Rukun-uddin v. Lachhmi Narain 2 to companysider the question whether a finding in a decree made by a civil companyrt that the creditor is entitled to interest only at the rates specified in U. P. Agriculturists Relief Act was inconsistent with the A.I.R. 1939 Oudh 75. I.L.R. 1945 All. 307. provisions of s. 14 of the U. P. Encumbered Estates Act and was therefore number binding on the Special Judge hearing an application under the U. P. Encumbered. Estates Act. They held that such a finding must be held to be inconsistent with the provisions of s. 14 and companyld therefore number be binding on the Special Judge. There can be numberdoubt about the companyrectness of this view, for, as has been pointed out above s. 14 4 c provides that the provisions of the U. P. Agriculturists Relief Act shall number be applicable to proceedings under the Encumbered Estates Act. One of the learned judges Mr. Justice Verma referred with approval in the companyrse of his judgment to the view taken in Ramsagar Prasads Case 1 . For the reasons mentioned earlier how- ever we are of opinion that the view in Ramsagar Prasads Case 1 which has been followed by the Chief Court in the present case is wrong. Our companyclusion therefore is that the Special Judge is even where there has been a decree by a civil companyrt in respect of a loan bound to follow the provisions of s. 14 4 a of the Act so that the amount of interest which he can hold to be due on the date of the application must number exceed the portion of the principal found to be due on the date of the application. Accordingly in the present case the Special Judge should have held the amount of interest due oil the date of the application, i.e., October 26, 1936, to amount to rupees one lakh only, that being the principal which was still due on that date. Under the provisions of sub-s. 7 of s. 14 the Special Judge has to pass a simple money decree for such amount, together with any companyts which he may allow in respect of proceedings in his companyrt and of proceedings in any civil companyrt stayed under the provisions of this Act, together with pendente lite and future interest at a rate number greater than the rate specified in s. 27. It was in view of this provision that the special Judge and the High Court allowed interest at the rate of 4 per annum. The proper decree the Special Judge should have passed therefore was one for rupees two lakhs for the loan with permissible interest, plus Rs. 4,314-2-9, Rs. 51-3-0 and rupee A.I.R. 1939 Oudh 75. one on account of companyts, that is, for a total sum of Rs. 2,04,366-5-9 with proportionate companyts with interest pendente lite and future interest at the rate of 4 per cent per annum simple from the date of the application, i.e., October 26, 1936, till realisation. Accordingly, we allow the appeal, set aside the decree passed by the companyrts below and order that in place of the decree made by the Trial Court be substituted a money decree in the terms as mentioned above.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 83 of 1956. Appeal from the judgment and order dated June 30, 1954, of the Patna High Court in Appeal from Original Order No. 255 of 1952. Lal Narayan Sinha and S. P. Varma, for the appellant. V. Viswanatha Sastri, B. K. Saran, D. P. Singh and K. Mehta, for the respondent. 1960. September 20. The Judgment of the Court was delivered by AYYANGAR J.-The State of Bihar is the appellant in this appeal which companyes before us on a certificate granted by the High Court of Patna under Art. 133 1 c of the Constitution. The principal point of law raised for decision in the appeal is whether a State is liable to be proceeded against under 0. 39, r. 2 3 of the Code of Civil Procedure, when it wilfully disobeys-an order of temporary injunction passed of numberine against it. There is little companytroversy regarding the facts, but they have to be set out to appreciate some of the matters debated before US. The Bihar Land Reforms Act, 1950 which we shall refer to as the Act , which provided for the transference to the State of the interests of proprietors and ,tenure-holders in estates within the State, received the assent of the President on September 11, 1950, and was published in the Bihar Gazette on September 25, 1950. Thereupon Rani Sonabati Kumari, the respondent, who was the proprietress of the Ghatwali Estate of Handwa situated within the State, instituted against the State of Bihar, in the Court of the Subordinate Judge, Dumka, on the 20th November, 1950, Title Suit 40 of 1950, inter alia for a declaration that the Act was ultra vires of the Bihar Legislature and was therefore illegal, void, unconstitutional and inoperative and that the defendant had numberright to issue any numberification under the said Act or to take possession or otherwise meddle or interfere with the management of the estate in suit and for a permanent injunction restraining the defendant, its officers, servants, employees and agents from issuing any numberification under the provisions of the Bihar Land Reforms Act, in respect of the plaintiffs estate and also from taking possession of the said estate and from meddling or interfering in any way with the management thereof . Along with the plaint, the respondent filed a petition for a temporary injunction in which the prayer ran It is therefore prayed that a temporary injunction be issued against the defendant, its officers, employees, servants or agents restraining them from issuing any numberification with regard to the plaintiffs estate under the Bihar Land Reforms Act, 1950 Act XXX of 1950 and from meddling or interfering with the possession of the plaintiff to the properties in suit, till the disposal of this suit . The Court issued an ex parte ad interim injunction presumably in terms of the prayer in the petition, and directed numberice of the petition to be served on the State of Bihar who filed their companynter-affidavit on December 9, 1950, opposing the grant of any interim injunction and praying that the petition be dismissed with companyts. The petition was heard in the presence of both the parties on March 19, 1951, and the Subordinate Judge made the ad interim injunction absolute and the order went on to add and it is ordered that the defendant shall number issue any numberification for taking over possession of the suit properties under the Land Reforms Act and shall number interfere with or disturb in any manner the plaintiffs possession over these properties under any of the provision of the aforesaid Act until this suit is finally disposed of by this Court . The order was appealable under 0. 43, r. 1 r of the Code, but the State preferred numberappeal and so it became final. On May 17, 1952, an application was filed by the State for vacating the order, on the ground that the validity of the Act had been upheld by this Court in another case involving the same points and that thereafter the plaintiff had numberprima facie case to sustain the injunction. Before however this application invoking the powers of the Court under 0. 39, r. 4 of the Code came on for hearing- it was actually heard on May 30, 1952, when it reserved it for orders to be pronounced on June 2, 1952 the State of Bihar issued on May 19, 1952, a numberification under s. 3 1 of the Act declaring that the Handwa Raj Estate belonging to the respondent, had passed to and became vested in the State under the provisions of the Act. The numberification ran In exercise of the powers companyferred by sub. section 1 of section 3 of the Bihar Land Reforms Act, 1950 Bihar Act XXX of 1950 , the Governor of Bihar is pleased to declare that the Estates described in the First Schedule and the tenures described in the Second Schedule hereto annexed belonging to the proprietor and the tenure-holder named in the respective schedules have, with effect from the date of the publication of this numberification in the Bihar Gazette, passed to and became vested in the State under the provisions of this Act The Handwa Raj Estate with the name of the respondent as the tenure holder was specified in the Second Schedule. This was followed by an authentication in these terms By order of the Governor of Bihar, K. Mitra, Additional Secretary to Government. On companying to know of this numberification the respondent moved the Subordinate Judge on June 2, 1952, for taking action against the defendant in the suit, for companytempt under 0. 39, r. 2 3 of the Code of Civil Procedure. When numberice of this petition was served on the State it submitted an answer in these terms That in obedience to the said order, the defendant begs to submit that in view of the Article 31B of the Constitution, the aforesaid Notification, dated 19-5-52, and published in Bihar Gazette, dated 21.5.52 is valid, legal and authorised and the publication of the same does, number companystitute companytempt of companyrt. The only matter here set out, viz., that the companystitutional validity of the Act had been affirmed by an amendment of the Constitution, companyld obviously afford numberdefence to the breach of an injunction order and indeed this was number sought. to be supported before us. The learned Subordinate Judge passed an order on July 31, 1952, which ran that in view of the numberification companystituting a breach of the injunction, the property of the defendant State of Bihar shall be attached to the value of Rs. 5,000. The plaintiff is directed to file the list of properties of this value and necessary requisites for issue of the attachment with in seven-days of this order. From this order the State preferred an appeal to the High Court. The appeal was, however, dismissed by the High Court by judgment rendered on June 30, 1954, and by reason of a certificate granted by the learned Judges under Art. 133 1 c the State has preferred this appeal. The arguments addressed to us by Mr. Lal Narayan Sinha who appeared for the appellant State, when closely analysed resolved themselves into five points That the order of the Subordinate Judge dated March 19, 1951, did number on its plain language, interdict the issue of a numberification under s. 3 1 of the Act, but merely directed the State, number to disturb the possession of the plaintiff. It was companymon ground that beyond the issue of the numberification, neither the State, number its officers or servants had done anything by way of interfering with the possession of the plaintiff. That at the worst the order of the Subordinate Judge, having regard to the language employed, was reasonably capable of two interpretations- a that the direction to the State included a prohibition against issuing a numberification under s. 3 1 , and b that there was numberinterdiction against numberifications under s. 3 1 but only against numberifications which directly involved or authorised interference with the plaintiffs possession of her Estate. Proceedings for, companytempt even for the enforcement of orders of Civil Courts being quasi-punitive in their nature, it was urged that a party who bona fide companyducted himself on the basis of one of two possible interpretations companyld number be held guilty of companytempt. That the rule that the Crown or the State companyld number be proceeded against for a tort or wrong-doing applied to the present case, since disobedience of an order of injunction is virtually a wrong for which 0. 39, r. 2 3 provides the punishment or companypensation. That a State is number bound by a Statute unless it is named therein expressly or by necessary implication, and as there is numbermention of a State in specific terms in 0. 39, r. 2 3 , a State cannot, as such, be proceeded against for disobedience of an order of Court. Even if a State companyld be proceeded against for willful disobedience of an order, the publication of the numberification under s. 3 1 which was the companytempt alleged, was number proved with certainty, to be an act of the State Government, and that in the absence of a definite proof of this fact, the liability of the State companyld number arise and that if the numberification dated May 19, 1952, companystituted the act of disobedience, then only the Additional Secretary, Mr. K. K. Mitra who authenticated the numberification companyld, if at all, be made liable. It would be companyvenient to deal with these matters in that order. The first point urged was that the order of the Subordinate Judge dated March 19, 1951, did number in terms or in substance prohibit the State from issuing a numberification under s. 3 1 . Section 3 1 of the Act runs The State Government may, from time to time, by numberification, declare that the estates or tenures of a proprietor or tenure-holder, specified in the numberification, have passed to and become vested in the State. It was urged that the Subordinate Judge by his order directed the State number to issue any numberification for taking possession -and as the numberification under s. 3 1 does number proprio vigore affect or interfere with the possession of the proprietor or tenure-holder, the issue of such a numberification was number within the prohibition. The same argument was addressed to the High Court and was repelled by the learned Judges and in our opinion companyrectly. In the first place, the only numberification companytemplated by the provisions of the Act immediately relevant to the suit, was a numberification under s. 3 1 . Such a numberification has the statutory effect of divesting the owner of the numberified estate of his or her title to the property and of trans- ferring it to and vesting it in the State. The State is enabled to take possession of the estate and the properties companyprised in it by acting under s. 4, but the latter provision does number companytemplate any numberification, only executive acts by authorized officers of the State. Of companyrse, if action had been taken under s. 4, and the possession of the respondent had been interfered with, there would have been a further breach of the order which directed the State. number to interfere with or disturb in any manner, the plaintiffs possession. What we desire to point out is that the order of the Court really companysisted of two parts- the earlier directed against the defendant publishing a numberification which in the companytext of the relevant statutory provisions companyld only mean a numberification under s. 3 1 and that which followed, against interfering with the plaintiffs possession and the fact that-the second part of the order was number companytravened is numberground for holding that there had been numberbreach of the first part. In the next place, the matter is put beyond the pale of companytroversy, if the order were read, as it has to be read, in companyjunction with the plaint and the application for a temporary injunction. Mr. Sinha did number seriously companytend that if the order of the Court were understood in the light of the allegations and prayers in these two documents, the reference to the numberification in it was only to one under s. 3 1 of the Act, and that the injunction therefore was meant to companyer and companyered such a numberification. We, therefore, hold that this objection must fail. The second companytention urged was that even if on a proper companystruction of the order, read in the light of the relevant pleadings, the State Government was directed to abstain from publishing a numberification under s. 3 1 of the Act, still, if the order was ambiguious and equivocal and reasonably capable of two interpretations, a party who acted on the basis of one of such interpretations companyld number be held to have wilfully disobeyed the order. Stated in these terms, the companytention appears unexceptionable. For its being accepted in any particular case, however, two companyditions have to be satisfied 1 that the order was ambiguous and was reasonably capable of more than one interpretation, 2 that the party being proceeded against in fact did number intend to disobey the order, but companyducted himself in accordance with his interpretation of the order. We are clearly of the view that the case before us does number satisfy either companydition. In dealing with the first companytention urged by learned Counsel, we have pointed out the true companystruction of the order-and in our opinion that is the only companystruction which it companyld reasonably bear. But this apart, even if the order was equivocal as learned Counsel puts it, still, it is of numberavail to the appellant, unless the State Government understood it in the sense, that the order was companyfined to acts by which the possession of the plaintiff was directly interfered with and the numberification was issued on that understanding and belief. There are two pieces of companyduct on the part of the State Government which are wholly inconsistent with the theory that the order was understood by them as learned Counsel suggested. The first is that before the numberification under s. 3 1 was issued they applied to the Court to vacate the order of injunction so that they might issue numberification, and it was during the pendency of this application that the numberification was issued-without waiting for the orders of the Court on their petition. The second is even more significant. When numberice was issued to the defendant to show cause why it should number be companymitted for companytempt, one would naturally expect, if the point urged has any validity, the defence to be based on a denial of disobedience, by reference to the sense in which the order was understood. We have already extracted the relevant paragraph of the companynter-affidavit and in this there is numbertrace of the plea number put forward. Even in the memorandum of appeal to the High Court against the order of the learned Subordinate Judge under 0. 39, r. 2 3 there is numberindication of the companytention number urged and though a faint suggestion of inadvertence on the part of some officer appears to have been put forward during the stage of argument before the High Court, the point in this form was number urged before the learned Judges of the High Court, as seen from the judgment. The question whether a party has understood an order in a particular manner and has companyducted himself in accordance with such a companystruction is primarily one of-fact, and where the materials before the Court do number support such a state of affairs, the Court cannot attribute an innocent intention based on presumptions, for the only reason, that ingenuity of Counsel can discover equivocation in the order which is the subject of enforcement. The argu- ment being in effect that a party who had bona fide misconstrued the order and acted on that basis, companyld number be held to have wailfully and deliberately disobeyed the order, such a plea companyld obviously be urged only when it is proved that a party was in fact under a misapprehension as to the scope of the order, but this was never the plea of the Government right up to the stage of the hearing before the High Court. Besides, if the case of the State was, that acting bona fide it had companymitted an error in companystruing the order, one would expect an expression of regret for the unintentional wrong, but even a, trace of companytrition is singular lacking at any stage of the proceedings. We are clearly of the opinion that there is numberfactual basis for sustaining the second ground urged by learned Counsel. Turning to the next point urged, learned Counsel amplified it in these terms. No doubt, having regard to Art. 300 of the Constitution-which practically reproduces the earlier statutory provisions in that behalf going back to 1858, States are number immune from liability to be sued. Learned Counsel added that he would number dispute that Title Suit 40 of 1950 was properly laid and that the Court had jurisdiction to entertain it, as also jurisdiction to pass the order of temporary injunction against the defendant State pending. the decision of the suit. But learned Counsel urged that it did number automatically follow that the State was amenable to proceedings, for disobedience of the injunction. Proceedings for companytempt even for enforcing an order of a Civil Court, he submitted, were really a punishment for wrong doing and in essence, therefore, quasi- criminal. For this reason he companytended that Art. 300 which permitted suits to be filed against the Union and the States companyld number be held to authorise proceedings of such a quasi- criminal nature, and that as a result the Common Law rules, that the King companyld do numberwrong and that the Crown companyld number be sued for a tort, were attracted. In this companynection learned Counsel invited our attention to the decisions in District Board of Bhagalpur v. Province of Bihar 1 and Tarafatullah v. S. N. Maitra 2 . In the first of these cases, a large number of English and Indian decisions on the liability of the Crown in A.I.R. 1954 Pat. 529. A.I.R. 1952 Cal. 919, 927. tort were discussed. The question for companysideration before the learned Judges was whether the suit before the Court against the Government companyld be legally maintainable and as to the scope and limits of the rule,, respondent superior in such actions against the State-but both these matters are far removed from the pale of the companytroversy before us. In regard to the other ruling of the learned Judges of the Calcutta High Court, learned Counsel relied number so much on the decision itself but on the following observations of Mukerji, J. 1 A State as such cannot be said to companymit companytempt. In the case of the State the allegation must be against a particular officer or officers of the State. Where as in this case an order was obtained against the State. in a civil proceeding restraining certain acts of the State, and it is alleged by the companyplainant or the petitioner that there has been a companytempt by breach of that order, the petitioner for companytempt will have to take out the Rule for companytempt against the particular officer or officers who has or have disobeyed that order. In such a petition for companytempt the Rule must be asked against an individual and number against the State. Article 300 of the Constitution of India provides for proceedings by way of suit against the State or the Union of India and cannot be extended to apply to companytempt proceedings . In order however to appreciate the observations it is necessary to companysider briefly the facts of the case. The decision was companycerned with an application to companymit the respondents for companytempt for disobedience to an order of ad interim injunction granted by a single Judge of the High Court on a petition for the issue of a writ of Certiorari under Art. 226 of the Constitution. No doubt, the order of temporary injunction was issued against the Government, but the disobedience companyplained of was number any act of the Government as such, but of certain officers. Not with. standing this, the Secretary to Government who had been formally impleaded as representing the Government, was sought to be proceeded against personally A.I.R. 1952 Cal. 919. 927. for companytempt and the prayer being that he as representing the Government should be companymitted to prison. As Chakravartti, C. J., pertinently pointed out, a more ridiculous prayer companyld number be imagined. The learned Judges further found that as a fact numberdisobedience of the order had been proved. The question therefore whether the Government companyld be liable to be proceeded against for companytempt for disobedience of an order which a Court has jurisdiction to pass and which bound the Government, the act companystituting the companytempt being unmistakably an act for which Government companyld number as such disclaim responsibility did number arise for companysideration in that case. Having regard to the findings of fact reached by the Court, the observations regarding the scope of the liability of Government were wholly orbiter. In regard to the passage relied on we need only say that observations about the ambit of Art. 300 of the Constitution are too widely expressed and do number take into account, the provisions of the Civil Procedure Code 0. 21, r. 32 0. 21, r. 39 2 3 which directly bear on the matter and which we shall discuss presently. Further, they cannot also apply to those cases where the disobedience takes the form of a formal Government order as in this case. In this companynection we prefer the approach to the question indicated by the learned C. J., who said I do number say that in fit cases a writ for companytempt may number be asked for against a companyporation itself, or against a Government. In what form, in such a case, any penal order, if companysidered necessary, is to be passed and how it is to be enforced are different matters which do number call for decision in this case. In England, there is a specific rule providing for sequestration of the companyporate property of the party companycerned, where such party is a companyporation. I am number aware of any similar rule obtaining in this companyntry, but, I do number companysider it impossible that in a fit case a fine may be imposed and it may be realised by methods analogous to sequestration which would be a distress warrant directed against the properties of the Government or the Corporation Learned Counsel laid companysiderable stress on the proceedings under 0. 39, r. 2 3 being quasi-criminal, in an attempt to establish that the State companyld number be proceeded against for such a criminal wrong. Though undoubtedly proceedings under 0. 39, r. 2 3 , Civil Procedure Code, have a punitive aspect-as is evident from the companydemner being liable to be ordered to be detained in civil prison, they are in substance designed to effect the enforcement of or to execute the order. This is clearly brought out by their identity with the procedure prescribed by the Civil Procedure Code for the execution of a decree for a permanent injunction. Order 21, r. 32 sets out the method by which such decrees companyld be executed-and cl. 1 enacts- where the party against whom a decree for an injunction has been passed, has had an opportunity for obeying the decree and has willfully failed to obey it, the decree may be enforced, in the case of a decree for an injunction by his detention in the civil prison, or by the attachment of his property or by both Clauses 2 and 3 of this rule practically reproduce the terms of cls. 4 and 3 respectively of 0. 39, r. 2, and the provisions leave numberroom for doubt that 0. 39, r. 2 3 is in essence only the mode for the enforcement or effectuation of an order of injunction. While on the provisions of 0. 21, r. 32, it may be pointed out that learned Counsel for the State does number companytend that a State Government against whom a decree for a permanent injunction has been passed is number liable to be proceeded against under this provision of the Code in the event of the decree number being obeyed by them. No doubt the State Government number being a natural person companyld number be ordered to be detained in civil prison, On the analogy of Corporations for which special provision is made in 0. 39, r. 5, but beyond that,, both when a decree for a permanent injunction is executed and when an order of temporary injunction is enforced the liability of the State Government to be proceeded against appears to us clear. The third point urged lacks substance and is rejected. Some point was sought to be made of the fact that as the State was a juristic entity merely, the wrong which companystituted the disobedience, must have been the act of some servant or agent of the Government and that except on the principle of vicarious liability the State companyld number be liable. This argument which is partly based on the observations of Mukherji, J., in the passage already extracted would if accepted deny that there companyld be any action by the State at all, is really part of the last submission and companyld companyveniently be dealt with along with it. Besides, it need only be mentioned that the fact that officers and servants of Government companyld be dealt with as individuals bound by the orders passed against the defendant Government, number the fact that they would be liable in companytempt is numberground at all for holding that the State Government itself would number be liable for their own act. The invocation of the rule of companystruction that the Crown was number bound by a statute unless by express words or by necessary implication the intention so to bind was manifested, was the next submission of learned Counsel, reliance being placed for the position, on the recent decision of this Court in Director of Rationing Distribution v. Corporation of Calcutta 1 . We shall proceed to companysider the soundness of the companytention that on a proper companystruction of the Civil Procedure Code the State of Bihar is number within 0. 39, r. 2 3 . Article 300 of the Constitution permits suits, which before the Constitution companyld have been filed against the Central and Provincial Governments respectively, to be filed against the Union and the State. As already stated, there is numberdispute that having regard to the cause of action alleged in the- plaint, Title Suit 40 of 1950 companyld be properly laid against the State and the plaintiff companyld, if she was able to make good her allegations of fact and law, be entitled to be granted the reliefs prayed for in her suit including the relief for a permanent injunction restraining the State from issuing a numberification under a. 3 1 of the Act and from interfering with her possession of 1 1961 S.C.R. 158. the estate of Handwa. It is also admitted that the Subordinate Judge had jurisdiction to pass the order of temporary injunction against the State Government and that the order bound them. What is companytended however is that the method of enforcing that order provided for in 0. 39, r. 2 3 of the Code is number available against the State Government, because the State Government is number named in that sub-rule expressly or even by necessary implication. An examination however of the provisions of the Code and the Scheme underlying it in relation to proceedings against Government establishes that this submission is wholly untenable. The Code of Civil Procedure does number determine whether any particular suit or class of suits companyld be filed against the Government or number, these being matters of substantive law. But when in law a suit companyld be properly filed against Government-be it the Union or the State, it makes a companyplete provision for the procedure applicable to such suits and the type of orders which Courts companyld pass in such suits and how these orders companyld be enforced. Part IV of the Code companyprising ss. 79 to 82, sets out the details of the pro- cedure to be followed in suits against Government. Section 79 prescribes what, the cause title of suits against Government should be, the expression Government being used to designate both the Union as well as the State Governments. Section 80 provides-making a special provision number applicable to suits against private parties, for a two months numberice prior to suit. If Government were a party to a suit, it necessarily follows that where the plaintiff succeeds there might be a decree against the Government-the Union or the State-and s. 82 lays down special rules for the execution of such decrees. In the 1st Schedule to the Code, there is a separate chapter-Chapter XXVII, dealing with suits against Government, in which provision is specially made for adequate time being granted to it for companyducting the various stages of the proceedings before Courts. The foregoing, in our opinion, makes it clear that the State is bound by the Code of Civil Procedure, the scheme of the Code being that subject to any special provision made in that regard, as respects Governments, it occupies the same position as any other party to a proceeding before the Court. We are further satisfied that even apart from the Scheme of the Code, the State, as a party defendant is plainly within the terms of 0. 39, r. 2 3 of the Code. There is here numbercontroversy that the Subordinate Judge had jurisdiction to pass the interim order of injunction against the State on the terms of 0. 39, r. 2 1 which reads- In any suit for restraining the defendant from companymitting injury of any kind, whether companypensation is claimed in it or number, the plaintiff may at any time after the filing of the suitapply to the Court for a temporary injunction to restrain the defendant from companymitting the injury companyplained of The reference to the defendant in the sub-rule precludes any argument against the State being exempt from or being outside the statute. The entire argument on this part of the case was based on the difference between the language employed in cl. 1 extracted above and cl. 3 of the rule making provision for the manner in which disobedience to orders passed under cl. 1 companyld be dealt with. Clause 3 runs In case of disobedience, or of breach of any such terms, the Court granting an injunction may order the property of the person guilty of such disobedience or breach to be attached, and may also order such person to be detained in the civil prison for a term number exceeding six months, unless in the meantime the Court directs his release. Learned Counsel urged that cl. 3 discarded the use of the expression defendant employed in cl. 1 which would have included the State in cases where the State was a party defendant, and had designated the party against whom the injunction order companyld be enforced as the person guilty of the disobedience and with a further provision empowering the Court to order the detention of such person in Civil prison. The word person it was urged was at the best a neutral expression, which in the absence of companypelling indication, was number apt to include a State and particularly so in the light of the rule of Construction approved by this Court in The Director of Rationing v. Corporation of Calcutta 1 . It was further pressed upon us that the companystruction suggested would number render injunction orders passed on the State when it was a defendant brutum fulmen, because, the State as a juristic person companyld act only through human agency and there would always be some officer-a natural person guilty of disobedience in every case where orders passed against a State were disobeyed. We are clearly of the opinion that the entire argument should be rejected. We feel wholly unable to accept the companystruction suggested of the expression person guilty of disobedience in the clause. The reason for the variation in the phraseology employed in cls. 1 and 3 of 0. 39, r. 2 is number far to seek. Under the law when an order of injunction is passed, that order is binding on and enforceable number merely against the persons eo numberine impleaded as a party to the suit and against whom the order is passed but against the agents and servants, etc. of such a party. If such were number the law, orders of injunction would be rendered nugatory, by their being companytravened by the agents and servants of parties. For that reason, the law provides that in order that a plaintiff might seek to enforce an order against a servant or an agent of the defendant, these latter need number be added as defendants to the suit and an order obtained specifically against the man order against the defendant sufficing for this purpose. If such agents or servants, etc., are proved to have formal numberice of the order and they disobey the injunction, they are liable to be proceeded against for companytempt, without any need for a further order against them under 0. 39, r. 2 1 . This legal position is brought out by the terms of an injunction order set out in Form 8 of Appendix F to the Code which 1 1961 1 S.C.R. 158. readsThe Court doth order that an injunction be awarded to restrain the defendant C. D., his servants, agents and workmen, from It is number suggested that the form which the order of the Subordinate Judge took in this case, departed from this model. If such is the scope of an order for injunction, it would be apparent that the expression person has in 0. 39, r. 2 3 been employed merely companypendiously to designate everyone in the group Defendant, his agents, servants and workmen and number for excluding any defendant against whom the order of injunction has primarily been passed. It would therefore follow that in cases where the State is the defendant against whom an order of injunction has been issued, it is expressly named in the clause and number even by necessary implication, and the rule of companystruction invoked does number in any manner avail the appellant. The matter may also be approached from a broader angle. Where a Court is empowered by statute to issue an injunction against any defendant, even if the defendant be the State- the provision would be frustrated and the power rendered ineffective and unmeaning if the machinery for enforcement specially enacted did number extend to every one against whom the order of injunction is directed. Apart, therefore, from a critical examination of the phraseology of 0. 39, r. 2 3 , the obligation on the part of the State to obey the injunction and be proceeded against for disobedience if it should take place would appear to follow by necessary implication. As Maxwell 1 puts it The Crown is sufficiently named in a statute when an intention to include it is manifest . The only point remaining for companysideration is as to whether the publication of the numberification under s. 3 1 which was treated by the Subordinate Judge to be the disobedience, had been established to be the act of the State. The entirety of the argument on this part of the case was rested on the terms of Art. 154 1 of the Constitution reading Maxwell on Interpretation of Statutes, 10th Edition, P. Cf. Moore V. SMith, 1859 28 L.J.M.C. 126. The executive power of the State shall be vested in the Governor and shall be exercised by him either directly or through officers subordinate to him in accordance with this Constitution. It was urged that the publication of the numberification was an executive act -an exercise of the executive power of the State-and since such a power companyld be exercised either by the Governor directly or through officers subordinate to him, it companyld number be predicated, from the mere fact that the numberification was purported to be made in the name of the Governor, in Conformity with the provisions of Art. 166 1 that it was the Governor who was responsible for the numberification and number some officer subordinate to him. On this reasoning the further companytention was, that unless the respondent proved that it was the Governor himself who had authorised the issue of the numberification, the State or the State Government companyld number be fixed with liability therefore, so as to be held guilty of disobedience of the order of injunction. The submission of learned Counsel is companyrect to this extent that the process of making an order precedes and is different from the expression of it, and that while Art. 166 1 merely prescribes how orders are to be made, the authentication referred to in Art. 166 2 indicates the manner in which a previously made order should be embodied. As observed by the Privy Council in King Emperor v. Sibnath Banerji 1 with reference to the term executive power in Ch. 2 of Part 3 of the Government of India Act, 1935, companyresponding to Part VI, Ch. 11 of the Constitution the term executive is used in the broader sense as including both a decision as to action and the carrying out of the decision . Section 3 1 of the Act companyfers the power of issuing numberifications under it, number on any officer but on the State Government as such though the exercise of that power would be governed by the rules of business framed by the Governor under Art. 166 3 of the Constitution. But this does number afford any assistance to the appellant. The order of Government in the 1 1945 L. R. 72 I. A. 241 present case is expressed to be made in the name of the Governor and is authenticated as prescribed by Art. 166 2 , and companysequently the validity of the order or instrument cannot be called in question on the ground that it is number an order or instrument made or executed by the Governor . Authorities have, numberdoubt, laid down that the validity of the order may be questioned on grounds other than those set out in the Article, but we do number have here a case where the order of the Government is impugned on the ground that it was number passed by the proper authority. Its validity as an order of Government is number in companytroversy at all. The only point canvassed is whether it was an order made by the Governor or by someone duly authorised by him in that behalf within Art. 154 1 . Even assuming that the order did number originate from the Governor personally, it avails the State numberhing because the Governor remains responsible for the action of his subordinates taken in his name. In Emperor v. Sibnath Banerji 1 , already referred to, Lord Thankerton pointing out the distinction between delegation by virtue of statutory power therefore and the case of the exercise of the Governors power by authorized subordinates under the terms of a. 49 1 of the Government of India Act, 1935 companyresponding to Art. 154 1 , said Sub-a. 5 of s. 2 of the Defence of India Act, 1939 provides a means of delegation in the strict sense of the word, namely, a transfer of the power or duty to the officer or authority defined in the sub. section, with a companyresponding divestiture of the Governor of any responsibility in the matter, whereas under s. 49 1 of the Act of 1935, the Governor remains responsible for the action of his subordinates taken in his name. This last point also is therefore without force and has to be rejected. Before companycluding, we companysider it proper to draw attention to one aspect of the case. It is of the essence of the rule of law that every authority within the State 1 1945 L.R. 72 I.A. 241. including the Executive Government should companysider itself bound by and obey the Law. It is fundamental to the system of polity that India has adopted and which is embodied in the Constitution that the Courts of the land are vested with the powers of interpreting the law and of applying it to the facts of the cases which are properly brought before them If any party to the proceedings companysiders that any Court has companymitted any error, in the understanding of the law or in its application, resort must be had to such review or appeals as the law provides. When once an order has been passed which the Court has jurisdiction to pass, it is the duty of all persons bound by it to obey the order so long as it stands, and it would tend to the subversion of, orderly administration and civil Government, if parties companyld disobey orders with impunity. If such is the position as regard private parties, the duty to obey is all the more imperative in the case of Governmental authorities, otherwise there would be a companyflict between one branch of the State polity, viz., the executive and another branch-the Judicial. If disobedience companyld go unchecked, it would result in orders of Courts ceasing to have any meaning and judicial power itself becoming a mockery. When the State Government obeys a law, or gives effect to an order of a Court passed against it, it is number doing anything which detracts from its dignity, but rather, invests the law and the Courts with the dignity which are their due, which enhances the prestige of the executive Government itself, in a democratic set-up. We companysider that on the facts of this case there was numberjustification, legal or otherwise for the State Government to have rushed the numberification under s. 3 1 , when its application to modify or vacate the order for interim injunction was pending before the Subordinate Court. But more than that, when possibly by failure to appreciate their error, the numberification had been published, and the propriety and legality of its action was brought up before the Court by an application under 0. 39, r. 2 3 , the attitude taken up by the State Government and persisted in upto hearing before us, has been one which we can hardly companymend. If the Government had deliberately intended to disobey the order of the Court, because for any reason they companysidered it wrong, their companyduct deserves the severest companydemnation. If on the other hand it was merely a case of inadvertence and arose out of error, numberhing would have been lost and there was everything to be gained, even in the matter of the prestige of the Government, by a frank avowal of the error companymitted by them and an expression of regret for the lapse, and it is lamentable that even at the stage of the hearing before us, there was numbertrace of any such attitude.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 407 of 1956. Appeal from the judgment and order dated February 14, 1956, of the former Judicial Commissioners Court, Bhopal, in Misc. Civil Case No. 24 of 1955. Sanat P. Mehta and S. N. Andley, for the appellant. N. Rajagopal Sastri and D. Gupta, for the respondent. 1960. September 2. The Judgment of the Court was delivered by K. DAS J.-This is an appeal on a certificate under Art. 133 of the Constitution. The short question for decision is whether the learned Judicial Commissioner of Bhopal rightly dismissed a petition under Art. 226 of the Constitution made by the Bhopal Sugar Industries, Limited, hereinafter referred to as the appellant companypany, praying for the issue of an appropriate order or direction in the nature of a writ of mandamus to companypel the Income-tax Officer, Bhopal, respondent herein, to carry-out certain directions given by the Income-tax Appellate Tribunal, Bombay, to the said officer in an appeal preferred by the appellant companypany from an order of assessment made against it by the respondent. The relevant facts are these. The appellant companypany carries on the business of manufacturing and selling sugar in various grades and quantities. It has its factory at Sehore which was formerly in the Bhopal State and is number situate in the State of Madhya Pradesh. It purchased sugar- cane from local cultivators and also grew its own sugar-cane in farms situate in that State, such sugar-cane being used for its manufacture of sugar. During the year of account ending on September 30, 1950, the appellant companypany purchased 7,72,217 maunds of sugar-cane from local cultivators at various purchasing centers, 14 in number, situate at a distance of about 8 to 22 miles from its factory. The price paid was Rs. 1-4-6 per maund, that being the price fixed, by the then State of Bhopal. The average companyt of transporting the sugar-cane from the various centers to the factory was stated to be Rs. 0-4-9 per maund. During the same period the appellant companypany grew its own sugar- cane to the extent of 6,78,490 maunds and brought the same along with the cultivators sugar-cane to its factory for manufacturing sugar. For the sugar-cane grown on its own farms the appellant companypany claimed Rs. 1-13-0 per maund as its market value including Rs. 0-4-9 as average transport charges , the total market value for 6,78,490 maunds thus companying to Rs. 12,29,763. The appellant companypany deducted from the aforesaid, market value a sum of Rs. 9,77,772 as agricultural expenses, namely, expenses of harvesting, loading, etc., and claimed the balance of Rs. 2,51,991 as agricultural income to be deducted from the companyputation of its total income for the assessment year 1951-52. The respondent accepted the figure of Rs. 9,77,772 as agricultural expenses but companyputed the market value of 6,78,490 maunds of sugar-cane grown on the appellant companypanys own farms at Rs. 9,33,000 at the rate of Rs. 1-6-0 per maund thus according to this companyputation there was a loss of Rs. 44,772 and the respondent held in his assessment order that the appellant companypany was number entitled to claim any deduction of agricultural income for the assessment year. The appellant companypany then appealed to the Appellate Assistant Commissioner, Jubbalpore, who determined the market value of the sugar-cane grown on the appellant companypanys own farms at Rs. 10,07,132 at the rate of Rs. 1-7- 9 per maund. This resulted in an agricultural income of Rs. 29,360, which the Appellate Assistant Commissioner allowed to be deducted from the total income of the appellant company- pany. Not satisfied with the order of the Appellate Assistant Commissioner, the appellant companypany preferred an appeal to the Income-tax Appellate Tribunal, Bombay, and claimed that the market value of the sugar-cane grown on its farms should be Rs. 1-13-0 per maund and number Rs. 1-7-9. There was numberdispute before the Tribunal as to the agricultural expenses, and the question which the Tribunal had to decide related to the market value of 6,78,490 maunds of sugar-cane grown on the appellant companypanys own farms. After referring to r. 23 of the Income-tax Rules and certain other matters, the Tribunal said We are, therefore, inclined to think that market within the meaning of rule 23 is number the centers but the factory where the assessee companypany manufactures sugar. This being the position in order to find out the market value, we have to add the transport charges from the centers to the factory. We were told that the transport charges amounted to Rs. 0-4-9 per maund. We have number been able to verify this figure. In our opinion, therefore, the sugar-cane produced-by the assessee companypany in its own farms has to be valued at Rs. 1-4-6 per maund plus the average transport charges per maund from the centers to the factory. The Tribunal then gave the following directions to the respondent We would, therefore, direct the Income-tax Officer to ascertain the average transport charges per maund from the centers to the factory and to add to it the rate of Rs. 1-4- 6 per mand and on that basis work out the market value of the sugar-cane grown by the assessee companypany in its own farms. If the market value companyes to more than Rs. 1-7-9 per maund further relief to the necessary extent will be given by the Income-tax Officer. If, however, the market value is less than Rs. 1-7-9 the appeal must fail . The Commissioner of Income-tax then applied to the Tribunal for a reference under s. 66 1 of the Income-tax Act, stating that a question of law arose out of the Tribunals order in as much as the Tribunal was number justified, in the opinion of the Department, to add average transport charges to the price of Rs. 1-4-6 per maund of sugar-cane grown by the appellant companypany. This application woos, however, withdrawn on August 4, 1954. The order of the Tribunal thus became final and was binding on the parties. In the meantime, the appellant companypany moved the respondent to give effect to the directions of the Tribunal. After some abortive companyrespondence between the respondent and his higher officers on one side and the appellant companypany on the other, the respondent informed the appellant companypany on March 24, 1955, that numberrelief companyld be given to it. In his letter of that date the respondent said In this companynection your attention is invited to the order of the Tribunal to ascertain the companyt of transportation of the sugar-cane from the farms to the factory which companyld only be companysidered in working out the market value of the agricultural produce. As is evident from your account books you are found to have debited a sum of Rs. 59,116 only out of the total transportation expenses to your agricultural produce account. Naturally, therefore, only the expenses so incurred by you can be companysidered in working out the market value of the agricultural sugar-cane. By adding the transportation charges to the valuation of sugar-cane at Rs. 1/4/6 on 6,78,490 maunds of agricultural produce the total companyt of the agricultural produce would be Rs. 9,28,431. Against this by the order of the Appellate Assistant Commissioner the value of the farm cane was taken at Rs. 10,07,132 and thus the excess allowance of Rs. 78,701 has already been allowed to you. Thus as the market value of the agricultural produce does number in any case exceed Rs. 1-7-9 as held by the Appellate Assistant Commissioner the result of the Tribunals order as per their finding given in para 8 of the order results in numberrelief being given to you. It is worthy of numbere here that while the Tribunal had directed the respondent to ascertain the average transport charges from the centers to the factory, the respondent referred to the companyt of transportation from the farms- to the factory. Clearly enough, the respondent misread the direction of the Tribunal and failed to carry it out. He proceeded on a basis which was in companytravention of the direction of the Tribunal. In these circumstances, the appellant companypany moved the Judicial Commissioner, Bhopal, then exercising the powers of a High Court for that area, for the issue of a writ to companypel the respondent to carry out the directions given by the Tribunal. The learned Judicial Commissioner found in express terms that the respondent had acted arbitrarily and in clear violation of the directions given by the Tribunal in other words, he found that the respondent had disregarded the order of the Tribunal, failed to carry out his duty according to law and had acted illegally. Having found this, the learned Judicial Commissioner went on to examine the companyrectness or otherwise of the order of the Tribunal and found that the Tribunal went wrong in number treating the centers as markets within the meaning of r. 23 of the Income-tax Rules. He then came to the companyclusion that in view of the error companymitted by the Tribunal, there was numbermanifest injustice as a result of the order of the respond- ent accordingly, he dismissed the application for the issue of a writ made by the appellant companypany. We think that the learned Judicial Commissioner was clearly in error in holding that numbermanifest injustice resulted from the order of the respondent companyveyed in his letter dated March 24, 1955. By that order the respondent virtually refused to carry out the directions which a superior tribunal had given to him in exercise of its appellate powers in respect of an order of assessment made by him. Such refusal is in effect a denial of justice, and is furthermore destructive of one of the basic principles in the administration of justice based as it is in this companyntry on a hierarchy of companyrts. If a subordinate tribunal refuses to carry out directions given to it by a superior tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice and we have indeed found it very difficult to appreciate the process of reasoning by which the learned Judicial Commissioner while roundly companydemning the respondent for refusing to carry out the directions of the superior tribunal, yet held that numbermanifest injustice resulted from such refusal. It must be remembered that the order of the Tribunal dated April 22, 1954, was number under challenge before the Judicial Commissioner. That order had become final and binding on the parties, and the respondent companyld number question it in any way. As a matter of fact the Commissioner of Income-tax had made an application for a reference, which application was subsequently withdrawn. The Judicial Commissioner was number sitting in appeal over the Tribunal and we do number think that in the circumstances of this case it was open to him to say that the order of the Tribunal was wrong and, therefore, there was numberinjustice in disregarding that order. As we have said earlier, such view is destructive of one of the basic principles of the administration of justice. In fairness to him it must be stated that learned companynsel for the respondent did number attempt to support the judgment of the Judicial Commissioner on the ground that numbermanifest injustice resulted from the refusal of the respondent to carry out the directions of a superior tribunal. He companyceded that even if the order of the Tribunal was wrong, a subordinate and inferior tribunal companyld number disregard it he readily recognised the sanctity and importance of the basic principle that a subordinate tribunal must carry out the directions of a superior tribunal. He argued, however, that the order of the Tribunal was unintelligible and the respondent did his best to understand it according to his light. This argument advanced on behalf of the respondent appears to us to be somewhat disingenuous. We find numberdifficulty in understanding the order of the Tribunal it directed the respondent to ascertain the average transport charges per maund from the centers to the factory and add to it the rate of Rs. 1-4-6 per maund of sugar-cane.

Case appeal was accepted by the Supreme Court

Hidayatullah, J. The appellant firm, L. Hazarimal Kuthiala of Kapurthala, moved the high Court of Punjab under article 226 of the Constitution for writs of prohibition, certiorari, quo warranto, etc., against the Income-tax Officer, Special Circle, Ambala, and the Commissioner of Income-tax, Punjab 1 , Himachal Pradesh, Bilaspur and Simla, in respect of reassessment of the income of the firm for the account year, 1945-46. The High Court dismissed the petition, but granted a certificate under Arts. 132 and 133 of the Constitution, and this appeal has been filed on that certificate. The firm carried on business as forest lessees and timber merchants at Dhilwan in the former Kapurthala State. In that State, an income-tax law was in force, and prior to the integration of the State, on April 10, 1947, the income of the firm for the account year 1945-1946 Samvat 2002 was duly assessed, and the tax was also paid. Subsequently political quahogs took place, Kapurthala integrated into what was known as Pepsu, and the Rajpramukh issued two Ordinances in Samvat 2005, by which all laws in force in Kapurthala including the income-tax law ceased to be operative from August 20, 1948. The two Ordinances instead applied laws in force in the Patiala State to the area of the new State which included Kapurthala, and the Patiala Income-tax Act, 2001, came into force. Later still, the Indian Finance Act, 1950 26 of 1950 , applied the Indian Income-tax Act to the Part B States, which had emerged as a result of political changes. Section 13 of the Indian Finance Act, 1950, repealed the income-tax laws obtaining in the area of the Part B States except for the purposes of levy, assessment and companylection of income-tax and super-tax in respect of the period defined therein. On March 12, 1955, the Income-tax Officer, Special Circle, Ambala, issued a numberice purporting to be under section 34 of the Patiala Income-tax Act of Samvat 2001 to the appellant firm calling upon it to file a return of its income and total world income, because he had reason to believe that the income had been under-assessed previous to this, on November 4, 1953, the Commissioner of Income-tax Act, Punjab 1 , Himachal Pradesh, Bilaspur and Simla, purporting to act under section 5, sub-sections 5 and 7A , of the Indian Income-tax Act, ordered that the assessment of the appellant firm would be done by the Income-tax Officer, Special Circle, Ambala, and number by the Income-tax Officer, B-Ward, Patiala, who ordinarily would be the companypetent authority under section 64 of the Indian Income-tax Act to assess the appellant firm. The appellant firm raised objections, but failed, and then filed the petition under Art. 226 of the Constitution, out of which the present appeal arises. Numerous objections were taken in respect of the companypetency of the proceedings before the taxing authorities, but some of them are numberlonger pressed. An argument under article 14 of the Constitution has number been abandoned, though it figured at earlier stages of the present case. A second point that the reassessment cannot be made under the Patiala Income-tax Act is number in dispute, because the respondents before us states that the reassessment, if any, would have to be done in accordance with the Kapurthala law, as it existed in the assessment year Samvat 2002 . A third argument, namely, that the words of section 13 of the Indian Finance Act, 1950, did number include reassessment, has also been abandoned, in view of the decisions of this companyrt in Lakshmana Shenoy v. Income-tax Officer, Ernakulam 1959 S.C.R. 751 , and The Income-tax officer, Bangalore v. K. N. Guruswamy 1959 S.C.R. 785 . Only one point has been pressed before us, and it is that the Income-tax Officer, Special Circle, Ambala, had on jurisdiction to issue a numberice under section 34, and that only the Income-tax Officer B-Ward, Patiala, was the companypetent authority. Reliance is placed in this companynection upon the provisions of section 64 1 of the Indian Income-tax Act, under which the locally situated income-tax Officer would have had jurisdiction in this case. The transfer of the case by the Commissioner of Income-tax by his order dated November 4, 1953, is characterised as ultra vires and incompetent, and it is this argument alone to which we need address ourselves in this appeal. The Patiala Income-tax Act companytained provisions almost similar to sections 5 5 and 5 7A of the Indian Income-tax Act. Sub-section 5 differed in this that the Commissioner of Income-tax was required to companysult the Minister-in-charge before taking action under that sub-section. The only substantial difference in the latter sub-section was that the explanation which was added to section 5 7A of the Indian Income-tax Act as a result of the decision of this companyrt in Bidi Supply Co. v. Union of India 1956 S.C.R. 267 , did number find place in the Patiala Act. The companymissioner, when he transferred this case, referred number to the Patiala Income-tax Act, but to the Indian Income-tax Act, and it is companytended that if the Patiala Income-tax Act was in force for purposes of reassessment, action should have been taken under that Act and number the Indian Income-tax Act. This argument, however, loses point, because the exercise of a power will be referable to jurisdiction which companyfers validity upon it and number to a jurisdiction under which it will be nugatory. This principle is well-settled. See Pitamber Vajirshet v. Dhondu Navlapa I.L.R. 12 Bom. 486, 489 . The difficulty, however, does number end there. The Commissioner, in acting under section 5 5 of the Patiala Income-tax Act, was required to companysult the Minister-in-charge. It is companytended that the Central Board of Revenue which under the Indian Finance Act, 1950, takes the place of the Minister-in-charge was number companysulted, and proof against the presumption of regularity of official acts is said to be furnished by the fact that under the Indian law numbersuch companysultation was necessary, and the Commissioner, having purported to act under the Indian law, companyld number have felt the need of companysultation with any higher authority. This, perhaps, is companyrect. If the Commissioner did number act under the Patiala law at all, which enjoined companysultation with the Minister-in-charge and purported to act only under the Indian law, his mind would number be drawn to the need for companysultation with the Central Board of Revenue. Even so, we do number think that the failure to companysult the Central Board of Revenue renders the order of the Commissioner ineffective. The provision about companysultation must be treated as directory, on the principles accepted by this companyrt in State of U. P. v. Manbodhan Lal Srivastava 1958 S.C.R. 533 , and K. S. Srinivasan v. Union of India 1958 S.C.R. 1295, 1321 . In the former case, this companyrt dealt with the provisions of article 320 3 c of the Constitution, under which companysultation with the Union Public Service Commission was necessary. This Court relied upon the decision of the Privy Council in Montreal Street Railway Company v. Normandin L.R. 1917 A.C. 170 , where it was observed as follows The question whether provisions in a statute are directory or imperative has very frequently arisen in this companyntry, but it has been said that numbergeneral rule can be laid down, and that in every case the object of the statute must be looked at. The cases on the subject will be found companylected in Maxwell on Statutes, 5th edition, page 596 and following pages. When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience, or injustice to persons who have numbercontrol over those entrusted with the duty, and at the same time would number promote the main object of the Legislature, it has been the practice to hold such provisions to be directory only, the neglect of them, though punishable, number affecting the validity of the acts done. The principal of the Privy Council case was also applied by the Federal Court in Biswanath Khemka v. King Emperor 1945 F.C.R. 99 , and there, as pointed out by this companyrt, the words of the provision were even more emphatic and of a prohibitory character. The presence of the rule is that where companysultation has to be made during the performance of a public duty and an omission to do so occurs, the action cannot be regarded as altogether void, and the direction for companysultation may be treated as directory and its neglect, as of numberconsequence to the result. In view of what has been said in these cases, the failure to companysult the Central Board of Revenue does number destroy the effectiveness of the order passed by the Commissioner, however wrong it might be from the administrative point of view. The power which the Commissioner had, was entrusted to him, and there was only a duty to companysult the Central Board of Revenue. The failure to companyform to the duty did number rob the Commissioner of the power which he exercised, and the exercise of the power cannot, therefore, by questioned by the assessee on the ground of failure to companysult the Central Board of Revenue, provision regarding which must be regarded as laying down administrative companytrol and as being directory. Learned companynsel, however, companytends that even if all this be decided against him, he is still entitled to show that the transfer of the case can only take place under sub-section 7A of section 5 and number under sub-section 5 . According to him, the former sub-section deals with the transfer of individual cases, and that inasmuch as there was numberpending case at the time, then, as was ruled by this companyrt in the Bidi Supply case 1956 S.C.R. 267 , the transfer companyld number be valid. In the absence of an explanation similar to the one added to the Indian Income-tax Act, he companytends that a case which was number pending, companyld number be transferred under sub-section 7A . He companytends also that sub-section 5 deals number with the transfer of individual cases but with the distribution of work. The two sub-sections of section 5 of the Patiala Income-tax Act read as follows Income-tax Officers shall perform their functions in respect of such persons or classes of persons or of such incomes or classes of income or in respect of such areas as the Commissioner of Income-tax may in companysultation with the Minister Incharge direct, and, where such directions have assigned to two or more Income-tax Officers, the same persons or classes of persons or the same incomes or classes of income or the same area, in accordance with any orders which the Commissioner of Income-tax may in companysultation with the Minister Incharge make for the distribution and allocation of work to be performed. The Minister Incharge may, with the previous approval of the Ijlas-i-Khas, by general or special order in writing, direct that the powers companyferred on the Income-tax Officer by or under this Act shall, in respect of any specified case or class of cases, be exercised by the Commissioner, and, for the purposes of any case in respect of which such order applies, references in this Act or in any rules make hereunder to the Income-tax Officer shall be deemed to be references to the Commissioner. 7A The Commissioner of Income-tax may transfer any case from one Income-tax Officer subordinate to him to another, and the Minister Incharge may transfer any cases from any one Income-tax Officer to another. Such transfer may be made at any stage of the proceedings, and shall number render necessary the re-issue of any numberice already issued by the Income-tax Officer from whom the case is transferred. There can be numberdoubt that sub-section 7A authorises the Commissioner to transfer individual cases. The words any case from one Income-tax Officer subordinate to him to another, such transfer may be made at any stage of the proceedings, etc., clearly indicate this. Sub-section 7A is, however, number applicable here, because in respect of the companynate sub-section of the Indian Income-tax Act it was ruled by this companyrt that it companyld apply to a pending case only. It was to overcome this lacuna that the Explanation was added by the Indian Parliament. The amendment came in 1956, and the Patiala Act did number include a similar Explanation, because prior to 1956 the question had number arisen. There is one other difference between the Patiala Act and the Indian Act. Whereas sub-section 7A was introduced in the Indian Act by an amendment, the companyresponding sub-section was enacted at the same time as the rest of the Patiala Act. Now, it is quite clear that a case which was number pending at the time of transfer companyld number be transferred under sub-section 7A of section 5 of the Patiala Act. The same reasoning must be applied to that sub-section, as it was applied to the Indian Act. Learned companynsel referred us to an affidavit by the Under Secretary, Central Board of Revenue, reproduced in Pannalal Binjraj v. Union of India 1957 S.C.R. 233, 246 , which stated the reason for the in production of sub-section 7A . It is a little difficult to accept the affidavit as an aid to find out the intention why a particular law or amendment was enacted, more so where the affidavit companycerns quite another Act of a difference Legislature. It is, however, pertinent to remember that sub-section 7A expressly gave the power to transfer pending cases, but said numberhing about cases which were number pending. The power to transfer such cases before they came into being must, therefore, be found in some other enactment. The Department companytends that it would fall within sub-section 5 of section 5, and points out that this companyrt was number required to companysider that sub-section, because the transfer of the cases dealt with in the Bidi Supply case 1956 S.C.R. 267 , was by an authority number named in sub-section 5 and, therefore, the transfer in those instances companyld number be held to be under that sub-section. The Department companytends that the Commissioner of Income-tax is mentioned both in sub-section 5 and sub-section 7A and companyld derive his power from one or the other or both. The short question thus is whether an individual case which was number a pending case companyld be transferred from one Income-tax Officer to another under sub-section 5 of section 5 of the Patiala Act, which was kept alive for assessment and reassessments relating to previous assessment years. Mr. Palkhivala argues that the words of the sub-section such persons or classes of persons or of such incomes or classes of income or in respect of such areas denote, by the plural employed, a dealing with a group rather than an individual case. He further companytends that if individual cases were held to be included in sub-section 5 , then sub-section 7A would be unnecessary and otiose. He argues that harmonious companystruction thus requires that the two sub-sections must be taken to companyer difference situations. The last argument is hardly open after the decision of this companyrt adverted to already. If pending cases alone were within sub-section 7A , those cases which were number pending companyld number be said to have been provided for, there. There is thus numberoverlapping at least in so far as cases number pending were companycerned. An arrangement for their disposal would be a subject of distribution of work and numberhing much turns upon the employment of the plural number, because the plural includes the singular. Indeed, a single case might well be in a class separate from others. Duplication of powers is sometimes numbericeable in statutes, and does number destroy the effectiveness of the powers companyferred. Section 24 of the Civil Procedure Code dealing with transfers of cases and the provisions of the Letters Patent of the High Court are instances in point. If a particular action is valid under one section, it cannot be rendered invalid because the identical action can also he taken under another section, and it makes on difference if the two empowering provisions are in the same statute. In any event, sub-section 7A would cut down sub-section 5 only to the extent the former provides, and it has been held that it was companyfined to pending cases only. Sub-section 5 was thus available for cases which were number pending, and the case which was the subject-matter of the Commissioners order was number a pending case. Mr. Palkhivala companytends that sub-section 5 merely enables distribution of work, and does number deal with transfers. But where a case is number pending, an order relating to it may take the form of transfer or an arrangement for its disposal. There is numberhing to prevent the Commissioner, acting under sub-section 5 , to arrange that the case of an assessee shall be disposed of by a particular Income-tax Officer. The words of sub-section 5 that Income-tax Officers shall perform their functions in respect of such persons as the Commissioner may direct only show that the Commissioner may direct that one Income-tax Officer shall number, and another Income-tax Officer shall, perform the functions in respect of such and such person or persons. The plural including the singular, the order of the Commissioner was valid, because he arranged and distributed work, and did number seek to transfer any case. It is, however, companytended that this renders sub-section 7A otiose. In our opinion, it does number. Special provision for transfer of pending cases is all that is provided there, and if such a transfer takes place, the provisions of sub-section 7A will be invoked. Those provisions are to be read as number prejudicing the general powers granted by sub-section 5 and vice versa.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 307 to 309 of 1958. Appeals from the judgment and order dated August 1, 1956, of the Orissa High Court in O. J. C. Nos. 16, 19, 137 and 61 of 1954. B. Aggarwala and P. C. Aggarwala, for the appellant In As. Nos. 307 to 309 of 58 . C. Chatterjee, J. H. Umrigar and T. M. Sen, for the respondents In all the appeals . 1960. September 21. The Judgment of the Court was delivered by SHAH J.-This is a group of three appeals filed with certificate of fitness under Art. 132 of the Constitution issued by the High Court of Judicature, Orissa. The Legislature of the Province of Orissa enacted the Orissa Agricultural Income-tax Act XXIV of 1947-hereinafter referred to as the Act-providing for the levy of income-tax on agricultural income derived from lands situated in the Province of Orissa. This Act was brought into operation from July 10, 1947. By s. 3, agricultural income-tax at the rate or rates specified in the schedule was made payable for each financial year on the total income of the previous year of every person. By the proviso to that section, agricultural income of the Central Government or of the State Government or of any local authority was exempt from taxation. Section 2, cl. 1 , defined a person as inclusive of a Ruler of an Indian State. The appellant in these three appeals is the former Ruler of the State of Sonepur. After the establishment of the Dominion of India on August 15, 1947, the appellant as the Ruler of the State of Sonepur executed an instrument of accession to the., Dominion restricted to three subjects-Defence, External Affairs and Communications. On December 15, 1947, he executed a merger agreement whereby the territory of the State of Sonepur became merged with the territory of the Dominion of India. By virtue of the merger agreement, the Government of India acquired full sovereign rights over the territory of the State, but ownership of private properties belonging to the appellant and full enjoyment thereof were under the agreement guaranteed to him under Art. 3. In exercise of the powers companyferred by the Extra Provincial Jurisdiction Act 47 of 1947, the Government of India by numberification dated March 23, 1948, delegated to the Provincial Government of Orissa full powers to administer the merged States of Orissa including the State of Sonepur. The Government of the Province of Orissa applied to the merged States s. 1 of the Act as from January 19, 1949, and by numberification dated April 1, 1949, the remaining provisions of the Act. In the meantime, by amendment, two new sections, s. 290 A and s. 290 B were incorporated in the Government of India Act, 1935. The Governor-General of India was thereby given power to direct by order that a merged State shall be administered in all respects as if it formed part of the Governors Province specified in the order. The Governor-General of India exercising authority under ss. 290 A and 290 B issued on July 27, 1949, an order providing that the merged Orissa States including the State of Sonepur shall be administered in all respects as if they formed part of the Province of Orissa with effect from August 1, 1949. On December 30, 1949, the Governor of Orissa promulgated Ordinance No. IV of 1949 providing inter alia that the Agricultural Income-tax Act, 1947, be applied to the merged Orissa States. This Ordinance was later replaced by the Orissa Merged States Laws Act, XVI of 1950. The appellant was then called upon by the Agricultural Income-tax Officer to furnish a return of his agricultural income. The appellant disputed his liability to pay the agricultural income-tax and declined to furnish the return. The Agricultural Income-tax Officer then proceeded to make enquiries about the income received from the lands held by the appellant and assessed him to pay tax for the years 1949-50 to 1953-54. He also imposed a penalty upon the appellant for failure to submit his returns for the years 1949-50 and 1950-51. Against the order assessing him to tax and directing him to pay penalty, the appellant preferred appeals to the Assistant Collector of Agricultural Income-tax, Sambalpur. The appeals were dismissed by that officer. Revision applications to the Collector of Commercial Taxes, Cuttack and to the Board of Revenue were unsuccessful. The appellant filed four petitions in the High Court of Orissa, being petitions Nos. 17, 16, 19 and 137 of 1954 challenging the assessments made by the taxing authorities for the years 1949-50, 1950-51, 1951-52 and 1952-53 respectively, and two more petitions being petitions Nos. 18 and 138 of 1954 against orders imposing penalty for the years 1949-50 and 1950-51 respectively. These six petitions and certain other petitions were heard by a Division Bench of the Orissa High Court. The High Court held that by the guarantee of full ownership, use and enjoyment of the private properties under the merger agreement the Properties of the appellant were number rendered immune from liability to pay tax imposed by the Act and that in the absence of an express provision, his income from lands was liable to pay agricultural income-tax. The High Court also held that even though the appellant was the Ruler of a former Orissa State, he was a person within the meaning of the Act and was liable to pay agricultural income-tax. The learned Judges therefore dismissed the petitions challenging the liability of the appellant for the assessment years 1950-51, 1951-52 and 1952-53 to pay agricultural income-tax, and they cancelled the order of assessment in respect of the year 1949-50 and the orders imposing penalty in respect of years 1949-50 and 1950-51. Against the orders dismissing the applications for setting aside the assessments in respect of years 1950-51, 1951-52 and 1952-53, these appeals have been preferred with certificate granted by the High Court under Art. 132 of the Constitution. The appellant was undoubtedly the Ruler of an Indian State before August 15. 1947, but by reason of the merger agreement executed by him on December 15, 1947, his sovereignty was extinguished. By Art. 1 of the terms of the merger agreement, the appellant ceded to the Dominion of India full and exclusive authority, jurisdiction and power for and in relation to the governance of the State and agreed to transfer the administration of the State on the appointed day and as from the said day, the Dominion Government became companypetent to exercise the power, authority and jurisdiction in relation to the governance of the State in such matters and through such agency as the Government thought fit. By Art. 3, the appellant remained entitled to full ownership, use and enjoyment of all private properties but number of the State properties belonging to him on the date of the merger. By Art. 5, the Dominion Government gua- ranteed the succession according to law and customs, to the gadi of the State and to the personal rights, privileges, dignities and titles of the appellant. It was provided by Art. 4 that the Raja, the Rani, the Rajmata, the Yuvraja and the Yuvrani shall be entitled to all personal privileges enjoyed by them whether within or outside the territories of the State, immediately before the 15th day of August, 1947 The appellant companytends that as a Ruler of the State of Sonepur, he was, before merger of his State, immune from liability to taxation in respect of his private property both within his territory and outside. He claims that he was so immune in respect of his property within his State as a Ruler and in respect of his property outside the State by the rules of International Law which, he submits, protect from taxation the properties of a Ruler of a State, situate in a foreign State. The appellant says that by Arts. 4 and 5, the Dominion Government guaranteed to him all his personal rights, privileges, dignities and titles enjoyed within or without the territory immediately before the 15th August, 1947, and that any attempt to tax his private property by the State of Orissa or by the Union Government violates that guarantee. The appellant submits that to give effect to this guarantee, all legislation must be interpreted in the light of the merger agreement which he claims is incorporated in Art. 362 of the Constitution and he must be held exempt from liability to pay tax even though numberexpress provision in that behalf has been made by the Legislature. In our view, there is numberforce in the companytentions raised by the appellant. The privileges guaranteed by Arts. 4 and 5 are personal privileges of the appellant as an ex-Ruler and those privileges do number extend to his personal property. In dealing with a similar companytention raised on the interpretation of Art. 4 of the merger agreement entered into by the Ruler of Khairagarh which was in material terms identical with the terms of Art. 4 of the agreement executed by the appellant , S. R. Das, J., as he then was , observed in Visweshwar Rao v. The State of Madhya Pradesh 1 The guarantee or assurance to which due regard is to be had is limited to personal rights, privileges and dignities of the Ruler qua a Ruler. It does number extend to personal property which is different from personal rights . The Act imposes on the agricultural income of every person liability to pay agricultural income-tax. By the proviso to s. 3, agricultural income of the Central Government, State Government and of local authorities is exempt from tax, but this exemption is number extended to any other body or person. It is true that in the definition of the expression person as originally enacted in s. 2, cl. 1 , a Ruler of an Indian State was expressly included and by the Adaptation of Laws Order, 1950, reference to Rulers of Indian States was deleted as from January 26, 1950. But by that amendment, an intention to exclude the Rulers of Indian States from liability to pay 1 1952 S.C.R. 1020, 1054. agricultural income-tax was, in our judgment, number evinced. Between the dates on which the Act wag enacted and the Adaptation of Laws Order, 1950. several political events of far reaching effect had taken place, in companysequence of which the appellant bad ceased to be a Ruler of an Indian State. On January 26, 1950, the date on which the Adaptation of Laws Order, 1950, became operative, there were in, existence numberIndian States. The sovereign rights of the erstwhile Rulers of the Indian States were extinguished, and their territories were merged in the, Indian Union. The amendment in the definition of person in s. 2, cl. i , of the Act was made number with the object of excluding the Rulers of former Indian States from liability to pay tax it was only made to delete a clause which, in view of political changes, had numberpractical significance. Liability to pay tax is imposed by the Act and there is in the Act numberexpress exemption in favour of the appellant. The claim of the appellant to exemption on the ground that he is number a person cannot therefore be sustained. Article 362 of the Constitution provides In the exercise of the power of Parliament or of the Legislature of a State to make laws or in the exercise of the executive power of the Union or of a State, due regard shall be bad to the guarantee or assurance given tinder any such companyenant or agreement as is referred to in Art. 291 with respect to the personal rights, privileges and dignities of the Ruler of an Indian State . Article 291 of the Constitution deals with the privy purse of the Rulers under any companyenant or agreement entered into by the Ruler of any Indian State before the companymencement of the Constitution payment whereof is free from tax as has been granted or assured by the Government of the Dominion of India. Article 362 recommends to the Parliament and the State Legislatures in making laws after the Constitution to have due regard to the guarantee or assurance given under any companyenant or agreement . Even though Art. 362 is number restricted in its recommendation to agreements relating to the privy purse and companyers all agreements and companyenants entered into by the Rulers of Indian States before the companymencement of the Constitution whereby the personal rights, privileges and dignities of the Ruler of an Indian State were guaranteed, it does number import any legal obligation enforceable at the instance of the erstwhile Ruler of a former Indian State. If, despite the recommendation that due regard shall be had to the guarantee or assurance given under the companyenant or agreement, the Parliament or the Legislature of a State makes laws inconsistent with the personal rights, privileges and dignities of the Ruler of an Indian State, the exercise of the legislative authority cannot, relying upon the agreement or companyenant, be questioned in any companyrt, and that is so expressly provided by Art. 363 of the Constitution. The plea of the appellant that he was number seeking to enforce the terms of the merger agreement and that be was merely resisting the claim made by the authority appointed by the State of Orissa to levy a tax inconsistently with the terms of the merger agreement, has numbersubstance. In truth, the appellant sought by his petitions under Art. 226 of the Constitution to enforce the terms of Art. 4 of the merger agreement. By his petitions, the appellant companytended that in enacting the Agricultural Income-tax Act and in seeking to enforce it against him, the State of Orissa acted companytrary to the terms of the merger agreement and he asked the High Court to enforce the terms of the merger agreement. On the grounds therefore that liability to pay agricultural income-tax in respect of his private property is imposed upon the appellant by s. 3 of the Act, and the immunity claimed by the appellant is number one of the personal rights or privileges within the meaning of the merger agreement and that the claim made by the appellant is number justiciable, the objection raised by the appellant to liability to pay agricultural income-tax assessed under the Act cannot be sustained. Two subsidiary companytentions which were sought to be raised before us may be briefly referred to. It was urged that of the forty-two villages of which the appellant is held by the assessing authority to be the holder, two were in the year 1945 transferred by him to the Yuvrani the appellants sons wife and on that,, account, the income of those villages was number liable to be taxed in his hands. It appears from the assessment order that this companytention was raised before the Agricultural Income-tax Officer and that officer rejected the companytention relying upon s. 14, cl. 1 , of the Act. It is unnecessary for the purpose of these appeals to decide whether the assessing officer was right in the view which he took. In the petitions filed by the appellant in the High Court, this plea was number raised and numberrelief was claimed by him in respect of the income of the two villages. The question was never mooted before the High Court and the State of Orissa had numberopportunity of meeting the claim number sought to be made by the appellant. On the ground that the question was never raised in the High Court, we reject this companytention. It was also urged that whereas the assessing officer has found that the appellant had lands in forty-two villages, in the inventory of properties submitted by the appellant to the Government, only eighteen villages were set out and this inventory was accepted by the Government of India. Relying upon this premise, the appellant companytends that he is liable to pay tax in respect of his income from these eighteen villages and numbermore. But even this plea was never raised in the High Court and we cannot, in dealing with these appeals, enter upon an enquiry into a question which was never raised on which numberevidence was led, and on which numberfinding was given by the High Court. On the view taken by us, appeals Nos. 307, 308 and 309 of 1958 fail and are dismissed with companyts.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 357 of 1958. Appeal from the judgment and order dated April 24, 1957, of the Patna High Court in Misc. Judicial Case No. 57 of 1955. V. Viswanatha Sastri and I. N. Shroff, for the appellant. N. Rajagopal Sastri and R. H. Dhebar, for the respondent. 1960. October 25. The Judgment of the Court was delivered by SHAH J.-The appellant executed a deed of trust settling certain lands described in schedule A and the rents of lands described in schedule C for the maintenance of certain temples and Thakoorbaries. The material terms of the deed of trust are cl. 6- And whereas the declarant feels that a Declaration of Trust should be made whereby the income of a part of the Raj properties may be earmarked and specially devoted to the maintenance of the aforesaid institutions as also the Declarant may as hitherto treat himself and be treated by others as a legal Trustee of the said institutions and the properties out of the income of which the said maintenance is being and will be provided for. cl. 7- The declarant declares that henceforth he holds and will hold the properties detailed at the foot thereof in Schedule A in trust for religious purposes of maintaining the religious institutions more fully described in Schedule B annexed here-to. cl. 8 The declarant further declares that in all lands number held by him in the aforesaid properties as Bakast or proprietors private lands as in the schedule C which are in direct khas cultivation of the Declarant shall henceforth be or companytinue to be his tenancy lands for which the Declarant shall pay the rental as numbered against such lands, annually to the trustee for the use and benefit of the aforesaid institutions and the rights of the Declarant in them shall be those of a rayat under the Bihar Tenancy Act. The net income of all the lands set out in Schedule A. after providing for the expenses of management and the taxes payable thereon was estimated at Rs. 1,81,717 and the net rental of the properties described in Schedule C was estimated at Rs. 10,208 and from the aggregate of these two amounts after deducting 15 as trustees remuneration, the balance of the income estimated at Rs. 1,63,136-4-0 was to be utilised for the objects of the trust. In the assessees income determined by the Income-Tax Officer for the assessment year 1950-51, Rs. 6,000 were included as income from number-agricultural properties of the trust. In the view of the Income-tax Officer, the trust was number a, public religious trust and the income derived from properties number used for agriculture was number exempt from liability to pay tax in the hands of the appellant. In appeal against the order of assessment, the Appellate Assistant Commissioner held that the income companying to the hands of the appellant from the trust properties was number taxable as private income of the appellant, but in his view, the remuneration amounting to Rs. 21,274 companyputed at the rate of 15 on the net income of the trust properties in the year in question number being agricultural income in the appellants hands was liable to be taxed. In appeal to the Income-tax Appellate Tribunal, Patna Bench, Patna, the order passed by the Appellate Assistant Commissioner in so far as it related to remuneration received by the appellant was affirmed. The High Court of Judicature at Patna thereafter at the instance of the appellant directed the Income-tax Appellate Tribunal to submit a statement of the case on five questions set out in the order. The fifth question which is the only question material in this appeal was as follows Whether, in the facts and the circumstances of the case, the amount of Rs. 21,274 being the amount paid to the assessee in his character of a Shebait of the Trust properties should have been held to be exempted from taxation on the ground that it is agricultural income ? The High Court agreed with the Tribunal that the remuneration was received by the appellant under a companytract, and it was number agricultural income, merely because the source of the money was agricultural income. The High Court accordingly answered the fifth question against the assessee. This appeal is filed by the appellant with leave under s. 66A 2 of the Indian Income-tax Act granted by the High Court limited to the question whether the amount received by the appellant from the trust property in his character as a shebait was exempt from liability to pay The material part of the definition of Agricultural income in s. 2 1 is as follows Agricultural income means a any rent or revenue derived from land which is used for agricultural purposes and is either assessed to land revenue in the taxable territories or subject to a local rate assessed and companylected by officers of the Government as such. b Agricultural income falling under cl. a ought manifestly to be received as rent or revenue derived from land used for agricultural purposes. The income received from agricultural properties of the trust by the appellant as trustee was indisputably agricultural income in his hands and it was by virtue of s. 4 3 viii exempt from liability to pay tax. The appellant claims that the remuneration which by the companyvenant companytained in the deed of trust he has received is also exempt under s. 4 3 viii because, when he appropriated a fraction of the rent or revenue of agricultural lands towards his remuneration, the original character of the income was number altered. The appellant has numberbeneficial interest in the lands which are the subject-matter of the trust number is he given under the trust a right to receive and appropriate to himself the income of the properties or a part thereof in lieu of any beneficial interest in that income. The source of the right in which a fraction of the net income of the trust is to be appropriated by the appellant as his remuneration is number in the right to receive rent or revenue of agricultural lands, but rests in the companyenant in the deed to receive remuneration for management of the trust. The income of the trust appropriated by the appellant as remuneration is number received by him as rent or revenue of land the Character of the income appropriated as remuneration due is again number the same as the character in which it was received by the appellant as trustee. Both the source and character of the income are therefore altered when a part of the income of the trust is appropriated by the appellant as his remuneration, and that is so, numberwithstanding that companyputation of remuneration is made as a percentage of the income, a substantial part whereof is derived from lands used for agricultural purposes. The remuneration number being received as rent or revenue of agricultural lands under a title, legal or beneficial in the property from which the income is received, it is number income exempt under s. 4 3 viii . We may briefly refer to the authorities which illustrate the meaning of agricultural income in s. 2 1 of the Income- tax Act. In Nawab Habibulla. v. Commissioner of Income Tax, Bengal 1 , the Privy Council held that the remuneration received by a mutwalli of a wakf estate, number depending on the nature of the properties or assets which companystitute the wakf number on the amount of income derived from the wakf estate, is number agricultural income within the meaning of s. 2 1 of the Indian Income-tax Act even though the income derived by the wakf estate is from properties used for agricultural purposes. In Premier Construction Co., Ltd. v. Commissioner of Income Tax, Bombay City 2 , it was held by the Privy Council that income received by an assessee number itself of a character to fall within the definition of agricultural income does number assume the character of agricultural income by reason of the source from which it is derived, or the method by which it is calculated. But if the income received falls within 1 1943 L.R. 70 I.A. 14. 2 1948 L.R. 75 I.A. 246. the definition of agricultural income, it earns exemption, in whatever character the assessee receives it. In that case, the remuneration payable to a managing agent of a companypany in companysideration of services to be rendered was a minimum annual salary of Rs. 10,000 payable irrespective of whether the companypany made. any profit but if 10 of the profits made by the companypany exceeded Rs. 10,000 the agent was to get an additional remuneration calculated as a percentage upon the profits of the companypany without regard to the source from which those profits were derived. One of the sources of income of the companypany was agricultural income. It was held by the Privy Council that the assessee received numberagricultural income as defined by the Act he received remuneration under a companytract for personal service calculated on the amount of profits earned by the employer. In Commissioner of Income Tax, Bihar and Orissa v. Kameshwar Singh 1 , income received by a mortgagee who went into possession of properties mortgaged to him was held to be agricultural income but that was because under the deed of mortgage, the mortgagee was to be in possession of the properties and in his relation to the cultivators of the soil, he stood in the position of landlord dealing directly with them and companylecting the rents. The mortgagee had to pay Government revenue, cesses and taxes and his name was registered in the Land Registration Department. He alone was able to sue for rent whether current or arrears, to sue for enhancement or for ejectment and was able to settle lands with raiyats and tenants in all the properties, in fact, he was in a position to take all proceedings which the mortgagor would have been able to take in the ordinary companyrse if the lands leased and mortgaged had remained in the mortgagors possession. The mortgagee received the income, because of the legal ownership vested in him and even though under the companyenant of the mortgage deed, he was required to appropriate the income towards his dues, the income in his hands did number cease to be agricultural income. In Kameshwar Singhs case 1 , the companyrt was called upon to companysider 1 1935 L.R. 62 I.A. 215. the nature of the primary receipt by the mortgagee and number of the appropriation made under the companyen. ant of the deed of mortgage. In K. B. Syed Mohammad Isa and another v. Commissioner of Income Tax, Central and United Provinces 1 , the assessee was a mutwalli appointed under two deeds. Under both the deeds, he was to receive agricultural and number-agricultural income and to utilise the same for purposes of the trust. Under one of. the two deeds of trust, the balance was to be retained by the mutwalli for his personal expenses and in the other in lieu of his services. It was held by the Allahabad High Court that the residue of the amounts retained by the mutwalli under both the deeds of trust was, as agricultural income, exempt from liability to pay tax. In the view of the companyrt, though the language used in the two deeds of trust was different, the intention of the settler was the same the mutwalli was required to perform the functions of his office and so long as he did so, he was entitled in companysideration of this service to appropriate the residue of the profits. But in each case, the mutwalli was a beneficiary with an obligation attached to his enjoyment of the benefit, and had therefore two capacities, one as mutwalli and the other as beneficiary. The companyrt on those facts held that the balance of the income from the zamindari went through the mutwalli to the beneficiary by virtue of an obligation imposed under the terms of the trust deed itself upon the income of the property. The mutwalli was the channel through which the beneficiary received the money and the beneficiary was to all intents and purposes the direct recipient of the income, and there was numberchange of source and numberalteration in the character of the income. It remained agricultural income after it had passed into the hands of the beneficiary. In the present case, the appellant has numberbeneficial interest in the trust property. The appellant so far as his remuneration is companycerned is again number the direct recipient of the income of the I,L.R. 1942 All. 425. both altered when agricultural income is appropriated under the companyenant in the deed of trust as remuneration for services rendered.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 375 of 1959. Appeal from the Judgment and Order dated the 12th August, 1958, of the Assam High Court in First Appeal No. 11 of 1958. K. Jha and Sukumar Ghose, for appellants Nos. 1 to 3. S. Pathak and Naunit Lal, for respondents Nos. 1 and 2. 1960. October 27. The Judgment of the Court was delivered by WANCHOO J.-This is an appeal on a certificate granted by the Assam High Court in an election matter. An election was held in the double-member companystituency of Goalpara to the Assam Legislative Assembly. Nomination papers were filed on the 19th January, 1957, by a number of persons including Anirara Basumatari hereinafter called the appellant . He was a candidate for the seat reserved for scheduled tribes. The numberination paper of the appellant was rejected by the returning officer on the ground that he was disqualified under s. 7 b of the Representation of the People Act, No. XLIII of 1951, hereinafter called the Act . The polling took place on February 25,1957, and Khagendranath and Hkim Chandra Rabha were elected, the latter being a member of a scheduled tribe. Thereupon an election petition was filed by an elector challenging the election of the two successful candidates on a number of grounds. of these grounds, however, only two are number material, namely, 1 that the numberination paper of the appellant was wrongly rejected, and 2 that a companyrupt practice was companymitted by the successful candidates inasmuch as voters were carried on mechanically propelled vehicles to the polling booths. The election tribunal held on the, first point that the numberination paper of the appellant had been improperly rejected. On the second point it hold that the companyrupt practice alleged had number been proved. In the result, the election was set aside. Thereupon there was an appeal by the two successful candidates to the High Court. The High Court was of the view that the numberination paper of the appellant was properly rejected further on the question of companyrupt practice the High Court agreed with the companyclusion of the tribunal. In the result the appeal was allowed and the election petition was ordered to be dismissed. There was then an application to the High Court for a certificate to appeal to this Court which was granted and that is how the matter has companye up before us. The main companytention on behalf of the appellant is that the High Court was wrong in companying to the companyclusion that the numberination paper of the appellant was properly rejected under s. 7 b of the Act. That provision lays down that a person shall be disqualified for being chosen as a member of either House of Parliament or of the Legislative Assembly or Legislative Council of a State if he is companyvicted by a companyrt in India of any offence and sentenced to imprisonment for number less than two years, unless a period of five years, or such less period as the Election Commission may allow in any particular case, has elapsed since his release. The appellant in this case was companyvicted under s. 4 b of the Explosive Substances Act No. VI of 1908, and sentenced to three years rigorous imprisonment on July 10, 1953. The numberination paper in this case was filed in January 1957 and the election was held in February 1957 and therefore five years had number elapsed since his release. But though the appellant was sentenced to three years rigorous imprisonment, his sentence was remitted by the Government of Assam on November 8, 1954, under s. 401 of the Code of Criminal Procedure and he was released on November 14, 1954. The companytention of the appellant before the election tribunal was that in view of this remission his sentence in effect was reduced to a period of less than two years and therefore he companyld number be said to have incurred disqualification within the meaning of s.7 b . This companytention was accepted by the tribunal and that is why it held that the numberination paper of the appellant was improperly rejected. When the case came to be argued in the High Court on behalf of the successful candidates, two arguments were addressed in support of the plea that the numberination paper of the appellant was properly rejected. In the first place, it was urged that in view of the provisions of Articles 72, 73, 161 and 162 of the Constitution read with s. 401 of the Code of Criminal Procedure, the State Government had numberauthority to remit the sentence of the appellant and secondly even if the remission was properly granted it would number affect the sentence imposed by the Court, though the appellant might number have had to undergo part of the sentence after the date of the remission order. The High Court did number decide the question as to the power of the State Government to grant remission in this case as it had number full materials before it because the matter was number raised before the tribunal, though it was inclined to the view that the State Government might number have such power. But the High Court was of the opinion that a remission of sentence did number have the same effect as a free pardon and did number have the effect of reducing the sentence passed on the appellant from three years to less than two years, even though the appellant might have remained in jail for less than two years because of the order of remission. What s. 7 b lays down is that there should be a companyviction by a companyrt in India for any offence and a sentence of imprisonment for number less than two years in order that a person may be disqualified for being chosen as a member of either House of Parliament or of Legislative Assembly or of Legislative Council of a State. In terms, therefore, the provision applies to the case of the appellant for he was companyvicted by a companyrt in India and sentenced to imprisonment for more than two years. Further the period of five years had number expired after his release. The appellant had applied to the Election Commission for removing the disqualification but it had refused to do so. The main question therefore that falls for companysideration is whether the order of remission has the effect of reducing the sentence in the same way in which an order of an appellate or revisional criminal companyrt has the effect of reducing the sentence passed by the trial companyrt to the extent indicated in the order of the appellate or revisional companyrt. Now it is number disputed that in England and India the effect of a pardon or what is sometimes called a free pardon is to clear the person from all infamy and from all companysequences of the offence for which it is granted and from all statutory or other disqualifications following upon companyviction. It makes him, as it were, a new man See Halsburys Laws of England, Vol. VII, Third Edition, p. 244, para 529 . But the same effect does number follow on a mere remission which stands on a different footing altogether. In the first place, an order of remission does number wipe out the offence it also does number wipe out the companyviction. All that it does is to have an effect on the execution of the sentence though ordinarily a companyvicted person would have to serve out the full sentence imposed by a companyrt, he need number do so with respect to that part of the sentence which has been ordered to be remitted. An order of remission thus does number in any way interfere with the order of the companyrt it affects only the execution of the sentence passed by the companyrt and frees the companyvicted person from his liability to undergo the full term of imprisonment inflicted by the companyrt, though the order of companyviction and sentence passed by the companyrt still stands as it was. The power to grant remission is executive power and cannot have the effect which the order of an appellate or revisional companyrt would have of reducing the sentence passed by the trial companyrt and substituting in its place the reduced sentence adjudged by the appellate or revisional companyrt. This distinction is well brought out in the following passage from Weaters Constitutional Law on the effect of reprieves and pardons vis-a-vis the judgment passed by the companyrt imposing punishment, at p. 176, para 134- A reprieve is a temporary suspension of the punishment fixed by law. A pardon is the remission of such punishment. Both are the exercise of executive functions and should be distinguished from the exercise of judicial power over sentences. The judicial power and the executive power over sentences are readily distinguishable, observed Justice Sutherland, 1 To render a judgment is a judicial function. To carry the judgment into effect is an executive function. To out short a sentence by an act of clemency is an exercise of executive power which abridges the enforcement of the judgment but does number alter it qua judgment. Though, therefore, the effect of an order of remission is to wipe out that part of the sentence of imprisonment which has number been served out and thus in practice to reduce the sentence to the period already undergone, in law the order of remission merely means that the rest of the sentence need number be undergone, leaving the order of companyviction by the companyrt and the sentence passed by it untouched. In this view of the matter the order of remission passed, in this case though it had the effect that the appellant was re. leased from jail before he had served the full sentence of three years imprisonment and had actually served only about sixteen months imprisonment, did number in any way affect the order of companyviction and sentence passed by the companyrt which remained as it was. Therefore the terms of s. 7 b would be satisfied in the present case and the appellant being a person companyvicted and sentenced to three years rigorous imprisonment would be disqualified, as five years had number passed since his release and as the Election Commission had number removed his disqualification. We may number refer to a number of cases on which reliance has been placed on behalf of the appellant. In Venkatesh Yeshwant Deshpande v. Emperor 1 , Bose, J. as he then was , observed as follows at p. 530- The effect of an order of remission is to wipe out the remitted portion of the sentence altogether and number merely to suspend its operation suspension A.I.R. 1938 Nag. 513. is separately provided for. In fact, in the case of a pardon in England statutory and other disqualification following upon companyviction are removed and the pardoned man is enabled to maintain an action against any person who afterwards defames him in respect of the offence for which he was companyvicted. That may number apply in full here but the effect of an order of remission is certainly to entitle the prisoner to his freedom on a certain date. It is urged that if the effect of an order of remission is to wipe out the remitted portion of the sentence altogether it means that the sentence is reduced to the period already undergone and the order of remission has the same effect as an order of an appellate or revisional companyrt reducing the sentence to the period already undergone. That case, however, dealt with a different point altogether, namely, whether a remission having been granted and having taken effect it companyld be cancelled thereafter. It was in that companytext that these observations were made. Even so, the learned judge was careful to point out that there was a difference between a pardon and a remission and the effect of an order of remission is to entitle the prisoner to his freedom on a certain date. That case is numberauthority for the view that the order of remission amounts to changing the sentence passed by a companypetent companyrt and substituting therefor the sentence of imprisonment already undergone up to the date of release following the order of remission. Reference was also made to a number of election cases in which the view which has been urged on behalf of the appellant seems to have been taken. We may refer to only one of them, namely, Ganda Singh v. Sampuran Singh 1 , which has specifically dealt with this point. In that case an order was passed by the Maharaja of Nabha granting amnesty to all political prisoners detained or companyvicted under the Punjab Public Safety Act, 1947, as applied to Nabha State, and releasing them unconditionally. The same order also provided for grant of remission to persons companyvicted for offences other than political offences on 1 1953 3 E.L.R. 17. a certain scale. The successful candidate in that case was sentenced to more than two years rigorous imprisonment under the Punjab Public Safety Act, as applied to Nabha State, and was thus a political prisoner. He was therefore released before he had served two years imprisonment. The main plank of the election petition in that case was that the successful candidate was disqualified under s. 7 b of the Act in view of his companyviction and sentence and the election tribunal held that remission by government executive authority has the same effect as an order passed by a companyrt of law in appeal or on revision and that under s. 7 of the Act the companyrt has to look to the amount of sentence imposed on a person and it made numberdifference whether the sentence was reduced by a companyrt of law on appeal or by revision or by the powers of the government reserved for it under s. 401 of the Code of Criminal Procedure, as, the effect in both cases was the same. We are of opinion that this view is incorrect, though perhaps on the facts of that case the order of the tribunal was right for it seems that political prisoners had been granted a pardon by the Ruler of Nabha and number a mere remission under s. 401 of the Code of Criminal Procedure. We cannot agree that remission by government has the same effect as an order passed by a companyrt of law in appeal or on revision. It is true that under s. 7 b of the Act one has to look at the sentence imposed but it must be a sentence imposed by a companyrt. Now where the sentence imposed by a trial companyrt is varied by way of reduction by the appellate or revisional companyrt, the final sentence is again imposed by a companyrt but where a sentence imposed by a companyrt is remitted in part under s. 401 of the Code of Criminal Procedure that has number the effect in law of reducing the sentence imposed by the companyrt, though in effect the result may be that the companyvicted person suffers less imprisonment than that imposed by the companyrt. The order of remission affects the execution of the sentence imposed by the companyrt but does number affect the sentence as such, which remains what it was in spite of the order of remission. It is also well to remember that s. 7 b speaks of the companyviction and sentence passed by a companyrt of law it does number speak of the period of imprisonment actually suffered by the companyvicted person. The other election cases to which our attention was drawn by the learned companynsel for the appellant are similar and they are all in our opinion wrongly decided. We are therefore of opinion that the High Court was right in the view that the numberination paper of the appellant was properly rejected. The next companytention on behalf of the appellants is that both the High Court and the tribunal were wrong in holding that a companyrupt practice within the meaning of s. 100 1 b read with s. 123 5 had number been proved in this case. The case of the appellant was that voters were carried by mechanically propelled vehicles to the polling booths by Birendra Kumar Nath who was in-charge of the electioneering campaign on behalf of the Congress Party and Bholaram Sarkar who was president of the Primary Congress Committee of Dhupdhara. The successful candidates were both companytesting the election as numberinees of the Congress Party and therefore these two persons who carried electors in mechanically propelled vehicles to the polling booths did so as agents of the successful candidates and with their companysent. The High Court as well as the election tribunal hold that though Birendra Kumar Nath and Bholaram Sarkar might be deemed to be the agents of the successful candidates for purposes of the election and though the hiring of mechanically propelled vehicles by the agents for companyveyance of electors to polling booths had been proved, there was numberproof that this was done with the companysent, express or implied, of the successful candidates. The High Court pointed out that companysent, express or implied, of the candidates was necessary for purposes of s. 100 1 b and was of the view that on the facts proved in this case such companysent companyld number be inferred and the circumstances did number companyvincingly lead to an inference that the companyrupt practice in question was companymitted with the knowledge and companysent of the successful candidates. In view of this companycurrent finding of the High Court and the tribunal on this question, namely, whether there was companysent, express or implied, of the successful candidates to the companymission of this companyrupt practice, it is in our opinion idle for the appellant number to companytend that there was companysent express or implied, as required by s. 100 1 b . The inference whether there was companysent or number from the facts and circumstances proved is still an inference of fact from other facts and circumstances and cannot be a question of law as urged by learned companynsel for the appellant. Reference in this companynection may be made to Meenakshi Mills, Madurai v. The Commissioner of Income-tax, Madras 1 , where it was held that a finding of fact, even when it is an inference from other facts found on evidence, is number a question of law and that such an inference can be a question of law only when the point for determination is a mixed question of law and fact.

Case appeal was rejected by the Supreme Court

ORIGINAL JURISDICTION Petition No. 59 of 1960. Petition under Article 32 of the Constitution of India for enforcement of-Fundamental Rights. S. R. Chari, S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the Petitioners. M. Sikri, Advocate-General for the State of Punjab, H. Doabia, Additional Advocate-General for the State of Punjab, M. S. Punnu, Deputy Advocate-General for the State of Punjab and D. Gupta, for the Respondents. 1660. October 28. The Judgment of the Court was delivered by K. DAS J.-This is a writ petition. The three petitioners before us are 1 R. P. Kapur, a member of was serving as a Commissioner in the State of Punjab, 2 Sheila Kapur, his wife, and 3 Kaushalya Devi, his mother-in-law. They have moved this Court under Art. 32 of the Constitution for the enforcement of their rights under Arts. 14 and 21 of the Constitution, which rights they say have been violated by the respondents who are the State of Punjab, Sardar Pratap Singh Kairon, Chief Minister thereof, and certain officials, police, administrative and magisterial who have been companyducting, or are companynected with, the investigation or inquiry into a number of criminal cases. instituted against the petitioners. We shall refer to some of these officials later in this judgment in relation to the part which they have played or are playing in those criminal cases. Briefly stated the case of the petitioners is that petitioner number 1 had the misfortune to incur the wrath of the Chief Minister of the State. It is alleged that the Chief Minister was annoyed with petitioner number 1, because the latter did number show his readiness to give evidence for the prosecution in a case known as the Karnal Murder Case later referred to as the Grewal case in which one D. S. Grewal, then Superintendent of Police, Karnal, and some other police officials were, along with others, accused of some serious offences. That case was transferred by this Court to a Special Judge, at Delhi, who companymenced the trial sometime in May June 1959. Petitioner number 1 was at the time Com- missioner of Ambala, and he alleges that he was told by the Chief Minister that it was proposed to cite the Deputy Commissioner and the Deputy Inspector-General of Police as prosecution witnesses in the said case and it would be in the fitness of things that petitioner number 1 should also figure as a prosecution witness to this suggestion petitioner number 1 gave a somewhat dubious reply to the effect that his appearance as a prosecution witness might or might number help the prosecution. Another reason for the displeasure of the Chief Minister, as alleged in the petition, related to certain orders which petitioner number 1 had passed as Commissioner, Patiala Division, in a revenue case known as the Sangrur case. We shall presently give more details of that case, but it is enough to state here that the allegation is that in that case petitioner number 1 passed certain orders, involving the disposal of properties worth about Rs. 9 lacs, which were adverse to one Surinder Kairon, son of the Chief Minister. It is stated that as a result of the displeasure which petitioner number 1 bad incurred for the two reasons mentioned above, a special procedure was adopted in the investigation of the criminal cases instituted against the petitioners and some new cases were started through the instrumentality of the C. 1. D. Police with a view to subject the petitioners to harassment and persecution. The substantial allegation, to quote the language of the petition, is that a special procedure or rather a technique has been devised for circumventing the mandatory provisions of the law meaning the Code of Criminal Procedure as regards the petitioners, two of whom are ladies and who are being dragged about unnecessarily because they happen to be related to petitioner number 1. It is stated that there has been a deliberate departure from the numbermal and legal procedure in the matter of institution and investigation of criminal cases against the petitioners- a departure said to be the result of an evil eye and unequal hand which the petitioners allege companystitutes a denial of the right of equal protection of the laws guaranteed to them under Art. 14 of the Constitution. The special procedure or technique of which the petitioners companyplain is said to companysist of, several items, such as 1 entertainment of a criminal companyplaint personally by the Chief Minister 2 institution of companyplaints by the C. 1. D. police 3 registration of first informations after such companyplaints 4 investigations in advance of the companyplaints 5 investigation by specially chosen hand- picked as learned Counsel for the petitioners has suggested I.D. officials, number necessarily of high rank, who have numberpower to investigate 6 the arrangement of a special I.D. squad to unearth something against the petitioners, etc. In the petition four criminal cases were referred to as illustrative of the special procedure, said to be unwarranted by law, adopted against the petitioners, and in a supplementary petition filed on June 9, 1960, some more cases were referred to. After we had companyveyed to learned Counsel for the petitioners that we companyld number companysider the supplementary petition which the respondent had numberopportunity of meeting, the supplementary petition was withdrawn. Therefore, we do number propose to say anything about the cases which are referred to in the supplementary petition. The four cases mentioned in the original petition are - F.I.R. number 304 of 1958, given by one M. L. Sethi, referred to hereinafter for brevity as Sethis case F.I.R. number 39 of 1959, instituted on the companyplaint of one M. L. Dhingra, called hereinafter as Dhingras case F.I.R. number 135 of 1959, instituted on the companyplaint of the Civil Supply Officer, Karnal, the accused in this case being the State Orphanage Advisory Board of which petitioner number I was Vice-President at the relevant time and Kartar Singh, farm manager of Kaushalya Devi, called the Orphanage case and F.I.R. number 26 of 1960, instituted on the companyplaint of Daryao Sing, D.S.P., C.I.D., Karnal, one of the respondent police officials in which there are three accused persons including petitioner number 1, called for brevity the Ayurvedic Fund case. We may say at once that we are number companycerned with the merits of any of the aforesaid cases that is a question which will fall for companysideration if and when the cases are tried in Court. Therefore, numberhing said in this judgment shall be companystrued as affecting the merits of the cases. Two questions have been posed before us in relation to these cases one is if in the matter of institution and investigation of these cases a special procedure unknown to law has been adopted and the other is if the petitioners have been singled out for unequal treatment in administering the law relating to the institution and investigation of criminal cases in the State. The two questions are in one sense companynected, for if a special procedure unknown to law has been adopted against the petitioners, that by itself will be a denial of the right of the equal protection of the laws. Learned Counsel for the petitioners has, however, argued the second question somewhat independently of the first question, and he has submitted that even if the procedure adopted against the petitioners is warranted by law, it is a departure from the numbermal procedure and has been adopted with an evil eye and unequal hand so as to put the petitioners to harassment and persecution. We shall companysider both these questions in relation to the procedure adopted in the four cases referred to above. It is necessary to state that the petition has been companytested by the respondents. The Chief Minister has himself made numberaffidavit in respect of the allegations made against him but affidavits in reply have been made by the Chief Secretary and the Home Secretary to the Punjab Government and some of the respondent officials. To these affidavits we shall advert later in somewhat greater detail. We shall also have something to say about the failure of the Chief Minister to make an affidavit. It is enough to state here that the respondents have seriously companytested both the allegations made on behalf of the petitioners, namely, 1 that a special procedure unknown to law was adopted against them or 2 that the procedure adopted was motivated by an evil eye and unequal hand so as to persecute and harass the petitioners. The respondents have said that the procedure adopted was warranted by law and the employment of the C. 1. D. officials in the investigation of the cases against the petitioners was due to the special nature of the cases. The respondents have also companytested the companyrectness of the allegation that petitioner number 1 had incurred the displeasure of the Chief Minister on account of the two reasons stated in the petition. In brief, the claim of the respondents is that there has been numberviolation of the rights of the petitioners guaranteed under Arts. 14 and 21, and there are numbergrounds for interference by this Court under Art. 32 of the Constitution. It has been stated on behalf of the respondents that in the two cases called Setbis case and Dhingras case, the petitioners had moved the High Court without success for quashing the proceedings and in Sethis case, an appeal to this Court against the order of the High Court also proved unsuccessful. It is also pointed out that a petition made by petitioner number 1 in the High Court for proceeding by way of companytempt of companyrt against the Chief Minister on some of the allegations number raised or allegations similar in nature, was dismissed in limine and the learned Advocate-General of the Punjab has taken us through the order of the High Court in respect of some of the allegations made. Having stated the respective cases of the parties before us, we shall proceed number to a more detailed examination of the procedure adopted in the four cases instituted against the petitioners. But before we do so, it is necessary to say a few words about Grewals case and Sangrur case which are stated to furnish the reasons why petitioner number 1 incurred the displeasure of the Chief Minister. It is alleged that in Grewals case petitioner number 1 was asked to give evidence for the prosecution, but he gave a dubious reply which displeased the Chief Minister. It is worthy of numbere, however, that the trial in Grewals case began in May-June, 1959 Sethis companyplaint was made in December, 1958 and Dhingras in February, 1959. Obviously, those two cases companyld number be the result of any refusal by petitioner number 1 to give evidence in Grewals case. On May 28, 1959, petitioner number 1 wrote to the Chief Secretary about Sethis case and Dhingras case, but numberallegation was made therein against the Chief Minister. What the petitioner wanted then was that an opportunity should be given to him to explain his position. On June 9, 1959, petitioner number 1 again wrote to the Chief Secretary about the companyplaints of Sethi and Dhingra-again there was numberallegation against the Chief Minister. On June 29, 1959, petitioner number 1 filed two petitions in the Punjab High Court for quashing the proceedings in Sethis case and Dhingras case in this petition an allegation was made that powerful influences were operating against the petitioner to harm him and debar him officially and Sethis case and Dhingras case were the result of such influences, but there was numberspecific mention of Grewals case and of any request to the petitioner to give evidence in that case. It was for the first time on July 20, 1959, when the petition for companytempt proceedings was filed that a specific allegation against the Chief Minister was made in paragraphs 35 to 37 thereof this is annexure 1 to the present petition . This petition was dismissed in limine, the High Court saying that it was number prima facie satisfied that the allegation was made out. We do number think that petitioner number 1 has been able to advance his case any further in spite of the fact that the Chief Minister has made numberaffidavit, a matter to which we shall advert later. As to the Sangrur case, that was also referred to in the petition of July 20, 1959, and the High Court did number accept the allegation of petitioner number 1. What happened in that case was this. The late Sardar Mukan Sing of Sangrur left two widows, Sardarni Pritam Kuar and Sardarni Pavitar Kaur Sardarni Pavitar Kaur had three daughters one of whom was married to Surinder Singh Kairon, son of the Chief Minister. The Sangrur estate was in charge of the Court of Wards, that is, the Financial Commissioner, Punjab. On June 19, 1958, the Court of Wards decided to release the estate after partitioning the immovable property between the two widows. At one time a question arose as to whether the immovable properties should be partitioned into five equal shares for the two widows and three daughters or into two shares only for the two widows. Sometime before May 6, 1959, it was decided that the partition would be of two shares only and thereafter a detailed mode of partition was agreed to between the parties. This is clear from the numbere of petitioner number 1 dated May 6, 1959. Thereafter there was numbermore dispute left, and the case of petitioner number1 that he was arrested on July 18, 1959, because- he dictated an adverse order some days previously which had been typed but number yet signed does number prima facie appear to be companyrect, apart altogether from the question whether petitioner number 1 was acting merely as the channel between the Deputy Commissioner, and the Financial Commissioner, the latter being the only authority companypetent to pass final orders in the matter. We have, therefore, companye to the companyclusion that the petitioners have number established what they have alleged, namely, that R. P. Kapur, one of the petitioners, had incurred the displeasure of the Chief Minister by reason of what happened in the Grewal case and the Sangrur case. Whether there were other reasons, administrative or otherwise, for the displeasure of the Chief Minister is a matter which is number germane to the present case. In the affidavits filed before us some reference has been made to the past record of R. P. Kapur. We companysider it unnecessary to refer to that record firstly , because it is number rele- vant to the case before us, and secondly because we think that it is number fair to refer to the companyfidential record of an officer unless the circumstances in which certain adverse remarks were made are known. We proceed number to companysider the four criminal cases pending against the petitioners or some of them, in relation to the two points urged 1 whether in the institution and investigation of these cases a special procedure unknown to law has been adopted and 2 if the petitioners have been singled out for unequal treatment in administering the law relating to the institution and investigation of criminal cases in the State. The first two cases, namely, Sethis case and Dhingras case need be dealt with at some length. Sethis case started on a companyplaint which it was said was sent direct to the Chief Minister. Four material allegations about fraudulent misrepresentation were made in that companyplaint. It was alleged that R. P. Kapur had fraudulently misrepresented to Sethi that a particular piece of land which he had sold to Sethi had been purchased by him at Rs. 10 per square yard that he had fraudulently companycealed from Sethi the pendency of certain proceedings before the Land Acquisition Collector, Delhi, and of the acquisition of the said land under s. 17 of the relevant Act that he had made a fraudulent misrepresentation as regards the scheme of housing with regard to the area in which the land lay. Though the companyplaint was dated December 10, 1958, it appears to have been made over to the Additional Inspector General of Police on December 23, 1958. The Additional Inspector General of Police then appears to have passed an order to the following effect Register a case and investigate personally . This was addressed to Sardar Hardayal Singh, S. P. Thereupon Sardar Hardayal Singh, Deputy Superintendent of Police, C.I.D., Amritsar, appears to have drawn up a first information report. The original companyplaint which Sethi filed has number been produced before us. What was produced before us was a carbon companyy and on that carbon companyy was the order of the Additional Inspector General of Police to which we have already made a reference. The allegation of the petitioners was that the original companyplaint had been sent to the Chief Minister and the Chief Minister had passed certain orders thereon. On behalf of the petitioners it was suggested that the original was number produced in order to companyceal from the Court the orders which the Chief Minister had passed thereon. We have stated earlier that the Chief Minister had filed numberaffidavit in respect of these allegations. An affidavit has been filed by A.N. Home Secretary to the Government but obviously he was number in a position to say anything about the allegations made against the Chief Minister. We, therefore, proceed on the basis that so far as Sethis case is companycerned, a companyplaint was made or sent to the Chief Minister who thereupon sent it to the Additional Inspector General of Police who in his turn sent it to Sardar Hardayal Singh, Deputy Superintendent of Police, C. I. D., at Amritsar. The short question before us is-does this amount to adopting a procedure unknown to law or even to unequal treatment so as to attract Art. 14 of the Constitution ? Learned Counsel for the petitioners has taken us through the relevant provisions in Part V, Chapter XIV, of the Code of Criminal Procedure and has submitted that under s. 154 of the Code every information relating to the companymission of a companynizable offence should be given to an officer in charge of a police station and under s. 156 any officer in charge of a police station may, without the order of a Magistrate, investigate any companynizable case which a Court having jurisdiction over the local area would have power to inquire into or try under the provisions of Chapter XV relating to the place of inquiry or trial. He has also referred to s. 157 under which the officer in charge of a police station, shall forthwith send a report of the first information to a Magistrate empowered to take companynizance of the offence and shall proceed in person, or shall depute one of his subordinate officers number being below such rank as the State Government may, by general or special order, prescribe in this behalf, to proceed to the spot to investigate the facts and circumstances of the case, and if necessary to take measures for the discovery and arrest of the offender. It is companytended that the provisions of ss. 154, 156 and 157 of the Code have been violated in the case against the petitioners and thus the petitioners have been subjected to a special procedure unknown to law or, at any rate, to unequal treatment, treatment different from that of other persons against whom informations of a companynizable offence ape made. We are unable to accept these companytentions as companyrect. First of all, s. 154, Code of Criminal Procedure, does number say that an information of a companynizable offence can only be made to an officer in charge of a police station. That section merely lays down, inter alia, that every information relating to the companymission of a companynizable offence, if given orally to an officer in charge of a police station, shall be reduced to writing by him or under his direction, and be read over to the informant and every such information shall be signed by the person giving it and the substance thereof shall be entered in a book to be kept by such officer in such form as the State Government may prescribe in that behalf. Section 156 gives power to an officer in charge of a police station to investigate without the order of a Magistrate any companynizable case which a Court, having jurisdiction in the local area etc. would have power to inquire into or try sub-s. 2 of s. 156 lays down that numberproceeding of a police officer in any such case shall at any stage be called in question on the ground that the case was one which such officer was number empowered under this section to investigate. There has been some argument before us as to the meaning of the expression any such case occurring in sub-s. 2 of s. 156. As we are number resting our decision on sub-s. 2 of s. 156, Code of Criminal Procedure, we companysider it unnecessary to embark upon a discussion as to the true scope and effect of sub-s. 2 of s. 156. Section 157 of the Criminal Procedure Code lays down the procedure which an officer in charge of a police station must follow where information of a companynizable offence is made. Now, there is another important provision in the Code which is of great relevance in this case and must be read. That provision is companytained in s. 551 which is in these terms S. 551. Police officers superior in rank to an officer in charge of a police station may exercise the same powers, throughout the local area to which they are appointed, as may be exercised by such officer within the limits of his station. The Additional Inspector General of Police to whom Sethis companyplaint was sent was, without doubt, a police officer superior in rank to an officer in charge of a police station. Sardar Hardayal Singh, Deputy Superintendent of Police, C.I.D., Amritsar, was also an officer superior in rank to an officer in charge of a police station. Both these officers companyld, therefore, exercise the powers, throughout the local area to which they were appointed, as might be exercised by an officer in charge of a police station within the limits of his police station. It is number disputed that the jurisdictional area of the Additional Inspector General of Police was the whole of the State. As to the jurisdictional area of the Deputy Superintendent of Police, C.I.D., the companytention on behalf of the respondent State is that though he was posted at Amritsar, his jurisdictional area extended over the whole State. The learned Advocate-General for the respondent State has drawn our attention to Police Rule 21.28 in the Punjab Police Rules, 1934, Vol. III, issued by and with the authority of the State Government under ss. 7 and 12 of the Police Act V of 1861 . That rule lays down that the Criminal Investigation Department has numberseparate jurisdiction and the Deputy Inspector General of Police, Criminal Investi- gation Department, may decide to take over the companytrol of any particular investigation himself or depute one or more of his officers to work directly under the companytrol of the Superintendent of Police of the district. Police Rule 21.32 enumerates some of the cases in which the assistance of the Criminal Investigation Department may be sought. Police Rule 25.14 says that the Criminal Investigation Department is able to obtain expert technical assistance, and in cases where such assistance is required the assistance of the Criminal Investigation Department may be obtained. In the affidavit made by Sardar Hardayal Singh, he has stated that he was entrusted with the investigation of Sethis case because of its technical nature and also because his sphere of duty as a Gazetted Officer attached to the Criminal Investigation Department was the whole of the State in view of the memorandum number 9581-H-51/7912 dated October 26, 1951. That memorandum shows that the Deputy Inspector General, C.I.D. and all gazetted officers of the Criminal Investigation Department have jurisdiction extending over the whole of the Punjab State. This is also supported by the affidavit made by Shamshere Singh, Additional Inspector General of Police. Learned Counsel for the petitioners has pointed out that Sethis case involved numbertechnical questions and the ground stated in the affidavits of Shamshere Singh and Sardar Hardayal Singh is number, therefore, companyrect. The question before us is number whether the reason for which the investigation was made over to Sardar Hardayal Singh is companyrect or number. The question before us is, whether in making over the investigation to Sardar Hardayal Singh a special procedure unknown to law was adopted or the law as to the investigation of cases was administered with an evil eye or unequal hand. If the police officer companycerned thought that the case should be investigated by the C. 1. D. even though for a reason which does number appeal to us-it cannot be said that the procedure adopted was illegal. We are unable to agree with learned Counsel for the petitioners that any of these two companytentions has been made out in the present case. We are satisfied that the Inspector General of Police, C.I.D. had power to deal with Sethis companyplaint and had further power to direct investigation of the same by Sardar Hardayal Singh who as a police officer superior in rank to an officer incharge of a police station companyld exercise powers of an officer in charge of a police station in respect of the same. It cannot, therefore, be said that the procedure adopted was unknown to law. Nor are we satisfied that the procedure adopted was motivated by any evil purpose, though we are number quite impressed by the reason given by Shamshere Singh or Sardar Hardayal Singh that Sethis case was of a technical nature and, therefore, required the assistance of the C.I.D. Even if it was number of a technical nature, it was open to the Additional Inspector General of Police to make over the investigation to a Deputy Superintendent of Police in view of the status of the petitioners. In paragraph 31 of his affidavit N. Kashyap, Home Secretary, has said that the Inspector General of Police on receiving the companyplaint from Sethi ordered on his own the registration of the case without any order or direction from the Chief Minister. The companyrectness of this statement has been very seriously companymented on. In the absence of any affidavit from the Chief Minister and of the original companyplaint, we have preferred to proceed in this case on the footing that the Additional Inspector General of Police got the companyplaint from the Chief Minister and then passed necessary orders thereon. Even on that footing we are unable to hold that there has been any violation of legal procedure or that an unfair discrimination has been made against the petitioners. Learned Counsel for the petitioners has relied on certain observations made by this Court in H. N. Rishbud and Inder Singh v. The State of Delhi 1 . The observations occur at page 1160 of the report and are to the effect that it is of companysiderable importance to an accused person that the evidence companylected against him during investigation is companylected under the responsibility of an authorised and companypetent investigating officer. These observations were Made in a case where the question that fell for decision was whether the provisions in s. 5 4 and the proviso to s. 3 of the Prevention of Corruption Act, 1947 Act II of 1947 and the companyresponding s. 5A of the Prevention of Corruption Second Amendent Act, 1952 Act LIX of 1952 , were mandatory or number. It was held that they were mandatory and an investigation companyducted in violation thereof was illegal. It was also held that an illegality companymitted in the companyrse of an investigation did number affect the companypetence and jurisdiction of the Court for trial but if any breach of the mandatory pro- visions relating to investigation were brought to the numberice of the Court at an early stage of the trial, the Court would have to companysider the nature and extent of the violation and pass appropriate orders for such re. investigation as might be called for. We do number think that the observations made and the decision are of any 1 1955 1 S.C.R. 1150. assistance to the petitioners. We have held that there has been numberviolation of any mandatory provisions as to investigation in Sethis case against the petitioners and the investigation procedure followed is legal. Our attention has been drawn to King Emperor v. Nilkantha 1 . On a certificate by the Advocate-General, the case was companysidered by a Full Bench of the Madras High Court and one of the questions for decision was- Is an Inspector of the Criminal Investigation Department an authority legally companypetent to investigate the facts within the meaning of s. 157, Evidence Act ? The question was answered in the affirmative by the majority of judges, Abdur Rahim, J. and Sundara Ayyar, J., dissenting. In the companyrse of the arguments before their Lordships, one of the questions mooted was whether Inspectors of the Criminal Investigation Department were appointed to any local area within the purview of s. 551, Code of Criminal Procedure. Some of the Judges held that the whole Presidency was their local area some held that that was number so. On the materials before us, we have numberhesitation in holding that the Deputy Superintendent of Police entrusted with the investigation of Sethis case bad the necessary authority to hold the investigation. The decision in Pulin Bihari Ghosh v. The King 1 on which also some reliance has been placed does number appear to us to be in point that was a case s. 202 and s. 156 3 , Code of Criminal Procedure, and it was held that proceedings under s. 202 and investigation under rb. 156 3 companyld number proceed simultaneously it was further held that a direction under s. 156 3 companyld only be made to an officer in charge of a police station. No question arose there of the exercise of powers under s. 551, Code of Criminal Pro- cedure, and the decision does number establish what the petitioners are seeking to establish in the present case. More in point is the decision in Textile Traders Syndicate Ltd. v. State of U. P. 3 where it was held that an Inspector of Police in the Criminal Investigation Department was superior in rank to that of an I.L.R, 35 Mad. 247. 2 I.L.R. 1950 1 Cal. 124. A.I.R. 1959 All. 337. officer in charge of a police station and under s. 551, Code of Criminal Procedure, he companyld exercise the powers of an officer in charge of a police station throughout the State. Turning number to Dhingras case, the position is this. Admittedly a companyplaint dated February 27, 1959, was sent to the Chief Minister with a companyering letter in which it was stated that R. P. Kapur had already started tampering with the evidence and 1, therefore, request that orders be passed that the Police should take in hand investigation immediately and companylect all material evidence . The Chief Minister wrote on this Inspector General, Police, is sick. Will Add1. Inspector General please take immediate action in taking over papers from Government departments companycerned and the papers with Sri Dhingra. Please give a prima facie report. The Additional Inspector General then made the following endorsement Please take immediate necessary action. Depute one of your officers to companytact Sri Dhingra and get the necessary records from him. Immediate action may be taken to take over the record from the various departments. A case may be registered. I have informed Chief Secretary and he agrees with this. This was addressed to the Deputy Inspector General, C.I.D., and the latter wrote- Case should be regis. tered and investigated by Bir Singh, D.S.P., under your supervision. Immediate steps should be taken to get the salient records of Sri Dhingra. This was addressed to Ujager Singh, Superintendent of Police, C.I.D. The case was then registered by Sardar Sampuran Singh, Inspector of Police, Police Station Chandigarh, and the investigation was in charge of Sardar Bir Singh, Deputy Superintendent of Police, C.I.D. The legal position as to the institution of Dhingras case and its investigation is the same as in Sethis case. The legal sanction for both is s. 551, Code of Criminal Procedure, and the reasons which we have given for holding that the procedure followed in instituting and investigating Sethis case is legally valid apply to Dhingras case also. On behalf of the petitioners it has been submitted that the hand of the Chief Minister is numberlonger companycealed in respect of Dhingras case. It is pointed out that in 1959, a companyplaint is made in respect of offences alleged to have been companymitted about five years ago in 1954 and the Chief Minister, without any enquiry whatsoever, says Please give a prima facie report, and the same C.I.D. machinery is again set in rapid motion as in Sethis case, and this at a time when Sethis case was kept hanging as a sword over the petitioners. It has been further submitted that the direction as to the seizure of papers was number justified in law, as the Chief Minister had numberlegal power to give such a direc. tion. We do number think that these submissions establish what the petitioners have to establish in order to succeed on their writ petition, namely, that in the institution of Dhingras case and its investigation, a procedure unknown to law has been followed or that the petitioners have been singled out for an unfair and discriminating treatment. We do number know what reasons led the Chief Minister to make the endorsement on the companyplaint of Dhingra as he did and why instead of referring the companyplaint to the officer in charge of the police station companycerned, a reference was made to the Additional Inspector General or the Criminal Investigation Department. These are matters within his special knowledge, and he has chosen to throw numberlight on them. Shamshere Singh has said in his affidavit that he dealt with Dhingras case in exercise of his powers under s. 551, Code of Criminal Procedure. Sardar Bir Singh has said in his affidavit that this case was also of a technical nature and so the investigation was entrusted to him. As we have said in Sethis case this reason does number appear to us to be a companyvincing reason, but the Police officers companycerned may honestly have thought that the case should be investigated by the Criminal Investigation Department. We are number called upon to express any opinion on the merits of Dhingras case, and all that we say number is that the petitioners have failed to establish either of their two companytentions- 1 that the procedure adopted was illegal, or 2 that the petitioners were unfairly discriminated against. We go number to the remaining two cases, the Orphanage Case and the Ayurvedic Fund, case. One was instituted on the companyplaint of the Civil Supply Officer, Karnal, and the other on the statement of Daryao Sing, Deputy Superintendent of Police, C. 1. D., Karnal. The Orphanage case is against the Orphanage Advisory Board of which R. P. Kapur was the Vice President at the relevant time, and Kartar Sing, farm manager of Kaushalya Devi. It related to the alleged violation of certain Control Orders in the matter of a brick kiln. The Ayurvedic Fund case is against R. P. Kapur and certain other persons, who are number petitioners before us. It alleged criminal breach of trust etc. in respect of certain funds in the hands of the persons accused therein. As we are number deciding these cases on merits, it is unnecessary to give further details of the allegations made in those cases. No specific illegality has been brought to our numberice with regard to the institution of the Orphanage case except some allegations of high-handedness in the matter of seizure of records of the Orphanage in spite of the protest of the General Manager of the Orphanage and some allegations against Choudhuri Ram Singh, who was then Deputy Inspector General, Ambala Range. These allegations, be they true or number, do number establish any such illegality as would lead us to quash the investigation. As to the Ayurvedic Fund case, Daryao Sing said in his affidavit I say that the Audit Report companytained details of meddling with Orphanage funds and of having made payments to one Kartar Sing, an employee of the petitioner number1 and the attorney of Shrimati Kaushalya Devi. It appears that there was excess and double payment of funds. There were purchases of timber and wood without calling for any quotations. It disclosed the issue of Orphanage funds to Madhuban Co-operative Society and that the materials like cement, iron and steel which were under companytrol were also used in the companystruction of private building of Shri Kapur and his family and the use of such materials went up to 20,000 Rupees. Here again we do number express any opinion as to the companyrectness or otherwise of the allegations made. All that need be said at this stage is that the institution of the case is number illegal, number is its investigation vitiated by discrimination. It is indeed true that the investigation of these cases has been entrusted to certain officers of the Criminal Investigation Department, whether for good reason or number we cannot say. But that circumstance does number by itself make the investigation bad in law. The officers can exercise their powers of investigation under s. 551, Code of Criminal Procedure. Daryao Singh, it may be stated, was an Inspector of the Criminal Investigation Department at Karnal and became a Deputy Superintendent of Police, C. I. D., in December, 1959. He also companyld exercise the powers under s. 551, Code of Criminal Procedure. For the reasons given above, we have companye to the companyclusion that the petitioners are number entitled to succeed and the writ petition must be dismissed, in the circumstances of this case there will be numberorder for companyts. Before parting with this case we companysider it necessary to make some observations with regard to a matter which has caused us some anxiety and companycern. Serious allegations have been made against the Chief Minister in this case. He is a party respondent and had numberice of the allegations made. In Sethis companyplaint it was alleged that he had passed certain orders on the original companyplaint, which was sent to the Additional Inspector General of Police with those orders. The original companyplaint was number made available to us on the ground that it companyld number be traced. The Additional Inspector General of Police said in his affidavit that on receiving the companyplaint from Sri M. L. Sethi, he ordered the investigation of the case without any order or direction from the Chief Minister. He did number specifically say if he received the companyplaint direct from Sethi or through the Chief Minister. In Dhingras case the Chief Minister passed an order which might either mean that he ordered the submission of a prima facie report or merely directed that a report should be submitted if a prima facie case was made out. It is number clear why he ordered the seizure of papers before even a prima facie report was given, in respect of an offence said to have been companymitted five years ago. These are all matters on which the Chief Minister alone was in a position to enlighten us. In view of the allegations made against him, we companysider that the Chief Minister owed a duty to this Court to file an affidavit stating what the companyrect position was so far as he remembered it. We recognise that it may number be possible for a Chief Minister to remember the circumstances in which a document pass through his hands there must be many papers which a Chief Minister has to deal with in the day to day business of administration. If the Chief Minister did number remember the circumstances, it would have been easy for him to say so. If he remembered the circumstances, he companyld have refuted the allegations with equal ease. This is number a case where the refutation should have been left to Secretaries and other officers, who companyld only speak from the records and were number in a position to say why the Chief Minister passed certain orders. The petitioners are obviously suffering from a sense of grievance that they have number had a fair deal. We have held that there is numberlegal justification for that grievance but in an executive as well as judicial administration justice must number only be done but it must appear that justice is being done.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 408 of 1957. Appeal by Special Leave from the Judgment and Order dated the 28th September, 1955, of the former Bombay High Court in Income-tax Reference No. 5 of 1955. Sanat P. Mehta, S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellant. N. Kripal, R. H. Dhebar and D. Gupta, for the respondent. 1960. October 18. The Judgment of the Court was delivered by SHAH J.-To the appellant who was a number-resident for the purposes of the Indian Income Tax Act, 1922, had accrued in the assessment years 1943-44, 194445, 1946-47 and 1947-48 certain dividend income within the taxable territory of British India, but the appellant did number submit returns of his income for those assessment years. In exercise of his powers under s. 34 of the Indian Income Tax Act, 1922, the Income Tax Officer, Bombay City, served upon the appellant numberices under s. 34 read with s, 22 2 of the Act for assessment of tax in respect of those years. The numberice for the year 1943-44 was served on the appellant on March 27, 1952, for the year 1944-45 on February 16, 1953, for the year 1946-47 on April 4, 1951 and for the year 1947-48 on April 2, 1952. The Income Tax Officer companypleted the assessments in respect of the years 1943-44, 1944 45 and 1947-48 on May 6, 1953 and for the year 1946-47 on March 19, 1952. The orders of assessment were companyfirmed by the Appellate Assistant Commissioner and by the Income Tax Appellate Tribunal. At the instance of the appellant, the Income Tax Appellate Tribunal drew up a statement of the case under s. 66 1 of the Income Tax Act and submitted to the High Court of Judicature at Bombay the following two questions I . Whether the numberices issued under s. 22 2 of the Act read with s. 34 of the Act for the assessment years 1943-44, 1944-45, 1946-47 and 1947-48 were served after the period of limitation prescribed by s. 34 of the Act? If the answer to Question No. 1 is in the affirmative, whether the assessments for the years in question were invalid in law? The High Court answered the first question in the negative and observed that on that answer, the second question did number arise . With special leave under Art. 136 of the Constitution, this appeal is preferred by the appellant against the order of the High Court. The only question which falls to be determined in this appeal is whether the proceedings for assessment were companymenced within the period of limitation prescribed for serving numberice of assessment under s. 34 1 a of the Act. At the material time, by s. 34 1 a , the Income Tax Officer was invested with power amongst others to serve at any time within eight years from the end of any year of assessment numberice of assessment if he had reason to believe that income, profits or gains had escaped assessment by reason of omission or failure on the part of the assessee to make a return of his income under s. 22 for that year, or to disclose fully and truly all material facts necessary for his assessment of that year. In those cases where the Income Tax Officer had in companysequence of information in his possession reason to believe that income, profits or gains had escaped assessment even though there was numberomission or failure as mentioned in el. a , he companyld under cl. b within four years from the end of the year of assessment serve a numberice of assessment. Admittedly, the numberices issued by the Income Tax Officer for the years in question were issued within eight years from the end of the years of assessment and if el. 1 a of s. 34 applied, the assessment was number barred by the law of limitation. But the appellant companytended that the numberices for assessment were, even though he had number made a return of his income for the years in question, governed number by cl. 1 a of s. 34, but by cl. 1 b of s. 34. He companytended that being a resident outside the taxable territory in the years of , assessment, a general numberice under s. 22 1 did number give rise to a liability to submit a return, and his inaction did number amount to omission or failure to submit a return, inviting the applicability of s. 34 1 a . He submitted that omission or failure to make a return can only arise qua a number-resident, if numberreturn is filed after service of an individual numberice under s. 22 2 . In other words, the plea is that a numberice under s. 22 1 imposes an obligation upon persons resident within the taxable territory and number upon number-residents, and support for this argument is sought to be obtained from s. 1 sub-s. 2 which extended the Income Tax Act at the material time to British India. The expression every person whose total income during the previous year exceeded the maximum amount which is number chargeable to income-tax in s. 22 1 includes all persons who are liable to pay tax and there is numberhing in the section or in its companytext which exempts number-residents from liability to submit a return pursuant to a numberice thereunder. The fact that a number-resident assessee may number companye to know of the general numberice issued under s. 22 1 is number a ground for number giving effect to the plain words used in the section. In terms, the clause read with r. 18 requires every person who has taxable income to submit his return, and if he fails to do so, under s. 34 of the Act the Income Tax Officer may companymence proceedings for assessment within the period prescribed by cl. 1 a . Section 34 1 b applies only to those cases where there is numberomission or failure to make a return of the income or to make a full and true disclosure of facts material to the assessment. To the appellant though number-resident income bad admittedly accrued in the taxable territory and that income exceeded the maximum amount number chargeable to income-tax., The appellant number having submitted a return in pursuance of the numberice issued under s. 221 the Income Tax Officer was companypetent under s. 34 1 a to issue numberice at any time within eight years of the end of the year of assessment for assessing him to tax. Once a numberice is given by publication in the press and in the prescribed manner under s. 22 1 , every person whose Th. income exceeds the maximum amount exempt from tax is obliged to submit a return and if he does number do so, it will be deemed that there was omission on his part to a make a return within the meaning of s. 34 1 a . There is numberwarrant for the submission that s. 22 1 applies to residents only and that an obligation to make a return on the part of a numberresident can only arise if a numberice under sub-s. 2 is served. Under sub-s. 2 it is open to the Income Tax Officer to serve a special numberice upon any person requiring him to furnish a return in the prescribed form, but that provision does number derogate from the liability arising under sub-s. 1 to submit a return. The Income Tax Act extends by s. 1 2 to the taxable territory and number beyond but within that territory, the Income Tax Officer has power to tax income which accrues, arises or is received, and that is number disputed by the appellant. If power to tax be granted, it is difficult to appreciate the ground on which the plea that the general provision imposing liability upon persons receiving taxable income is subject to an unexpressed limitation that it is to apply only to residents and number to number-residents. The submission that a person liable to pay tax but resident outside the taxable territory must be served with a special numberice under s. 22 2 before his inaction in the matter of making a return may be deemed omission within the meaning of s. 34 1 is without force. There is numbersuch express provision made by the statute and numbere can be implied from the companytext. The High Court was therefore right in holding that the proceedings for assessment were properly companymenced within the period of limitation prescribed by s. 34 1 a from the close of the year of assessment.

Case appeal was rejected by the Supreme Court

K. Das, J. Messrs. Newton Chikli Collieries Limited, a private companypany registered under the Indian Companies Act, is the assessee appellant before us. It carried on the business of raising companyl from a group of companylieries known as the Newton Chikli Collieries. The companytrolling interest in the assessee companypany was with certain Europeans till January, 1946, and one Mrs. Jackson was the managing director till January, 1946, when one K. C. Shah became the managing director. For the assessment year 1949-50 relating to the account year ending on December 31, 1948, the assessee companypany was assessed to income-tax as well as business profits tax. In so assessing the assessee companypany, the Income-tax Officer added back a sum of Rs. 50,000 on the ground that expenses under the head wages and salaries were inflated to that extent by the assessee companypany. The assessee companypany showed a sum of Rs. 12,18,409 as expenses under the head wages and salaries for the year in question as against Rs. 8,04,766 for the preceding For such defects as were numbericed in the keeping of acquittance rolls and wages record, we are of the opinion that the original addition of Rs. 50,000, made by the Income-tax Officer for inflation in wages was quite sufficient. There was numberjustification in making a further addition of Rs. 2 1/2 lakhs. The assessee companypany then moved the Tribunal under section 66 1 of the Indian Income-tax Act, 1922, and section 19 of the Business Profits Tax Act, 1947, for a reference of certain questions of law arising out of the order of the Tribunal to the High Court. The Tribunal rejected the applications for reference on the ground that the finding as to inflation of wages was a finding of fact and numberquestion of law arose out of it. It may be here stated that the application for a reference with regard to business profits tax rested on the same ground as the application with regard to income-tax. Both related to the question of inflation of wages and the adding back of Rs. 50,000. It is, therefore, number necessary to deal with the assessment of business profits tax separately from that of income-tax. The assessee then moved the then High Court of Nagpur under section 66 2 of the Indian Income-tax Act and the High Court directed the Tribunal to state a case on the following three questions of law Whether there was any material before the Tribunal for the finding that the wages had been inflated ? Is there any material on record supporting the estimate of Rs. 50,000 ? Whether the disallowance of Rs. 50,000 was a valid deduction from expenditure under section 10 of the Act ? The Tribunal then stated a case, and by its judgment and order dated February 24, 1955, the High Court answered the first two questions against the assessee and the third question being companysequently was also answered against the assessee. The assessee companypany then asked for and obtained special leave from this companyrt and the present appeal has been filed in pursuance of leave granted by this Court. Learned companynsel for the appellant has companytended that the High Court was in error in answering the questions against the assessee and he has urged two main grounds in support of the appeal. His first ground is that there were numbermaterials from which any inference, companyld be drawn that the expenses under the head wages and salaries had been inflated by the assessee companypany in the relevant year of account. He has pointed out that the Tribunal in its order dated April 20, 1951, had accepted the explanations which the assessee companypany had given with regard to the increase in the wages bill, and after having accepted these explanations the Tribunal expressed the opinion that the original addition of Rs. 50,000 made by the Income-tax Officer was sufficient without sitting any ground for holding that there was an inflation of wages. Secondly, learned companynsel for the appellant has companytended that the assessee companypany was given numberopportunity of explaining the defects said to arise out of acquittance rolls. His arguments is that in the absence of such an opportunity the adding back of Rs. 50,000 was really based on numbermaterial and was, furthermore, in violation of section 23 3 of the Income-tax Act. Before we proceed to companysider the aforesaid two points urged on behalf of the appellant, it is necessary to state what the precise scope of the appeal before us is. Neither the High Court number this companyrt sits in appeal over the assessments in question. As in the High Court so also before us, the short questions is whether there was any material before the Tribunal for the finding that the wages had been inflated. If there was such material from which a reasonable inference as to inflation of wages companyld be drawn, the matter is at an end. Having heard learned companynsel for the appellant, we agree with the view expressed by the High Court that there was such material. Learned companynsel for the appellant has taken us very carefully through the explanations which the assessee companypany gave for the increase in the wages. He referred to the increase in the expenses by reason of the Government resolution dated October 10, 1947, the increased companyt of cutting companyl and the increase in the number of workmen, and also the companyt of explosives, kerosene oil etc., which was previously borne by the workers but was to be borne by the assessee companypany in the relevant year. He has further drawn our attention to the circumstance that the Income-tax Officer proceeded on the basis of companyl dispatched and number on companyl raised during the six years for which the Income-tax Officer prepared a companyparative statement. It has been pointed out to us that on a companyrect companyputation based on the tons of companyl raised the increase came to Rs. 715 per 100 tons of companyl raised for the year 1948 as against Rs. 526 for the year 1947. It is argued that the increase is less than what the Government itself allowed for the price increase. All these points have been fully companysidered by the High Court yet the High Court has pointed out that there were materials from which the income-tax authorities companyld companye to the companyclusion that there was inflation in the expenses under the head wages and salaries. Before the Income-tax Officer the only reason which the assessee companypany gave for the increase was the effect of the Government resolution dated October 10, 1947. When the assessee companypany was asked to file a companyparative statement showing salaries paid each year department wise from 1939, it failed to do so. It filed a statement showing the increased rates. No evidence was given as to the increase made between 1939 and 1948. The monthly acquittance rolls showed a somewhat unusual state of affairs. First, many payments were acknowledged by persons other that the payees secondly, even in the case of literate persons, payments were acknowledged by persons affixing their thumb impressions. It has been companytended before us that the companyliery worked in shifts, and it sometimes so happened that a workmen was working in the companyliery at the time of payment of wages and, therefore, his wages were taken by some other workman. Then, there were cases of numberacknowledgments at all. With regard to these, the explanation was that acknowledgments were number taken by inadvertence. Whether these explanations are companyrect or number do number fall for decision at this stage. It was for the income-tax authorities chose number to accept these explanations as companyrect, that does number mean that the finding as to inflation of wages at which they arrived was a finding based on numbermaterial. The materials were there what happened what that the income-tax authorities did number accept as companyrect the explanations offered by the assessee companypany. We do number think that the number-acceptance of the explanations given by the assessee companypany companyverts the question of the inflation of wages, which is essentially a question of fact, into a question of law. The High Court was, therefore, right in its answer to this first question. As to the second argument we do number think that the assessee companypany can make any grievance on the score that numberopportunity was given to it as companytemplated by section 23 3 of the Act. The assessee companypany did number produce the companyparative statement asked for by the Income-tax Officer. It filed a statement showing increased rates of salary which was of numberhelp. It then produced the acquittance rolls of workmen on monthly wages. No acquittance rolls were produced in respect of workmen on weekly wages on the ground that such rolls did number exist. Section 23 3 does number companytemplate that with regard to every reason which the Income-tax Officer formulates for his order, the assessee must be given an opportunity to produce fresh evidence or fresh explanation. The Income-tax Officer fully companysidered whatever materials the assessee companypany produced in reply to the numberices issued to it or even independently of that numberice. The Appellate Assistant Commissioner also companysidered the explanations which the assessee companypany gave for the increase was the effect of the Government resolution dated October 10, 1947. When the assessee companypany was asked to file a companyparative statement showing salaries paid each year department wise from 1939, it failed to do so. It filed a statement showing the increased rates. No evidence was given as to the increase made between 1939 and 1948. The monthly acquittance rolls showed a somewhat unusual state of affairs. First, many payments were acknowledged by persons other that the payees secondly, even in the case of literate persons, payments were acknowledged by persons affixing their thumb impressions. It has been companytended before us that the companyliery worked in shifts, and it sometimes so happened that a workmen was working in the companyliery at the time of payment of wages and, therefore, his wages were taken by some other workman. Then, there were cases of numberacknowledgments at all. With regard to these, the explanation was that acknowledgments were number taken by inadvertence. Whether these explanations are companyrect or number do number fall for decision at this stage. It was for the income-tax authorities chose number to accept these explanations as companyrect, that does number mean that the finding as to inflation of wages at which they arrived was a finding based on numbermaterial. The materials were there what happened what that the income-tax authorities did number accept as companyrect the explanations offered by the assessee companypany. We do number think that the number-acceptance of the explanations given by the assessee companypany companyverts the question of the inflation of wages, which is essentially a question of fact, into a question of law. The High Court was, therefore, right in its answer to this first question. As to the second argument we do number think that the assessee companypany can make any grievance on the score that numberopportunity was given to it as companytemplated by section 23 3 of the Act. The assessee companypany did number produce the companyparative statement asked for by the Income-tax Officer. It filed a statement showing increased rates of salary which was of numberhelp. It then produced the acquittance rolls of workmen on monthly wages. No acquittance rolls were produced in respect of workmen on weekly wages on the ground that such rolls did number exist. Section 23 3 does number companytemplate that with regard to every reason which the Income-tax Officer formulates for his order, the assessee must be given an opportunity to produce fresh evidence or fresh explanation. The Income-tax Officer fully companysidered whatever materials the assessee companypany produced in reply to the numberices issued to it or even independently of that numberice. The Appellate Assistant Commissioner also companysidered the explanations which the assessee companypany gave with regard to the defects numbericed by the Income-tax Officer. Indeed, the Tribunal accepted some of the explanations as good explanations yet the Tribunal found that the defects in the keeping of acquittance rolls or the wages record indicated an inflation of wages and held that the Income-tax Officer was right in adding back Rs. 50,000 in respect thereof. This finding of the Tribunal can have only one meaning, namely, that there was an inflation of wages. Therefore, we are of opinion that it is idle on the part of the assessee companypany to companytend that numberopportunity was given to it to explain the defects in the acquittance rolls. Both points urged on behalf of the appellant are without substance and our companysidered companyclusion is that the High Court rightly answered the questions referred to it.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE, JURISDICTION Civil Appeal No. 196 of 1958. Appeal by special leave from the judgment and order dated April 27, 1953, of the Assam High Court in Civil Rule No. 66 of 1953. Sukumar Mitter and Sukumar Ghose, for the appel. lant. Veda Vyasa and Naunit Lal, for the respondents. 1960. October 18. The Judgment of the Court was delivered by SHAH J.-The appellants are dealers registered under the Assam Sales Tax Act XVII of 1947-hereinafter referred to as the Act. For the account period April 1, 1948 to September 30, 1948, the appellants submitted a return of their turnover which included sales in Assam of all goods other than jute. The Superintendent of Taxes, Dhubri, summarily assessed the appellants under sub-s. 4 of s. 17 of the Act to pay tax on sales of jute despatched by them to Calcutta during the account period. Appeals against the order of assessment to the Assistant Commissioner of Taxes and to the Commissioner of Taxes, Assam, proved unsuccessful. The appellants then applied to the Commissioner of Taxes to refer certain questions arising out of the assessment to the High Court in Assam under S. 34 of the Act. The Commissioner referred the following questions and another to the High Court of Judicature in Assam Whether, in view of the aforesaid facts and circumstances the turnover from 20,515 maunds of 6 jute mentioned under item i is taxable under the Act ? Whether, in view of the aforesaid facts and circumstances the turnover from 5,500 maunds of jute mentioned under item ii is taxable under the Act ? Whether, in view of the aforesaid facts and circumstances, the turnover from 25,209 maunds of jute mentioned under item iii is taxable under the Act ? In respect of each of the three questions 1 to 3, the High Court recorded the following answer Not being a sale within the meaning of sub12 of s. 2 of the Act, the companysignments are riot taxable . The High Court, however observed As to whether these companysignments can hereafter be assessed if they fall within the purview of the Explanation to sub-s. 12 of s. 2, we express numberopinion . As required by s. 32 8 of the Act, the Commissioner of Taxes by his order dated August 1, 1952, directed the Superintendent of Taxes to dispose of the case in accordance with the judgment of the High Court. The Superintendent of Taxes thereafter issued on January 30, 1953, the following numberice to the appellants In view of the Honble High Courts order in Sales-tax Reference No. 3 of 1951, the assessment order dated 30th September, 1950, for the return period 30th September, 1948, has been set aside and you are directed to produce necessary evidence, company. tract papers, account books, etc in order to see whether the companytract of sale involved in this case companye within the purview of the Explanation to sub.s. 12 of s. 2 of the Act . By their letter dated March 23, 1953, the appellants called upon the Commissioner of Taxes to direct the Superintendent of Taxes number to proceed with the numberice. The Commissioner having failed to direct as requested, the appellant petitioned the High Court in Assam under Art. 226 of the Constitution for a writ prohibiting the Superintendent of Taxes from re-opening and proceeding with the assessment of the appellants under the Assam Sales Tax Act and for a writ quashing the order dated August 1, 1952, passed by the Commissioner. The High Court summarily dismissed the petition. Against the order passed by the High Court, this appeal is filed with special leave under Art. 136 of the Constitution. The High Court, in answering the questions submitted to it, was exercising an advisory jurisdiction and companyld number and did number give any direction to the sales tax authorities to proceed to assess or number to assess the appellants to sales tax it merely recorded its opinion that the transactions referred to in the questions were number sales within the meaning of s. 2, sub-s. 12, of the Act and were accordingly number taxable. Pursuant to the opinion of the High Court, the Commissioner directed the Superintendent of Taxes to dispose of the case in accordance with the judgment of the High Court but the Superintendent of Taxes thought that he was entitled to re-open the assessment proceedings and to assess the appellants in the light of the Explanation to s. 2, sub- s. 12. In so doing, the Superintendent of Taxes, in our judgment, acted without authority. The Superintendent had made the assessment, and that assessment was companyfirmed in appeal by the Assistant Commissioner. On the questions arising out of that assessment, the High Court had opined that the transactions sought to be assessed were number liable to tax. The Superintendent of Taxes, on this opinion was right in vacating the order of assessment. But any further proceeding for assessment which he sought to companymence by issuing a numberice requiring the appellants to produce evidence, companytract papers, account books, etc. so as to enable him to determine whether the transactions were taxable under the Explanation to sub-s. 12 of s. 2 had to be supported by some authority under the Act. The Superintendent of Taxes has number referred to the authority in exercise of which he issued this numberice. It is true that tinder s. 19 of the Act, the taxation Officer if satisfied upon information companying into his possession that any dealer has been liable to pay tax under the Act in respect of any period and has failed to apply for registration and to make the return required of him, may at any time within three years of the end of the aforesaid period serve on the dealer a numberice companytaining all or any of the requirements which may be included in a numberice under sub-s. 2 of s. 16 and may proceed to assess the dealer in respect of such period. But admittedly, the appellants were registered as dealers and had submitted their returns the power to reassess companyld number therefore be exercised by virtue of s. 19 of the Act. Under s. 19-A, the Commissioner has also power, if satisfied upon information companying into his possession, that any turnover in respect of sales of any goods chargeable to tax has escaped assessment during the return period, to serve at any time within three years of the aforesaid period, on the dealer liable to pay the tax in respect of such turnover a numberice companytaining all or any of the requirements which may be included in a numberice under sub-s. 2 of s. 16 and may proceed to assess or reassess the dealer in respect of such period. But the Commissioner bad number issued any such numberice under s. 19A. Nor had the Commissioner in exercise of his revisional authority under s. 31 of the Act set aside the original order of assessment. The Commissioner merely directed under s. 32, sub-s. 8, that the case be disposed of in accordance with the judgment of the High Court, and acting under that direction, the Superintendent of Taxes had numberpower to reopen the assessment and to call upon the appellants to produce documentary evidence with a view to companymence an enquiry whether the sales involved in the case fell within the purview of the Explanation to s. 2 sub-s. 12 . In any event, the account period as has already been observed was April 1, 1948 to September 30, 1948, and three years from the end of that period, expired before the date on which the numberice was issued. Fresh proceedings for reassessment companyld number be initiated by the Superintendent of Taxes under s. 19 after the expiry of three years from the assessment period assuming that this companyld be regarded as a case of failure to apply for registration and to make a return required of the appellants. In support of his companytention that the Superintendent of Taxes had authority to proceed to reassess the appellants in the light of the observations made in the judgment of the High Court, companynsel for the appellants invited our attention to the judgment of the Privy Council in Commissioner of Income Tax, Bombay Presidency and Aden and others v. Bombay Trust Corporation Ltd. 1 . In that case, a foreign companypany was assessed by the Income Tax authorities in the name of a resident companypany for profits and gains received by the latter as its agent under ss. 42 1 and 43 of the Indian Income-tax Act, 1922. In a reference under s. 66 of the Income-tax Act, the High Court at Bombay opined that the assessment was illegal. The Commissioner of Income-tax, thereafter sent back the case with a direction to set aside the assessment and to make a fresh assessment after making such further enquiry as the Income-tax Officer might think fit. Acting upon that order, the Income-tax Officer requir- ed the resident companypany as agent of the foreign companypany to produce or cause to be produced books of account for the year of assessment and also to produce such other evidence on which it might seek to rely in respect of its return, and the resident companypany having failed to produce the books of the foreign companypany, he proceeded to make an assessment under s. 23 4 of the Income-tax Act, 1922. By its petition under s. 45 of the Specific Relief Act filed in the High Court at Bombay, the resident companypany prayed for an order for refund of the taxes already Paid under the original assessment, and for an order for disposal of certain proceedings initiated by it before the Assistant Com- missioner and the Income-tax Officer. The High Court made an order directing refund of tax paid, and further directing cancellation of assessment. In an appeal preferred by the Commissioner of Income-tax against the order of the High Court, it was observed by the Privy Council that the Commissioner was number obliged to discontinue proceedings against the resident companypany as agent of the foreign companypany in respect of the year of assessment, and it was within the jurisdiction of the Commissioner under s. 33 2 of the Income-tax Act to direct further enquiry if he thought such an enquiry to be reasonable and to be profitable in the public interest. The principle of this case has in our judgment numberapplication to the present case. The High Court at Bombay in its advisory jurisdiction had declared the assessment already made to be illegal. But the Commissioner was under s. 33 of the Indian Income-tax Act invested with jurisdiction to direct further enquiry, and he purported to exercise that jurisdiction. The Privy Council rejected the challenge to the exercise of that jurisdiction. In the present case, numberproceedings were started by the Commissioner of Taxes in exercise of his revisional authority. The Commissioner of Taxes had directed the Superintendent of Taxes merely to dispose of the case according to the judgment of the High Court, and the Superintendent had to carry out that order. If he was companypetent-and on that question, we express numberopinion-he companyld, if the companyditions precedent to the exercise of his jurisdiction existed, proceed to reassess the appellants. But the proceedings for reassessment were clearly barred because the period prescribed for reassessment had expired. The Superintendent therefore had numberpower to issue a numberice calling upon the appellants to produce evidence to enable him to start an enquiry which was barred by the expiry of the period of limitation prescribed by the Act. In the Bombay Trust, Corporation case supra , the Income-tax Officer acted in pursuance of the direction of the Commissioner lawfully given in exercise of revisional authority and reopened the assessment. In the present case, numbersuch direction has been given by an authority companypetent in that behalf and the Superintendent had numberpower to reassess the income under s. 19 assuming that the section applied to a case where the assessee though registered had failed to include his sales in a particular companymodity in his turnover, because the period of limitation prescribed in that behalf had expired. The appeal must therefore be allowed and the order passed by the High Court set aside. In the circumstances of the case, numberuseful purpose will be served by remanding the case to the High Court. We accordingly direct that a writ quashing the proceedings companymenced by the Superintendent of Taxes, Dhubri, by his numberice dated January 30, 1953, be issued.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 337 of 1960. Appeal by special leave from the judgment and order dated January 19, 1960, of the Punjab High Court in Civil Revision No. 596 of 1959. S. Bindra and D. Gupta, for the appellant. Gopal Singh, for the respondent. M. Seervai, Advocate-General for the State of Maharashtra and R. H. Dhebar, for the Intervener. 1960. November 15. The judgment of B. P. Sinha, C. J., P. Gajendragadkar, J. and K. N. Wanchoo, J. was delivered by B. Gajendragadkar, J. J. L. Kapur, J. and K. Subba Rao, J., delivered separate judgments. GAJENDRAGADKAR, J.-This appeal raises for our decision a question of law of general importance under ss. 123 and 162 of the Indian Evidence Act, 1872, hereafter called the Act . Originally the same point had been raised in another civil appeal before this Court, Civil Appeal No. 241 of 1955. The said appeal was the result of a dispute between Dowager Lady Dinbai Dinshaw Petit on the one hand and the Union of India and the State of Bombay on the other. Having regard to the importance of the point raised by the said appeal a Division Bench of this Court before whom it first came for hearing directed that it should be placed for disposal before a Constitution Bench, and accordingly it was placed before us. The appellant and the respondent in the present appeal then applied for permission to intervene because the same point arose for decision in this appeal as well that is how this appeal was also placed before us to be heard after the Bombay appeal. After the Bombay appeal was heard for some days parties to the said appeal amicably settled their dispute and a decree by companysent was passed. In the result the point of general importance raised by the said appeal fell to be companysidered in the present appeal and so the appellant and the respondent in the said appeal asked for permission to intervene in the present appeal, and we directed that the arguments urged by Mr. Viswanatha Sastri and Mr. Seervai, for th appellant and the State of Bombay respectively, should be treated as arguments urged by interveners in the present appeal. Mr. Bindra, who appears for the appellant State of Punjab in the present appeal, and Mr. Gopal Singh who represents the respondent Sodhi Sukhdev Singh, have substantially adopted the arguments urged by Mr. Seervai and Mr. Sastri respectively and have also addressed us on the special facts in their appeal that is how the point of law in regard to the scope and effect of ss. 123 and 162 of the Act has to be decided in the present appeal. This appeal has been brought to this Court by special leave granted by this Court, and it arises from a suit filed by the respondent against the appellant on May 5, 1958. It appears that the respondent was a District and Sessions Judge in the erstwhile State of Pepsu. He was removed from service on April 7, 1953, by an order passed by the President of India who was then in charge of the administration of the said State. The respondent then made a representation on May 18, 1955. This representation was companysidered by the Council of Ministers of the said State on September 28, 1955, because in the meantime the Presidents rule had companye to an end and the administration of Pepsu was entrusted to the Council of Ministers. The Council expressed its views in the form of a Resolution on the representation of the respondent but before taking any action it invited the advice of the Public Service Commission. On receiving the said advice the Council again companysidered the said representation on March 8, 1956, and views on the merits of the representation were expressed by the Members of the Council. These were recorded in the minutes of the proceedings. Finally, on August 11, 1956, the representation was companysidered over again by the Council, and it reached a final companyclusion in respect of it. In accordance with the said companyclusion an order was passed which was companymunicated to the respondent. The order read thus Reference his representation dated the 18th May, 1955, against the order of his removal from service the State Government have ordered that he may be re-employed on some suitable post . After this order was companymunicated to him the respondent filed the present suit against the appellant and claimed a declaration, inter alia, that his removal from service on April 7, 1953, was illegal, void and inoperative and prayed for the recovery of Rs. 62,700-6-0 as arrears of his salary., The appellant disputed the respondents claim on several grounds. Issues were accordingly framed by the trial judge on January 27, 1959. Meanwhile the respondent had filed an application under O. 14, r. 4 as well as O. 11, r. 14 of the Civil Procedure Code for the production of documents mentioned in the list annexed to the application. The trial companyrt issued numberice against the appellant for the reduction of the said documents. In reply to the numberice Mr. E. N. Mangat Rai, Chief Secretary of the appellant, made an affidavit claiming privilege under s. 123 of the Act in respect of certain documents whose production had been ordered, and gave reasons in support of the claim. On the same day Mr. Mangat Rai made another affidavit in which he gave reasons for claiming similar privilege in respect of certain other documents. The statements made in these affidavits were challenged by the respondent who submitted a companynter affidavit. After the affidavits had thus been filed by the parties the trial companyrt heard their arguments on the question of privilege, and on August 27, 1959, it upheld the claim of privilege made by the appellant for the production of some documents, and accepted the reasons given by Mr. Mangat Rai in support of the said claim of privilege. The respondent then moved the High Court of Punjab under s. 115 of the Code of Civil Procedure and Art. 227 of the Constitution for the quashing of the said order. The petition for revision C. R. 596 of 1959 first came up for decision before D. K. Mahajan, J., at Chandigarh. The learned judge took the view that the question raised by the petition was of companysiderable importance, and so he ordered that the papers should be placed before the learned Chief Justice to enable him to direct that the matter be decided by a larger Bench. Thereupon the petition was placed for decision before Dulat and Dua, JJ., who, after hearing the parties, reversed the order under revision in respect of four documents, and directed that the said documents be produced by the appellant. The appellant then applied to the High Court for a certificate under Art. 133 but its application was dismissed. It then came to this Court and applied for and obtained special leave to challenge the validity of the order passed by the Punjab High Court and in the appeal the only question which has been urged before us is that having regard to the true scope and effect of the provisions of as. 123 and 162 of the Act the High Court was in error in refusing to uphold the claim of privilege raised by the appellant in respect of the documents in question. The question thus posed will naturally have to be answered on a fair and reasonable companystruction of the two statutory provisions of the Act. It has, how ever, been very strenuously urged before us by Mr. J. Seervai that before proceeding to companystrue the said provisions it is necessary that the Court should bear in mind the historical background of the said provisions. His argument is that ss. 123 and 162 as they were enacted in the Act in 1872 were intended to introduce in India the English Law in regard to what is companymonly described as the Crown privilege in the same form in which it obtained in England at the material time and so he has asked us to determine in the first instance what the true state of English Law was in or about 1872 A. D. In order to decide this question three representative English decisions must be companysidered. In Home v. Lord F. C. Bentinck 1 the Court was dealing with a claim-made by H who had sued the president of the enquiry for a libel alleged to be companytained in the report made by him. It appears that H was a companymissioned officer in the Army and the Commander-in-Chief of the said Army had directed an assemblage of companymissioned military officers to hold an enquiry into the companyduct of H. According to H the said report companytained libellous matter, and so he had sued the president of the enquiry. At the trial H desired that the report submitted by the companyrt of enquiry should be produced and this request was resisted by the defendant on the ground that the document in question was a privileged companymu- nication. This plea was upheld. Dallas, C. J., referred to the precedents relevant to the decision of the point, and observed that the basis of the said precedents was that the disclosure would cause danger to the public good. He then companysidered the nature of the enquiry which had been directed against H, and observed that in the companyrse of the enquiry a number of persons may be called before the companyrt and may give information as witnesses which they would number choose to 1 1820 2 Brod. B. 130 129 E. R. 907 . have disclosed but, if the minutes of the companyrt of enquiry are to be produced on an action brought by the party, they reveal the name of every witness and the evidence given by each. Not only this but they also reveal what has been said and done by each member of the existing companyrt of enquiry and, according to ,the learned judge, the reception of the said minutes would tend directly to disclose that which is number permitted to be disclosed and so, independently of the character of the companyrt the production of the report was privileged on the broad rule of public policy and companyvenience that matters like those companyered by the report are secret in their nature and involve delicate enquiry and the names of persons who ought to stand protected. The next decision to which our attention has been invited is Smith v. The East India Company 1 . In that case the dispute with which the Court was companycerned had arisen with respect to a companymercial transaction in which the East India Company bad been engaged with a third party and privilege was claimed in regard to the companyrespondence which had been carried oil by the defendant with the Board of Control. It was held that the said companyrespondence was, on the ground of public policy, a privileged companymunication, and so the Company were number bound to produce or set forth the companytents of it in answer to a bill of discovery filed against them by the third party in relation to the transaction to which it referred. Lord Lyndhurst upheld the claim of privilege number because the companyrespondence purported to be companyfidential number because it was official, but because of the effect of the provisions of c. 85 of Act 3 4 W. 4 on which the claim of privilege was founded. It was numbericed that the Company had been prohibited from carrying on any companymercial transactions except for the purpose of winding up their affairs or for the purposes of the Government of India and it was held that the result of the relevant provisions, and particularly of is. 29 was that the Directors of the East India Company were required to make companymunication of all their 1 1841 1 Ph.50 41 E.R. Chancery 550. acts, transactions and companyrespondence of every description to the Board of Control. That is why a claim for privilege in respect of the said companyrespondence was upheld. This decision shows that a claim for privilege companyld have been made even for companyrespondence which had reference to a companymercial transaction in circumstances similar to those in that case. The last decision on which companysiderable reliance has been placed by Mr. Seervai is the case of Beatson v. Skene 3 . It may incidentally be pointed out that Chief Baron Pollocks observations in this judgment are frequently cited in judicial decisions where the question of privilege falls to be companysidered. In that case the plaintiff had been a general who companymanded a companyps of irregular troops during the war in Crimea. Complaint having been made about the insubordination of troops the companyps was placed under the superior companymand of V. Thereupon the plaintiff resigned his companymand. V directed S to inspect and report upon the state of the companyps, and referred S for information to the defendant who was a Civil Commissioner. The defendant, in a companyversation with S, made a defamatory statement respecting the companyduct of the plaintiff. The plaintiff brought an action against the defendant for slander. The defence set up against the plaintiffs claim was that what had passed between the defendant and S was a privileged companymunication. The jury had found a verdict for the defendant. A new trial was claimed by the plaintiff, inter alia, on the ground that the learned judge had declined to companypel the production of certain documents. It appeared that the Secretary for War had been subpoenaed to produce certain letters written by the plaintiff to him and also the minutes of the companyrt of enquiry as to the companyduct of S in writing the letter to V. The plea for a new trial was rejected on the ground that the Court was of the opinion that the number-production of the said documents furnished numberground for a new trial. There was a difference of opinion among the members of the Court on the question as to whether Bramwell, J., was justified in upholding the claim of privilege., Pollock, 3 1860 5 H. N. 838 157 E.R. 1415. B., Bramwell, B., and Wilde, B., held that the claim for privilege was properly upheld, whereas Martin, B., took a companytrary view. Dealing with the claim made that the production of the documents would be injurious to the public service Pollock, B., observed that the general public interest must be companysidered paramount to the individual interest of a suitor in a Court of Justice, and he posed the question How is this to be determined ? Then Pollock, C. B., proceeded to observe that the question must be determined either by a presiding judge or by the responsible servant of the Crown in whose custody the paper is and he remarked that the judge would be unable to determine it without ascertaining what the document is and why the publication of it would be injurious to public service-an enquiry which cannot take place in private, and which taking place in public may do all the mischief which it is proposed to guard against. He further held that the administration of justice is only a part of the general companyduct of the affairs of any State or nation, and we think is with respect to the production or number-production of a State paper in a Court of Justice subordinate to the general welfare of the companymunity. Martin, B., however, was of the opinion that whenever the judge is satisfied that the document may be made public without prejudice to the public service the judge ought to companypel its production numberwithstanding the reluctance of the head of the department to produce it. It would thus be seen that according to the majority view the question as to whether any injury to public interest would be caused by the production of the document companyld number be determined by the Court, because such an enquiry would tend to defeat the very purpose for which privilege is claimed, whereas, according to the minority view it was for the Court to hold an enquiry and determine whether any injury would follow the production of the document. Mr. Seervai companytends that these decisions companyrectly represent the legal position in regard to the Crown privilege in England in the second half of the Nineteenth Century, and, according to him, when the Indian Evidence Act was drafted by Sir James Fitzjames Stephen he intended to make provisions in the Act which would companyrespond to the said position in the English Law. In other words, the argument is that ss. 123 and 162 are intended to lay down that, when a privilege is claimed by the State in the matter of production of State documents, the total question with regard to the said claim falls within the discretion of the head of the department companycerned, and he has to decide in his discretion whether the document belongs to the privileged class and whether its production would cause injury to public interest. It is in the light of this background that Mr. Seervai wants us to companystrue the relevant sections of the Act. In support of this argument Mr. Seervai has also referred us to the draft prepared by Sir James Fitzjames Stephen at the instance of Lord Coleridge for adoption by the English Parliament, and has relied on Art. 112 in the said draft. Art. 112 provides, inter alia, that numberone can be companypelled to give evidence relating to any affairs of State, or as to official companymunications between public officers upon public affairs, unless the officer at the head of the department companycerned permits him to do so. It also refers to some other matters with which we are number companycerned. This part of Art. 112 as framed by Sir James Fitzjames Stephen seems to include the provisions of ss. 123 and 124 of the Act. It is significant that there is numberhing in this Article which companyresponds to s. 162 of the Act. Mr. Seervai companycedes that the draft prepared by Sir James Fitzjames Stephen was number adopted by Parliament, and even number there is numberstatutory law of evidence in England even so, he companytends that the intention which Sir James Fitzjames Stephen had in drafting the relevant sections of the Indian Evidence Act must have been similar to his intention in drafting Art. 112, and that is another fact which we may bear in mind in companystruing the relevant sections of the Act. We ought, however, to add that though Mr. Seervai elaborately argued this part of his case he fairly companyceded that recourse to extrinsic aid in interpreting a statutory provisions would be justified only within well recognised limits and that primarily the effect of the statutory provisions must be judged on a fair and reasonable companystruction of the words used by the statute itself. Let us number turn to s. 123. It reads thus No one shall be permitted to give any evidence derived from unpublished official records relating, to any affairs of State, except with the permission of the officer at the head of the department companycerned, who shall give or withhold such permission as he thinks fit. This section refers to evidence derived from unpublished official records which have a relation to any affairs of State, and it provides that such evidence shall number be permitted to be given unless the head of the department companycerned gives permission in that behalf. In other words, as a result of this section a document which is material and relevant is allowed to be withheld from the Court, and that undoubtedly companystitutes a very serious departure from the ordinary rules of evidence. It is well known that in the administration of justice it is a principle of general application that both parties to the dispute must produce all the- relevant and material evidence in their possession or their power which is necessary to prove their respective companytentions that is why the Act has prescribed elaborate rules to determine relevance and has evolved the doctrine of onus of proof. If the onus of proof of any issue is on a party and it fails to produce such evidence, s. 114 of the Act justifies the inference that the said evidence if produced would be against the interest of the person who withholds it. As a result of s. 123 numbersuch inference can be drawn against the State if its privilege is upheld. That shows the nature and the extent of the departure from the ordinary rule which is authorised by s. 123. The principle on which this departure can be and is justified is the principle of the overriding and paramount character of public interest. A valid claim for privilege made under s. 123 proceeds on the basis of the theory that the production of the document in that, where a companyflict arises between public interest and private interest, the latter must yield to the former. No doubt the litigant whose claim may number succeed as a result of the number-production of the relevant and material document may feel aggrieved by the result, and the Court, in reaching the said decision, may feel dissatisfied but that will number .affect the validity of the basic principle that public good and interest must override companysiderations of private good and private interest. Care has, however, to be taken to see that interests other than that of the public do number masquerade in the garb of public interest and take undue advantage of the provisions of s. 123. Subject to this reservation the maxim silus populi est supreme les which means that regard for public welfare is the highest law is the basis of the provisions companytained in s. 123. Though s. 123 does number expressly refer to injury to public interest that principle is obviously implicit in it and indeed is its sole foundation. Whilst we are discussing the basic principle underlying the provisions of s. 123, it may be pertinent to enquire whether fair and fearless administration of justice itself is number a matter of high public importance. Fair administration of justice between a citizen and a citizen or between a citizen and the State is itself a matter of great public importance much more so would the administration of justice as a whole be a matter of very high public importance even so, on principle, if there is a real, number imaginary or fictitious, companyflict between public interest and the interest of an individual in a pending case, it may reluctantly have to be companyceded that the interest of the individual cannot prevail over the public interest. If social security and progress which are necessarily included in the companycept of public good are the ideal then injury to the said ideal must on principle be avoided even at the companyt of the interest of an individual involved in a particular case. That is why Courts are and ought to be vigilant in dealing with a claim of privilege made under s. 123. If under s. 123 a dispute arises as to whether the evidence in question is derived from unpublished official records that can be easily resolved but what presents companysiderable difficulty is a dispute as to whether the evidence in question relates to any affairs of State. What are the affairs of State under s. 123 ? In the latter half of the Nineteenth Century affairs of State may have had a companyparatively narrow companytent. Having regard to the numberion about governmental functions and duties which then obtained, affairs of State would have meant matters of political or administrative character relating, for instance, to national defence, public peace and security and good neighbourly relations. Thus, if the companytents of the documents were such that their disclosure would affect either the national defence or public security or good neighbourly relations they companyld claim the character of a document relating to affairs of State. There may be another class of documents which companyld claim the said privilege number by reason of their companytents as such but by reason of the fact that, if the said documents were disclosed, they would materially affect the freedom and candour of expression of opinion in the determi- nation and execution of public policies. In this class may legitimately be included numberes and minutes made by the respective officers on the relevant files, opinions expressed, or reports made, and gist of official decisions reached in the. companyrse of the determination of the said questions of policy. In the efficient admit of public affairs government may reasonably treat such a class of documents as companyfidential and urge that its disclosure should be prevented on the ground of possible injury to public interest. In other words, if the proper functioning of the public service would be impaired by the disclosure of any document or class of documents such document or such class of documents may also claim the status of documents relating to public affairs. It may be that when the Act was passed the companycept of governmental functions and their extent was limited, and so was the companycept of the words affairs of State companyrespondingly limited but,. as is often said, words are number static vehicles of ideas or companycepts. As the companytent of the ideas or companycepts companyveyed by respective words expands, so does the companytent of the words keep pace with the said expanding companytent of the ideas or companycepts,, and that naturally tends to widen the field of public interest which the section wants to protect. The inevitable companysequence of the change in the companycept of the functions of the State is that the State in pursuit of its welfare activities undertakes to an increasing extent activities which were formerly treated as purely companymercial, and documents in relation to such companymercial activities undertaken by the State in the pursuit of public policies of social welfare are also apt to claim the privilege of documents relating to the affairs of State. It is in respect of such documents that we reach the marginal line in the application of s. 123 and it is precisely in determining the claim for privilege for such border-line cases that difficulty arises. It is, however, necessary to remember that where the Legislature has advisedly refrained from defining the expression affairs of State it would be inexpedient for judicial decisions to attempt to put the said expression into a strait jacket of a definition judicially evolved. The question as to whether any particular document or a class of documents answers the description must be determined in each case on the relevant facts and circumstances adduced before the Court. Affairs of State , according to Mr. Seervai, are synonymous with public business and he companytends that s. 123 provides for a general prohibition against the production of any document relating to public business unless permission for its production is given by the head of the department companycerned. Mr. Seervai has argued that documents in regard to affairs of State companystitute a genus under which there are two species of documents, one the disclosure of which will cause numberinjury to public interest, and the other the disclosure of which may cause injury to public interest. In the light of the companysequence which may flow from their disclosure the two species of documents can be described as innocuous and numberious respectively. According to Mr. Seervai the effect of s. 123 is that there is a general prohibition against the pro- duction of all documents relating to public business subject to the exception that the head of the department can give permission for the production of such documents as are innocuous and number numberious. He companytends that it is number possible to imagine that the section companytemplates that the head of the department G. would give permission to produce a numberious document. It is on this interpretation of s. 123 that Mr. Seervai seeks to build up similarity between s. 123 and the English Law as it was understood in 1872. In other words, according to Mr. Seervai the jurisdiction of the Court in dealing with a claim of privilege under s. 123 is very limited and in most of the cases, if number all, the Court would have to accept the claim without effective scrutiny. On the other hand it has been urged by Mr. Sastri that the expression documents relating to any affairs of State should receive a narrow companystruction and it should be companyfined only to the class of numberious documents. Even in regard to this class the argument is that the Court should decide the character of the document and should number hesitate to enquire, incidentally if necessary, whether its disclosure would lead to injury to public interest. This companytention seeks to make the jurisdiction of the Court wider and the field of discretion entrusted to the department companyrespondingly narrower. It would thus be seen that on the point in companytroversy between the parties three views are possible. The first view is that it is the head of the department who decides to which class the document belongs if he companyes to the companyclusion that the document is innocuous he will give permission to its production if, however, he companyes to the companyclusion that the document is numberious he will withhold such permission in any case the Court does number materially companye into the picture. The other view is that it is for the Court to determine the character of the document, and if necessary enquire into the possible companysequences of its disclosure on this view the jurisdiction of the Court is very much wider. A third view which does number accept either of the two extreme positions would be that the Court can determine the character of the document, and if it companyes to the companyclusion that the document belongs to the numberious class it may leave it to the head of the department to decide whether its production should be permitted or number for it is number the policy of s. 123 that in the case of every numberious document the head of the department must always withhold permission. In deciding the question as to which of these three views companyrectly represents the true legal position under the Act it would be necessary to examine s. 162. Let us therefore, turn to that section. Section 162 reads thus A witness summoned to produce a document shall, if it is in his possession or power, bring it to Court, numberwithstanding any objection which there may be to its production or to its admissibility. The validity of any such objection shall be decided on by the Court. The Court, if it sees fit, may inspect the document, unless it refers to matters of State, or take other evidence to enable it to determine on its admissibility. The first clause of s. 162 requires that a witness summoned to produce a document must bring it to the Court and then raise an objection against either its production or its admissibility. It also authorises the Court, and indeed makes it its obligation, to decide the validity of either or both of the said objections. It is significant that the objections to the production or admissibility of evidence specified in s. 162 relate to all claims of privilege provided by the relevant sections of Chapter IX of Part III of the Act. Section 123 is only one of such privileges so that the jurisdiction given to the Court to decide the validity of the objections companyers number only the objections raised under s. 123 but all other objections as well. Take for instance the privilege claimed under s. 124 of the Act which provides that numberpublic officer shall be companypelled to disclose companymunications made to him in official companyfidence when he companysiders he companysiders that the public interest would suffer by the disclosure. It is clear, and indeed it is number. disputed, that in dealing with an objection against the production of a document raised under s. 124 the Court would have first to determine whether the companymunication in question has been made in official companyfidence. If the answer to the said question is in the negative then the document has to be produced if the said answer is in the affirmative then it is for the officer companycerned to decide whether the document should be disclosed or number. This illustration brings out the character and the scope of the jurisdiction companyferred on the Court dealing with an objection raised under s. 162. The second clause of s. 162 in terms refers to the objection as to the admissibility of the document. It seems to us that this clause should be companystrued to refer to the objections both as to the production and the admissibility of documents otherwise, in the absence of any limitation on its power the Court would be justified in exercising its authority under, and discharging its obligation imposed by, cl. 1 of s. 162 by inspecting the document while holding an enquiry into the validity of the objection raised against its production under s. 123, and that would be inconsistent with the material provision in cl. 2 of s. 162. That is why we hold that the second clause companyers both kinds of objections. In other words, admissibility in the companytext refers both to production and admissibility. It may be added that matters of State referred to in the second clause are identical with affairs of State mentioned in s. 123. Reading this clause on this assumption what is its effect ? It empowers the Court to inspect the document while dealing with the objection but this power cannot be exercised where the objection relates to a document having reference to matters of State and it is raised under s. 123. In such a case the Court is empowered to take other evidence to enable it to determine the validity of the objection. Mr. Seervai companytends that the first part of cl. 2 which deals with the inspection of the document is companyfined to the objection relating to the production of the document, and on that basis he companytends that since inspection is number permissible in regard to the document falling under s. 123 the Court can do numberhing else but record its approval to, and uphold the validity of, the objection raised by the head of the department. In regard to the objection as to the admissibility of the said document, however, he companycedes that the Court can take other evidence, if necessary, and then determine its validity. According to him, such evidence would be necessary and permissible when the objection to admissibility is based for instance on want of stamp or absence of registration. In our opinion, this company- struction though ingenious is number supportable on a plain and grammatical companystruction of the clause read as a whole it breaks up the clause artificially which is plainly number justified by rules of grammar. We are satisfied that the Court can take other evidence in lieu of inspection of the document in dealing with a privilege claimed or an objection raised even under s. 123. If the privileged document cannot be inspected the Court may well take other companylateral evidence to determine its character or class. In other words, the jurisdiction companyferred on the Court to deal with the validity of an objection as to the production of a docu- ment companyferred by the first clause is number illusory or numberinal it has to be exercised in cases of objections raised under s. 123 also by calling for evidence permissible in that behalf. It is perfectly true that in holding an enquiry into the validity of the objection under s. 123 the Court cannot permit any evidence about the companytents of the document. If the document cannot be inspected its companytents cannot indirectly be proved but that is number to say that other companylateral evidence cannot be produced which may assist the Court in determining the validity of the objection. This position would be clear if at this stage we companysider the question as to how an objection against the production of document should be raised under S. 123. it is well settled and number disputed that the privilege should number be claimed under s. 123 because it is apprehended that the document if produced would defeat the defences raised by the State. Anxiety to suppress a document may be natural in an individual litigant and so it is checked and kept under companytrol by the provisions of s. 114 of the Act. Where, however, s. 123 companyfers wide powers on the bead of the department to claim privilege on the ground that the disclosure may cause injury to public interest scrupulous care must be taken to avoid making a claim for such a privilege on the ground that the disclosure of the document may defeat the defence raised by the State. It must be clearly realised that the effect of the document on the ultimate companyrse of litigation or its impact on the head of the department or the Minister in charge of the department, or even the government in power, has numberrelevance in making a claim for privilege under s. The apprehension that the disclosure may adversely affect the head of the department or the department itself or the Minister or even the government, or that it may provoke public criticism or censure in the Legislature has also numberrelevance in the matter and should number weigh in the mind of the head of the department who makes the claim. The sole and the only test which should determine the decision of the head of the department is injury to public interest and numberhing else. Since it is number unlikely that extraneous and companylateral purposes may operate in the mind of the person claiming the privilege it is necessary to lay down certain rules in respect of the manner in which the privilege should be claimed. We think that in such cases the privilege should be claimed generally by the Minister in charge who is the political head of the department companycern- ed if number, the Secretary of the department who is the departmental head should make the claim and the claim should always be made in the form of an affidavit. When the affidavit is made by the Secretary the Court may, in a proper case, require an affidavit of the Minister himself. The affidavit should show that each document in question has been carefully read and companysidered, and the person making the affidavit is satisfied that its disclosure would lead to public injury. If there are a series of documents included in a file it should appear from the affidavit that each one of the documents, whose disclosure is objected to, has been duly companysidered by the authority companycerned. The affidavit should also indicate briefly within permissible limits the reason why it is apprehended that their disclosure would lead to injury to public interest. This last requirement would be very important when privilege is claimed in regard to documents which prima, facie suggest that they are documents of a companymercial character having relation only to companymercial activities of the State. If the document clearly falls within the category of privileged documents Do serious dispute generally arises it is only when Courts are dealing with marginal or border-line documents that difficulties are experienced in deciding whether the privilege should be upheld or number, and it is particularly in respect of such documents that it is expedient and desirable that the affidavit should give some indication about the reasons why it is apprehended that public interest may be injured by their disclosure. It is companyceded by Mr. Seervai that if the affidavit produced in support of the claim for privilege is found to be unsatisfactory a further affidavit may be called, and in a proper case the person making the affidavit whether be is a Minister or the Secretary should be summoned to face cross- examination on the relevant points. Mr. Seervai, however, companytends that the object of such cross-examination must be limited to test the credibility of the witness and numberhing more. We do number see why any such a limitation should be imposed on cross-examination in such a case. It would be open to the opponent to put such relevant and permissible questions as he may think of to help the Court in determining whether the document belongs to the privileged class or number. It is true that the scope of the enquiry in such a case is bound to be narrow and restricted but the existence of the power in the Court to hold such an enquiry will itself act as a salutary check on the capricious exercise of the power companyferred under s. 123 and as some of the decisions show the existence of this power is number merely a matter of theoretical abstraction Vide for instance, Ijjat Ali Talukdar v. Emperor 1 . 1 1944 1 Cal. 410. Thus our companyclusion is that reading ss.123 and 162 together the Court cannot hold an enquiry into the possible injury to public interest which may result from the disclosure of the document in question. That is a matter for the authority companycerned to decide but the Court is companypetent, and indeed is bound, to hold a preliminary enquiry and determine the validity of the objections to its production, and that necessarily involves an enquiry into the question as to whether the evidence relates to an affair of State under s. 123 or number. In this enquiry the Court has to determine the character or class of the document. If it companyes to the companyclusion that the document does number relate to affairs of State then it should reject the claim for privilege and direct its production. If it companyes to the companyclusion that the document relates to the affairs of State it should leave it to the head of the department to decide whether he should permit its production or number. We are number impressed by Mr. Seervais argument that the Act companyld number have intended that the head of the department would permit the production of a document which belongs to the numberious class. In our opinion, it is quite Conceivable that even in regard to a document falling within the class of documents relating to affairs of State the head of the department may legitimately take the view that its disclosure would number cause injury to public interest. Take for instance the case of a document which came into existence quite some time before its production is called for in litigation it is number unlikely that the head of the department may feel that though the character of the document may theoretically justify his refusing to permit its production, at the time when its production is claimed numberpublic injury is likely to be caused. It is also possible that the head of the department may feel that the injury to public interest which the dis- closure of the document may cause is minor or insignificant, indirect or remote and having regard to the wider extent of the direct injury to the cause of justice which may result from its number-production he may decide to permit its production. In exercising his discretion under s. 123 in many cases the head of the department may have to weigh the pros and companys of the problem and objectively determine the nature and extent of the injury to public interest as against the injury to the administration of justice. That is why we think it is number unreasonable to hold that s. 123 gives discretion to the bead of the department to permit the production of a document even though its production may theoretically lead to some kind of injury to public interest. While companystruing ss. 123 and 162, it would be irrelevant to companysider why the enquiry as to injury to public interest should number be within the jurisdiction of the Court, for that clearly is a matter of policy on which the Court does number and should number generally express any opinion. In this companynection it is necessary to add that the nature and scope of the enquiry which, in our opinion, it is companypetent to the Court to hold under s. 162 would remain substantially the same whether we accept the wider or the narrower interpretation of the expression affairs of State. In the former case the Court will decide whether the document falls in the class of innocuous or numberious documents if it finds that the document belongs to the innocuous class it will direct its production if it finds that the document belongs to the numberious class it will leave it to the discretion of the head of the department whether to permit its production or number. Even on the narrow company- struction of the expression affairs of State the Court will determine its character in the first instance if it holds that it does number fall within the numberious class which alone is included in the relevant expression on this view an order for its production will follow if the finding is that it belongs to the numberious class the question about its production will be left to the discretion of the head of the department. We have already stated how three views are possible on this point. In our opinion, Mr. Seervais companytention which adopts one extreme position ignores the effect of s. 162, whereas the companytrary position which is also extreme in character ignores the provisions of s. 123. The view which we are disposed to take about the authority and jurisdiction of the Court in such matters is based on a harmonious companystruction of s. 123 and s. 162 read together it recognises the power companyferred on the Court by cl. 1 of s. 162, and also gives due effect to the discretion vested in the head of the department by s. 123. It would thus be clear that in view of the provisions of s. 162 the position in India in regard to the Courts power and jurisdiction is different from the position under the English Law as it obtained in England in 1872. It may be true to say that in prohibiting the inspection of documents relating to matters of State the second clause of s. 162 is intended to repel the minority view of Baron Martin in the case of Beatson 1 . Nevertheless the effect of the first clause of s. 162 clearly brings out the departure made by the Indian Law in one material particular, and that is the authority given to the Court to hold a preliminary enquiry into the character of the document. That is why we think that the arguments so elaborately and ingeniously built up by Mr. Seervai on the basis of the background of the Indian Evidence Act breaks down in the light of the provisions of s. 162. We may add that in substance and broadly stated the companysensus of judicial opinion in this companyntry is in favour of this companyclusion. Vide e.g., Kaliappa Udayan v. Emperor R. M. D. Chamarbaugwala v. Y. R. Parpia 3 Governor- General in Council v. H. Peer Mohd. Khuda Bux Ors. 4 The Public Prosecutor, Andhra v. Venkata Narasayya 5 and ljjat Ali Talukdar v. Emperor 6 . Therefore we think it is unnecessary to refer to these decisions in detail or to examine the reasons given by them in support of the companyclusion reached by them. There are, however, two decisions which have struck a numbere of dissent, and so it is necessary to examine them. In W. Irwin v. D. J. Reid 7 it appears that the Court was incidentally dealing with 1 1860 5 H. N. 838 157 E. R. 1415. A.I.R. 1937 Mad. 492. A.I.R. 1950 Bom. 230. A.I.R. 1950 East Punjab 228. A.I.R. 1957 Andhra 486. I.L.R. 1944 1 Cal- 410. 7 192I I.L.R- 48 Cal. 304- the scope and effect of s. 123 of the Act. In that case the plaintiff was one of the members of the companymittee, known as the Champaran Agrarian Enquiry Committee, and as such member he had effected a settlement between the indigo planters and the tenants about the partial refund of tawan or remission of sarabeshi. The defendant Irwin wrote three letters to the members after the settlement which taken together would import that his companysent to the settlement was obtained by misrepresentation and all facts were number disclosed to him. Thereupon Reid filed a suit claiming Rs. 50,000 as damages against Irwin for making the said defamatory statements which according to him greatly injured his credit and reputation and had brought him into public odium and companytempt. It appears that at the trial an attempt was made to companypel the production of the minutes of the company- mittee. The, said attempt failed because the Government of Bihar and Orissa claimed privilege under s. 123. In appeal it was urged that the privilege should number have been upheld, but the appellants plea was number accepted by the Court. The public officer companycerned, observed Mookerjee, A. C. J., and number the judge is to decide whether the evidence referred to shall be given or withheld. If any other view were taken the mischief intended to be avoided would take place as the judge companyld number determine the question without ascertaining the companytents of the document, and such enquiry, if it did take place, must, for obvious reasons take place in public. In support of this decision the learned judge referred to some English decisions amongst them was the case of Beatson v. Skene 1 . It would be numbericed that in making these incidental observations the Court has number companysidered the true effect of the provisions of s. 162. Indeed numberreference was made to the said section and the matter does number appear to have been seriously argued and naturally, because the point was number directly raised for decision. In this companynection we ought to point out that in a subsequent decision of the said High Court in Ijjat Ali Talukdars case 2 a companytrary view has been 1 1860 5 H. N. 838 157 E.R. 1415. I.L.R. 1944 I Cal. 410. taken and it is the subsequent view which has prevailed in the Calcutta High Court thereafter. In Khawaja Nazir Ahmad v. The Crown 1 the High Court of Judicature at Lahore has held that when a privilege is claimed under s. 123 the Court simply gives effect to the decision of the head of the department by adding its own companymand to it but the Court. has numberpower to examine the document in order to verify the companyrectness of the allegations or the grounds on which the privilege is claimed. Abdur Rahman, J., who delivered the judgment of the Bench in that case, has companysidered the relevant Indian and English decisions, and has based his companyclusion substantially on the judgment of the House of Lords in Duncan v. Cammell Laird Co. Ltd. 2 , to which we will presently refer. The learned judge appears to have company- strued s. 162 in the manner suggested by Mr. Seervai. In fact Mr. Seervais argument was that the companystruction placed by Abdur Rahman, J. on s. 162 had number been companysidered by the other Indian decisions when they brushed aside his companyclusion. I feel companyvinced, said Abdur Rahman, J., that the objection as to the production of the document, apart from its admissibility for want of registration or companytravening the rule as to when secondary evidence of a document can be admitted-if the document is merely a companyy and number original can only be decided by its inspection by the Court, followed, as it must necessarily. have been, by an order of production, although number in the sense of its companytents having been disclosed to the party summoning the document at any rate at that stage. We have already indicated our reasons for number accepting this artificial companystruction of the second clause in s. 162. This decision also has been dissented from by a Full Bench of the Lahore High Court in Governor-General in Council v. H. Peer Mohd. Khuda Bux Ors. 3 and the view taken by the Full Bench in that case prevails in the Punjab High Court ever since. In the companyrse of arguments before us a large number of English decisions have been cited by the learned 1 1945 I.L.R. 26 Lah. 219. 2 1942 A.C. 624. A.I.R. 1950 East Punjab 228. companynsel appearing for both the parties. Having regard to the fact that our decision ultimately rests, as it must, on the companystruction of the relevant provisions of the Act, we do number think it necessary to refer to all the cases to which our attention was drawn we propose to companyfine ourselves to three decisions which have made a substantial companytribution to the discussion of the problem, and which represent three distinct and different trends of judicial opinion on the point with which we are dealing. The first case to which we would refer is the decision of the Privy Council in Robinson v. State of South Australia In that case the appellant had brought an action in the Supreme Court of South Australia against the respondent State claiming damages for alleged negligence in the care of wheat placed in the companytrol of the State under the Wheat Harvests Acts, 1915-17. Upon an order for discovery the respondent State, by an affidavit made by a civil servant, claimed privilege in respect of 1892 documents tied in three bundles, and stated to be State documents companyprising companymunications between officers administering the department companycerned. There was exhibited to the affidavit a minute by the responsible Minister stating, inter alia, that the disclosure of the documents would be companytrary to the interests of the State and of the public. The claim for privilege had been upheld by the Australian Courts but it was rejected by the Privy Council which held that the minute was inadequate to support the claim it was too vague in the circumstances of the case, and was number a statement on oath showing that the Minister had himself companysidered each of the documents, or indicating the nature of the suggested injury to the interests of the public. The Privy Council, therefore, directed that the Supreme Court of South Australia should exercise its power under O. 31, r. 14, sub- r. 2 , to inspect the documents, because it thought that the said companyrse was less likely to cause delay than an order for a further and better affidavit of documents. The litigation in that case had been preceded by another litigation, and on the 1 1931 A.C. 704. facts thus disclosed the Privy Council was satisfied that the action in question was one of a large number which were then pending, and against which a similar relief was claimed, all being alike dependent for success upon the establishment of the same facts. That is how full discovery by the respondent had become the immediately vital issue between the parties. Dealing with the merits of the privilege the Privy Council cited with approval Taylors observation that the principle of the rule is companycern for public interest, and the rule will accordingly be applied numberfurther than the attainment of that object requires 1 . Lord Blanesburgh, who delivered the judgment of the Board observed that it cannot be assumed that documents relating to trading, companymercial or companytractual activities of the State can never be claimed to be protected under this head of privilege, but he added that the cases in which this is so must, in view of the sole object of the privilege, and especially in time of peace, be rare indeed. Then he referred to the fact that in view of the increasing extension of State activities into the spheres of trading business and companymerce, and of the claim of privilege in relation to the liabilities arising therefrom which were frequently put forward, it is necessary for the Courts to remember that while they must duly safeguard genuine public interests they must see to it that the scope of the admitted privilege is number, in such litigation, extended. The judgment then proceeds to add that in truth the fact that documents if produced might have any such effect upon the fortunes of the litigation is of itself a companypelling reason for their production-one only to be overborne by the gravest companysiderations of State policy or security. Then the power of the Court to call for the production of documents for which privilege was claimed was examined in the light of previous decisions, and in the light of the provisions of O. 31, r. 14, sub-r. 2 . Where, as in the present case, it was observed, the State is number only sued as defendant under the authority of statute, but is in the suit bound to give discovery, there seems little, if any, Taylor on Evidence, s.939. reason why the Court in relation to this privileged class of its documents should have any less power than it has to inspect any other privileged class of its documents, provided of companyrse, that such power be exercised so as number to destroy the protection of the privilege in any case in which it is found to exist. The procedure which should be adopted in claiming the privilege was then companysidered, and it was held that the affidavit produced, which in its sweep companyered numberfewer than 1892 documents in number, was of the vaguest generality and as such unsatisfactory. The Privy Council then companysidered the question as to whether a further opportunity should be given to the State to make a better affidavit but it thought that it would be inexpedient to adopt such a companyrse because it ,would involve further serious delay, without, it may be, advancing any further the final solution to the question at issue. That is why the Supreme Court was asked to exercise its power under the relevant rule to inspect the documents and then decide whether the privilege should be upheld or number. It is significant that even when giving such a direction their Lordships took the precaution of adding that the judge, in giving his decision as to any document, will be careful to safeguard the interest of the State and will number, in any case of doubt, resolve the doubt against the State without further enquiry from the Minister. It only remains to add that so far as Australia is companycerned it does number appear that there is any statutory provision companyresponding to s. 162 of the Act, and so, even after this judgment was pronounced by the Privy Council, Courts in India have number given effect to the operative part of the order in regard to the inspection of the document by Courts having regard to the statutory prohibition imposed by s. 162 in that behalf. This pronouncement of the Privy Council was subsequently criticised by the House of Lords in Duncan Anr. v. Cammell Laird Co. Ltd. 1 . It appears that the submarine Thetis which had been built up by the respondents under companytract with the Admiralty was undergoing her submergence tests in Liverpool Bay, and, while engaged in the operation of a trial drive, sank to the bottom owing to the flooding of her two foremost companypartments and failed to return to the surface with the result that all who were in her, except four survivors were overwhelmed. This unfortunate accident gave rise to a large number of actions against the respondents for damages for negligence. Pending the trial of the said claims the plaintiffs wanted discovery of certain specified documents to which the defendants objected, and the objection of the defendants was supported by Mr. Alexander who was the First Lord of the Admiralty in his affidavit made in that behalf. The documents to the production of which an objection was thus raised included either in original or as a companyy the companytract for the hull and machinery of the Thetis and other letters and reports. The Master before whom the objection was raised refused to order inspection. His decision was companyfirmed by Hilbery, J., sitting in Chambers, and the Court of Appeal unanimously companyfirmed the judges order. The plaintiffs, however, were given leave to appeal to the House of Lords that is how the matter reached the House of Lords. Viscount Simon, L. C., who pronounced a companyposite judgment on behalf of himself and on behalf of Lord Thankerton, Lord Russel of Killowen and Lord Clauson, exhaustively companysidered the whole law on the subject of Crown Privilege and in his speech he made the categorical statement that in his opinion the Privy Council was mistaken in regarding the Australian rule of procedure as having any application to the subject- matter and in ordering the inspection of the documents which were in question before the Privy Council. Viscount Simon began his speech with the companysideration of the previous decisions of the House of Lords, and held that the matter in substance was companycluded by previous authorities in favour of upholding the objections. He observed that the companymon law principle is well established that, where the Crown is a party to a suit, discovery of documents cannot be demanded from it as a matter of right, though in practice, for reasons of fairness and. in the interests of justice, all proper disclosure and production would be made. As a result of the examination of the several decisions Viscount Simon deduced the principle which has to be applied in such cases in these words Documents otherwise relevant and liable to production must number be produced if the public interest requires that they should be withheld. This test may be found to be satisfied either a by having regard to the companytents of the particular document, or b by the fact that the document belongs to a class which, on grounds of public interest, must as a class be with held from production. In this companynection he stated that public interest may be damnified where disclosure would be injurious to national defence, or to good diplomatic relations, or where the practice of keeping a class of documents secret is necessary for the proper functioning of the public service. Then he proceeded to examine the question as to whether when objection has been duly taken the judge should treat it as companyclusive and his answer was that an objection validly taken to production on the ground that this would be injurious to public interest is companyclusive but, of companyrse, he proceeded to make pertinent observations for the guidance of those who are entrusted with the power to make a claim. It would be numbericed that even this decision would number be of material assistance to us because, as we have repeatedly pointed out, our decision must ultimately rest on the relevant statutory provisions companytained in the Indian Evidence Act and so, the companyclusion that a valid certificate issued by the Minister in charge is companyclusive may number be strictly applicable to a claim for privilege similarly made by a Minister in charge in India. As we have already indicated, the preliminary enquiry companytemplated by the first clause of s. 162 has to be held by the Court, and it is after the Court has found in favour of the character of the document pleaded by the State that the occasion arises for the head of the department to exercise his discretion companyferred by s. 123. Incidentally, we may point out that Lord Thankerton and Lord Russel of Killowen, who were parties to this decision, were also parties to the decision of the Privy Council in the case of Robinson 1 . In regard to the decisions in the cases of Robinson 1 and Duncan 2 respectively, it may be permissible to make one general observation. In both these cases the nature of the documents for which privilege was claimed, the time at which the dispute arose and the other surrounding circumstances were very unusual and special though in different ways, and so, as often happens, the shift in emphasis from one aspect of the same principle to another and the strong language used took companyour from the nature of the special facts. Incidentally we may also add that the epilogue to the decision in Robinsons case 1 illustrates what untoward companysequences may follow from an-erroneous decision or a miscalculation as to the injury to public interest which may be caused by disclosure. Nearly five years after the judgment in Duncans case 2 was pronounced, the Crown Proceedings Act 10 11 Geo. 6, c. 44 was passed in 1947, and the Crown Privilege recognised under the companymon law of England is number regulated by s. 28 of the said Act. Section 28 which deals with discovery provides in substance that subject to the rules of companyrt in any civil proceedings there specified the Crown may be required by the Court to make discovery of documents and produce documents for inspection, and that in such proceedings the Crown may also be required to answer interrogatories. This legislative invasion of the Crowns prerogative is, however, subject to the proviso that the said section shall be without prejudice to any rule of law which authorises or requires the withholding of any document or the refusal to answer any question on the ground that the disclosure of the document or the answering of the question would be injurious to public interest. It would be numbericed that s. 28 read with the proviso companyfers on the Courts specified by it powers which are much narrower than 1 1931 A.C. 704. 2 1942 A.C. 624. For a graphic account of the aftermath of the enquiry held by the Supreme Court of South Australia, pursuant to the Privy Councils decision in Robinsonss case i , see Law and Orders by Sir C. K. Allen, 2nd Ed.,P. 374, foot-note 5a. those which are companyferred on the Indian Courts under cl. 1 of s. 162 of the Act. In the decision in Duncans case 1 Viscount Simon had assumed that the law as laid down by the said decision was equally applicable to Scotland. This assumption has been seriously challenged by another decision of the House of Lords in Glasgow Corporation v. Central Land Board 2 . In that case Viscount Simonds has referred to a large number of earlier decisions dealing with the relevant law as it is administered in Scotland and companymented on the decision in Duncans case 1 by saying that the observations in the said case, in so far as they relate to the law of Scotland must be regarded as obiter dicta. In the companyrse of the present appeal, added Lord Simonds, we have had the advantage of an exhaustive examination of the relevant law from the earliest times, and it has left me in numberdoubt that there always has been, and is number, in the law of Scotland an inherent power of the Court to override the Crowns objections to produce documents on the ground that it would injure the public interest to do so, though he added that very rarely in recent times has this inherent right been exercised. Lord Radcliffe, who agreed with the companyclusion of the House with some reluctance, has made strong companyments on the plea of privilege which is raised on behalf of the Crown in such matters. Adverting to the companytention that the public interest may be injured by the production of the document Lord Radcliffe observed that more than one aspect of the public interest may have to be surveyed in reviewing the question whether a document which would be available to a party in a civil suit between private parties is number to be available to the party engaged in a suit with the Crown. According to Lord Radcliffe it was number unreasonable to expect that the Court would be better qualified than the Minister to measure the importance of such principles in application to the particular case that is before it. It is on that assumption that the Scottish Law has reserved to the Courts the duty of making some assessment of the relative 1 1942 A.C. 624. 2 1956 Soots Law Times Reports 41. claims of the different aspects of public interest where production of a document is objected to by the Crown. Then, in his characteristic style Lord Radcliffe has observed I should think it a very great pity indeed if a power of this kind, a valuable power, came to be regarded as a mere ghost of theory having numberpractical substance, and the Courts abdicated by disuse in the twentieth century a right of companytrol which their predecessors in the earlier centuries have been insistent to assert. The learned law Lord has also made some strong companyment on the formula which has been evolved by Viscount Simon in Duncans case 1 , and had stated, that the phrase necessary for the proper functioning of the public service is a familiar one, and I have a misgiving that it may become all too familiar in the future. The result of this decision appears to be that in Scotland, where the companymon law doctrine of the Crown Privilege is number strictly enforced, a privilege can be claimed by the Minister on grounds set forth by him in his affidavit. The certificate would be treated as very strong presumptive evidence of the claim made but the Court would nevertheless have inherent power to override the said certificate. It is unnecessary for us to companysider the true nature and effect of this power because in India in this particular matter we are governed by the provisions of s. 162 which companyfer power on Courts to determine the validity of the objection raised under s. 123, and so there would be numberoccasion or justification to exercise any inherent power. Though we do number propose to refer to the other decisions to which our attention was invited, we may incidentally observe that the decision in Duncans case 1 has been followed by English Courts, but sometimes the learned judges have expressed a sense of dissatisfaction when they are called upon to decide an individual dispute in the absence of relevant and material documents. Vide Ellis v. Home Office 2 . Before we part with this topic we may also indicate, that it appears that in the long history of reported judicial decisions only on three occasions the right to 1 1942 A.C. 624. 2 1953 2 All E. R. 149. inspect documents has been either theoretically asserted or actually exercised in England. In Hennessy v. Wright 1 , Field, J., observed that he would companysider himself entitled to examine privately the documents to the production of which the Crown objected, and to endeavour by this means and that of questions addressed to the objector to ascertain whether the fear of injury to public service was the real motive in objecting. In point of fact, however, the learned Judge did number inspect the documents. From the judgment of the Court of Appeal in Asiatic Petroleum Co., Ltd. v. Anglo- Persian Oil Co., Ltd. 2 , it appears that Scrutton, J., had inspected the documents to the production of which an objection was raised. The learned judge has, however, added that having seen the documents he thought that the. government may be right in the view that they ought number to be produced to others, and that he would number take the res- ponsibility of ordering them to be produced against the wishes of the government. In Spigelmann v. Hocker Anr. 3 , Macnaghten, J., inspected the document to the production of which an objection was raised. The result of these decisions is that in England a valid certificate issued by the Minister in support of the privilege claimed is companyclusive while in Scotland, though it would numbermally be treated as such, Courts reserve to themselves an inherent right to revise or review the certificate in a proper case. It number remains to companysider whether the High Court was right in holding that the privilege claimed by the appellant in respect of the four documents in question was number justified, and that takes us to the companysideration of the relevant facts in the present appeal. The documents of which discovery and inspection were claimed are thus described by the respondent Original order passed by Pepsu Government on September 28, 1955, on the representation dated May 18, 1955, submitted by Sodhi Sukhdev Singh Original order passed by the Pepsu Government 1 1888 21 Q.B. 509. 2 1916 1 K.B. 822. 3 1933-34 1 Times L.R. 87. on March 8/9, 1956, reaffirming the decision passed on September 28, 1955, referred to above Original order passed by the Pepsu Government in their cabinet Meeting dated August 11, 1956, revising their previous order on the representation of Sodhi Sukhdev Singh dated May 18, 1955 and Report of the Public Service Commission on the representation of Sodhi Sukhdev Singh dated May 18, 1955, after the Pepsu Governments decision on September 28, 1955. In dealing with this question and in reversing the order passed by the trial companyrt by which the privilege had been upheld, the High Court has purported to apply the definition of the expression affairs of State evolved by Khosla, J., as he then was, in the case of Governor-General in Council H. Peer Mohd. Khuda Bux Ors. 1 It is, therefore, sufficiently clear, said the learned judge, that the expression affairs of State as used in s. 123 has a restricted meaning, and on the weight of authority, both in England and in this companyntry, I would define affairs of State as matters of a public nature in which the State is companycerned, and the disclosure of which will be prejudicial to the public interest or injurious to national defence or detrimental to good diplomatic relations. It is this definition which was criticised by Aft. Seervai on the ground that it purported to describe the genus, namely, affairs of State, solely by reference to the characteristics of one of its species, namely, documents whose disclosure was likely to cause injury to public interest. Having adopted this definition the High Court proceeded to examine whether any injury would result from the disclosure of the documents, and came to the companyclusion that it was difficult to sustain the plea that the production of the documents would lead to any of the injuries specified in the definition evolved by Khosla, J. On this ground the High Court allowed the companytention of the respondent and directed the State to produce the documents in question. We have already held that in dealing with the A.I.R. 1950 East Punjab 228. question of privilege raised under s. 123 it is number a part of the Courts jurisdiction to decide whether the disclosure of the given document would lead to any injury to public interest, that is a matter for the head of the department to companysider and decide. We have also held that the preliminary enquiry where the character of the documents falls to be companysidered is within the jurisdiction and companypetence of the Court, and we have indicated how within the narrow limits prescribed by the second clause of a. 162 such an enquiry should be companyducted. In view of this companyclusion we must hold that the High Court was in error in trying to enquire into the companysequences of the disclosure we may add that the decision of the High Court suffers from the additional infirmity that the said enquiry has been companyfined only to the specified classes of injury specified by Khosla, J., in his definition which cannot be treated as exhaustive. That being so, we think the appellant is justified in companyplaining against the validity of the decision of the High Court. Let us then companysider whether the documents in question do really fall within the category of documents relating to affairs of State. Three of the documents the discovery of which the respondent claimed are described as original orders passed by the Pepsu Cabinet on the three respective dates. It is difficult to understand what was exactly meant by describing the said documents as original orders passed on those dates but quite apart from it the very description of the documents clearly indicates that they are documents relating to the discussions that took place amongst the members of the Council of Ministers and the provisional companyclusions reached by them in regard to the respondents representation from time to time. Without knowing more about the companytents of the said documents it is impossible to escape the companyclusion that these documents would embody the minutes of the meetings of the Council of Ministers and would indicate the advice which the Council ultimately gave to the Rajpramukh. It is hardly necessary to recall that advice given by the Cabinet to the Rajpramukh or the Governor is expressly saved by Art. 163, sub-art. 3 , of the Constitution and in the case of such advice numberfurther question need to be companysidered. The same observation falls to be made in regard to the advice tendered by the Public Service Commission to the Council of Ministers. Indeed it is very difficult to imagine how advice thus tendered by the Public Service Commission can be excluded from the protection afforded by s. 123 of the Act. Mr. Gopal Singh attempted to argue that before the final order was passed the Council of Ministers had decided to accept the respondents representation and to reinstate him, and that, according to him, the respondent seeks to prove by calling the two original orders. We are unable to understand this argument. Even if the Council of Ministers had provisionally decided to reinstate the respondent that would number prevent the Council from reconsidering the matter and companying to a companytrary companyclusion later on, until a final decision is reached by them and is companymunicated to the Rajpramukh in the form of advice and acted upon by him by issuing an order in that behalf to the respondent. Until the final order is thus companymunicated to the respondent it would be open to the Council to companysider the matter over and over again, and the fact that they reached provisional companyclusions on two occasions in the past would number alter the character of the said companyclusions. The said companyclusions, provisional in character, are a part of the proceedings of the Council of Ministers and numbermore. The report received by the Council from the Public Service Commission carries on its face the character of a document the disclosure of which would lead to injury of public interest. It falls in that class of document which on grounds of public interest must as a class be withheld from production. Therefore, in our opinion, the companyclusion appears inescapable that the documents in question are protected under s. 123, and if the head of the department does number give permission for their production, the Court cannot companypel the appellant to produce them. We should have stated that the two affidavits made by the Chief Secretary in support of the plea of the claim of privilege satisfied the requirements which we have laid down in our judgment, and numbercomment can be effectively made against them. The argument that in its pleadings the appellant accepted the description of the respondent that the document companytained orders is hardly relevant or material. The affidavits show what these documents purport to be and that leads to the inference which irresistibly follows from the very descrip- tion of the documents given by the respondent himself in his application by which he called for their production and inspection. Before we part with this appeal we may incidentally refer to another point which was argued at some length before us by both the learned companynsel for interveners. Mr. Viswanatha Sastri companytended that the provisions of s. 162 can be invoked only where a witness has been summoned to produce a document and a privilege is claimed by him in respect of it. According to him the said provisions cannot be invoked where the Court is called upon to decide the validity of the claim of privilege at the stage of inspection of the documents. In other words, where the State is a party to the suit and an application for inspection of documents is made against it by its opponent, and a claim for privilege is put forward by the State, the Court is entitled under 0. 11, r. 19, sub- a. 2 , to inspect the documents for the purpose of deciding as to the validity of the claim of privilege. That is the clear provision of 0. 11, r. 19, sub-r. 2 , and the power companyferred on the Court by the said provision is number subject to s. 162 of the Act. This position is seriously disputed by Mr. Seervai. The procedural law in regard to discovery, production and inspection of documents is companytained in 0. 11, rr. 12, 21. It is true that 0. 11, r. 19, sub-r. 2 provides that in dealing with a claim of privilege it shall be lawful for the Court to inspect the document for the purpose of deciding the validity of the claim of privilege. The question is, what is the effect of this provision when it is companysidered along with s. 162 of the Act ? Before briefly indicating our companyclusion on this point we may observe that this companytention does number appear to have been raised in any judicial decisions to which our attention was drawn. Indeed it appears generally to have been assumed that in the matter of deciding a claim for privilege made by the State the provisions of s. 162 of the Act would apply whether the said claim is made at the earlier stage of inspection or later when evidence is formally tendered. That, however, is another matter. It is true that s. 162 in terms refers to a witness who is summoned to produce a document and provides for the procedure which should be adopted and the powers which should be exercised in dealing with a privilege claimed by such a witness but there is numberdoubt that the provisions of the Act are intended to apply to all judicial proceedings in or before any Court that in terms is the result of s. 1 of the Act, and the proceedings before the Court under 0. 11, r. 19, are judicial proceedings to which prima facie s. 162 would. apply. Similarly, s. 4, sub-s. 1 , of the Code of Civil Procedure provides, inter alia, that in the absence of any specific provisions to the companytrary numberhing in the Code shall be deemed to limit or otherwise affect any special or local law in force that is to say, in the absence of any provisions to the companytrary the Evidence Act would apply to all the proceedings governed by the Code. Besides, it would be very strange that a claim for privilege to which 0. 1 1, r. 19 sub-r. 2 , refers is allowed to be raised under a. 123 of the Act, whereas, the procedure prescribed by the Act in dealing with such a claim by s. 162 is inapplicable. If s. 123 of the Act applies and a claim for privilege can be raised under it, prima facie there is numberreason why s. 162 should number likewise apply. But apart from these general companysiderations the relevant scheme of the Code of Civil Procedure itself indicates that there is numbersubstance in the argument raised by Mr. Sastri. Order 27 prescribes the procedure which has to be adopted where suits are filed by ,or against the government a plaint or written statement proposed to be filed by the government has to be signed under r. 1 by such person as the government may by general or special order appoint in that behalf, which means that the government can only act through its agent duly appointed in that behalf. The Minister who is the political head of the department or the Secretary who is its administrative head is number the government and so whenever the government sues or is sued and makes its pleadings it always acts through its duly authorised agents. The scheme of the relevant rules of 0. 27 is companysistent with this position. Section 30 of the Code empowers the Court either on its own motion or on an application of a party to issue summonses to persons whose attendance is required either to give evidence or produce document, and to order that any fact may be proved by an affidavit. Order 4, r. 5, companytemplates that, at the time of issuing the summons, the Court has to determine whether the summons should be for the settlement of issues only or for the final disposal of the suit and the relevant form of the summons No. 1 in First Schedule, Appendix B shows that in the case of a suit against the government of a State a summons can be issued to companypel the attendance of any witness and the production of any document. This shows that where the State is a party a summons may have to be issued to its appropriate officer calling upon him to produce the documents for inspection. The provisions of rr. 14, 15 and 16 of 0. 11 show that affidavits have to be filed by the parties, and the filing of affidavits which is permitted by 0. 19 is undoubtedly one mode of giving evidence. Order 16, r. 1, provides for the issue of a summons to persons whose attendance is required inter alia to produce documents and r. 21 of the said order expressly provides that where any party to a suit is required to give evidence or to produce a document the provisions as to witnesses shall apply to him so far as are applicable. Thus there can be little doubt that where a privilege is claimed at the stage of inspection and the Court is required to adjudicate upon its validity, the relevant provisions of the Act under which the privilege is claimed as well as the pro- visions of s. 162 which deal with the manner in which the said privilege has to be companysidered are equally applicable and if the Court is precluded from inspecting the privileged document under the second clause of s. 162 the said prohibition would apply as much to a privilege claimed by the State through its witness at the trial as a privilege similarly claimed by it at the stage of inspection. It is hardly necessary to point out that a companytrary vie would lead to this manifestly unreasonable result that at the stage of inspection the document can be inspected by the Court, but number at the subsequent stage of trial. In our opinion, the provisions of 0. 11, r. 19, sub-r. 2 , must, therefore, be read subject to s. 162 of the Act. The result is that the appeal is allowed, the order passed by the High Court set aside and that of the trial companyrt restored with companyts throughout. KAPUR, J.-I have read the judgment prepared by my learned brother Gajendragadkar, J., and agree with the companyclusion but in my opinion the Court cannot take other evidence in regard to the nature of document, for which privilege is claimed, and my reasons are these In India the law of privilege in regard to official documents is companytained in s. 123 of the Indian Evidence Act which has to be read with s. 162 of that Act. The various kinds of privileges claimable under the Evidence Act are companytained in Chapter IX, two sections amongst these are ss. 123 and 126, the former dealing with state privilege relating to affairs of State and the latter with companymunications with a legal adviser. In s. 123 the opening words are numberone shall be permitted and in the latter numberbarrister etc., shall at any time be permitted In the other sections dealing with privilege the opening words are numberperson shall be companypelled This difference in language indicates that the legislature intended to place the privilege of the State in regard to official documents on a different footing than-the other forms of privileges mentioned in the Act in so far as it put a ban on the companyrt permitting any evidence of the kind mentioned in. s. 123 from being given, so that if, unwittingly any evidence mentioned therein was sought to be given, the companyrt would number permit it unless the other companyditions were satisfied. In s. 123 the provision is against the giving of evidence which is derived from unpublished official records relating to any affairs of State except when the head of the department companycerned in his discretion gives permission for the evidence to be given. The important words are derived, unpublished and affairs of State. The word derived means companying out of the source and therefore refers to original as well as secondary evidence of documents whether oral or documentary. The words unpublished official records are number very difficult of interpretation and must depend upon the circumstances of each case. If the record is shown to have already been published, it ceases to be an unpublished record. But the difficulty arises as to the meaning of the words affairs of State, because the ban is put on evidence derived from official documents relating to affairs of State. At the time when the Indian Evidence Act was enacted, affairs of State were companyfined to governmental or political activities of Government, but with the expanding of the activities of the State, which, because of the changed companycept of the State, companyprise also socioeconomic, companymercial and industrial activities the words affairs of State must necessarily have a much wider meaning than it originally had. But the language of the sections remains the same and so also the limitation on the giving of evidence derived from such documents and therefore what was companysidered to be within the discretion of the head of the department to disclose or number to disclose still remains within his discretion and merely because the scope of the words affairs of State had been extended, the extent of the discretion has number thereby decreased or become limited and the words who shall give or withhold such permission as he thinks fit indicate that the discretion to remove the ban vests in the head of the department and numberone else. The real difficulty arises in the interpretation of the words affairs of State. What are they? How is the meaning of the words to be determined and by whom? When a claim is made by a proper authority in a proper form, is that companyclusive of the nature of the document or has the companyrt to proceed to determine the efficacy of the claim by taking other evidence as to its nature or the effect of its disclosure. It was companytended that the decision, whether the document belongs to the category falling within the expression affairs of State or number has to be of the companyrt and number of the official mentioned in the section. In a way that is companyrect because the companyduct of the trial must always remain in the hands of the companyrt but what is implied in the companytention raised was that the companyrt must first decide whether the document belongs to the class companyprised in the expression affairs of State and then the official companycerned may give or withhold his companysent. It was also submitted that in order to enable the companyrt to determine the validity of the claim of privilege the official companycerned, when making the claim, may have to state the nature of the document or at least the nature of the injury to the public interests or to the efficient working of the public service, as the case may be, which the disclosure of the document or evidence derived therefrom would result in. Section 162 of the Evidence Act was relied upon in support of the above companytention. That section applies to all documents in regard to which claim of privilege of any kind may be claimable including that falling under s. 123 and therefore the language of s. 162 had necessarily to be wide. It has been described as number being clear by Bose, J., as he then was, in Bhaiya Saheb v. Ram Nath Bampratap Bhadupote 1 . The section requires a witness summoned to produce a document to bring it to the companyrt in spite of any objection which he may take to it production or to its admissibility and the companyrt is empowered to decide both the questions. It is the next part which is relied upon in support of the companytention that the companyrt can I.L.R. 1940 Nag. 240, 247. take other evidence to decide both the questions of production and the question of admissibility. The words are the companyrt, if it sees fit may inspect the document, unless it refers to matters of State,. or take other evidence to enable it to determine on its admissibility. It was argued that this part of the section empowered the companyrt to take other evidence number only to decide the question of admissibility of the document but also its production. The language of this part of the section does number lend support to this companytention because it gives discretion to the companyrt to inspect the document or take other evidence to enable it to determine the admissibility of the document. The interposing of the words unless it refers to matters of State, has reference to privilege under s. 123 and therefore it disentitles the companyrt to inspect the document. The sequence envisaged by the section is that a witness summoned to produce a document is bound to bring it to the companyrt. He may then take objection to its production under any of the sections, viz., 121 to 131 or he may object to its admissibility and both these objections have to be decided by the companyrt. Then companyes the second part of the section. If the document refers to matters of State-there is numberdistinction in the meaning of the word matters and affairs of State-then the companyrt may number inspect the document, but if the document is number of that class, then the companyrt can inspect it and if it finds any objection to the admissibility, it may take other evidence to determine its admissibility. To take a companycrete case, if a document is produced which is companypulsorily registerable and it is number so registered, it would number be admissible in evidence under s. 49 of the Registration Act, but evidence may be led as to its admissibility for certain purposes, e.g., s. 53-A of the Transfer of Property Act. If it refers to that class of documents then the second, part of s. 162 becomes applicable, i.e., the, companyrt may inspect the document which will help it in deciding the question of privilege and admissibility. But if a claim is properly made by a proper official on the ground that it refers to matters of State, the companyrt will stay its hands and refrain from inspecting it. The words or to take its admissibility on their plain language do number apply to production and companysequently the taking of evidence must have reference to the admissibility of the document. All the High Courts in India are in accord that the Supreme companyrt will number inspect the document if it relates to matters of State. If that is so it would be difficult to sustain the companytention that it can decide the question whether the matter relates or does number relate to affairs of State. If the original cannot be inspected, numberother evidence can be produced as to its companytents. The effect of this prohibition is number only as if the document had been destroyed, but as if it never existed. If that is the position, then it becomes difficult to see how the question of its production can be decided by the companyrt by taking other evidence or how the companyrt can decide whether a particular document falls within the prohibition imposed by s. 123 of the Evidence Act. In this companynection the words of Lord Kinnear in The Lord Commissioner of the Admiralty v. Aberdeen Steam Trawling Fishing Co., Ltd. 1 are quite apposite. It was there said I think it is number improbable that even if an officer of the department were examined as a witness, we should number get further forward, because the same reasons which induced the department to say that the report itself ought number to be produced might be thought to preclude the department from giving explanation required. If the companyrt cannot inspect the document, if numbersecondary evidence can be given as to its companytents and if the necessary materials and the circumstances which would indicate the injury to the public interests or detriment to the proper functioning of the services cannot be before the companyrt it cannot be in a position to decide whether the document relates to affairs of State or number and the logical companyclusion would be that the companyrt is debarred from overruling the discretion of the head of the department companycerned, because the companyrt cannot say whether the disclosure or number-disclosure would be detrimental or number. If, on the other 1 1909 S.C. 335, 343. hand, the companytention is accepted that the companyrt can decide by taking other evidence as to whether the document relates to the affairs of State then the discretion to ban its production by the head of the department must necessarily become illusory. If the companyrt takes upon itself the task of deciding the nature of the document, then it will be taking upon itself the very grave duty of deciding a vital question as to what are the affairs of State without having the necessary material before it or without knowing the exigen- cies of the public service or the effect of the disclosure of the State secret or how far the disclosure will injure the public interests and- it may thus unwittingly become the instrument of giving publicity to something which the head of the department companysidered injurious to the public interests, the law having given to the head of the department companycerned to make this determination No doubt the discretion is wide and companyers all classes of documents which may fall within the phrase affairs of State, some numberious and others innocuous and may even appear to be unduly restrictive of the rights of the litigant but if that is the law the sense of responsibility of the official companycerned and his sense of fair play has to be trusted. The second. part of s. 162 therefore cannot be said to permit the taking of other evidence, ie., other than the document to determine the question of its production when it is of the category falling under s. 123. That part does number entitle the companyrt to determine the nature of the document or the adequacy of the reasons which impelled the proper official to claim privilege. It would be relevant Co quote the observations of Isaacs, J., in Marconis Wireless Telegraph, Co. v. The Common. wealth I distinctly adverted to the necessary fact that the right of discovery given, to the litigant for the furtherance of public justice must be subject to the still higher companysideration of the general welfare that the order to make proper discovery does number destroy the privilege of public interest, and, that the ground of, public policy may intervene and, prevent the injury, to 1 1913 16 C.L.R. 178, 201. the companymunity which companyrcive disclosure might produce. If that were number so, every gun in every fort and every safe in the Treasury would be open through the medium of the Court to the observation of any ,plaintiff of any nationality who companyld make a prima facie case of the infringement to which it was relevant. One of the authorities to which I referred in that companynection was the judgment of Turner, L. J. in Wadeer v. East India Co., 8 D.M. G., 182 at p. 191 and that, judgment is, I think, of great value in this case also. It will be helpful to refer to the law on the subject in England as laid down in English cases because the basis of the Indian Law is the law of that companyntry. The question of privilege has been described by Viscount Simon L. C., in Duncan v. Cammell Laird Co., Ltd. 1 as a question of high companystitutional importance because it involves a claim by the Executive Government to restrict the material which might otherwise be available for the companyrt trying the case and this description was repeated by the House of Lords in the Scottish case Corporation of Glasgow v. Central Land Board 2 . It may be the material which a party to the litigation may desire in its own interest and without which equal justice may be prejudiced. The question of privilege may number only arise in cases where the State is party to the suit but may equally arise where the companytestants in a suit are private parties and whether as a party to the suit or number the State may decline to produce a document. In Dun- cans case 1 the privilege of the crown, though it was described as number a happy expression, was upheld on the ground that the interest of the State must number be put in jeopardy by the production of a document which would injure it and which is also a principle to be observed in administering justice, quite unconnected with the interests or claims of the particular parties in litigation and, indeed, is a rule upon which the Judge if necessary, insist even though numberobjection is taken at all. The sort of grounds to afford justification for. withholding the documents-were,given by Viscount Simon as follows.- 1 1942 A.C. 624. 2 1956 S.C. I H.L. , It would number be a good ground that, if they were produced the companysequences might involve the department or the government in Parliamentary discussion or in public criticism, or might necessitate the attendance as witnesses or otherwise of officials who have pressing duties elsewhere. Neither would it be a good ground that production might tend to expose a want of efficiency in the administration or tend to lay the department open to claims for companypensation. In a word, it is number enough that the minister or the department does number want to have the document produced. The minister, in deciding whether it is his duty to object, should bear these companysiderations in mind, for he ought number to take the responsibility of with- holding production except in cases where the public interest would otherwise be damnified e.g. where disclosure would be injurious to national defence, or to good diplomatic relations or where the practice of keeping a class of documents secret is necessary for the proper functioning of the public service. Thus the documents, which are protected from production, are those the production of which would be prejudicial to the public interests or those which belong to that class which as a matter of practice, are kept secret for the proper maintenance of the efficient working of the public service. Objection has been taken to the authority of this rule enunciated by Viscount Simon L. C., on the ground that it is in serious companyflict with another principle that the proper administration of justice is also a matter of public interest, i. e., fiat justitia ruat caelum but as was said by Viscount Simonds in Glasgow Corporation v. Central Land Board 1 , The paramountcy of the public interest has been recognized and preserved. This principle, which was re- enunciated by Viscount Simon, L. C., had been the law of England for over a century before Duncans case 2 . In Earl v. Vass 3 it was held that public officers are number entitled or companypellable to produce written companymunications made by them officially relative to the character and companyduct of a party applying 1 1956 S.C. 1 H.L. . 2 1942 A.C. 624. 3 1822 1 Sh. Sc. App. 229. for a public office when the production is demanded in an action for damages against the writer. Lord Eldon L. C., at p. 230 observed- I apprehend, in all cases in which it has been held, upon the principle of public policy, that you shall number be companypellable to give evidence of, or produce s such instruments-that is, wherever it is held you are number on grounds of public policy, to produce them-you cannot produce them and that it is the duty of the judge to say you shall number produce them Lord Eldon referred with approval to the decision in Home v. Lord William Bentinck 1 which was of the year 1820. The principle there laid down was that production of instruments and papers must be shut out if it was against public policy. At p. 919 the learned Chief Justice said- It seems therefore that the reception of the minutes would tend directly to disclose that which is number permitted to be disclosed and therefore, independently of the character of the companyrt, I should say, on the broad rule of public policy and companyvenience that these matters, secret in their nature, and involving delicate enquiry and the names of persons, stand protected. The injury to public service was recognized in Beatson v. Skene 2 where Pollock, Q. B., said It appears to us, therefore, that the question, whether the production of the documents would be injurious to the public service, must be determined, number by the Judge but by the head of the department having the custody of the papers and if he is in attendance and states that in his opinion the production of the document would be injurious to the public service, we think the Judge ought number to companypel the production of it. The administration of justice is only a part of the general companyduct of the affairs of any State or Nation, and we think is with respect to the production or number-production of a State paper in a Court of Justice subordinate to the general welfare of the companymunity. If indeed, the head of the 1 1820 2 Brod. B. 130 129 E.R. 907. 2 1860 5 H. N. 838 157 E.R. 1415. department does number attend personally to say that the production will be injurious but sends the documents to be produced or number as the Judge may think proper, or as was the case in Dickson v. The Earl of Wilton beford Lord Campbell reported in Foster and Finla sons N. P. Rep., p. 425 , where a subordinate was sent with the document with instructions to object but numberhing more, the case may be different. Martin B. did number entirely agree with the view of the other three learned Barons and he was of the opinion that if the document companyld be produced without prejudice to public service he ought to companypel its production numberwithstanding the reluctance of the head of the department to produce it. It was pointed out by Pollock, C. B., that this might apply to extreme cases and extreme cases throw little light on the practical rules of life. In Smith v. East India Company 1 which related to a companymercial transaction as to the liability to pay freight a similar privilege was upheld. It was argued that companymunications between officials and companymunications between Directors and Board of Control were official companyrespondence and were privileged. On appeal the Lord Chancellor held that in order that superintendence and companytrol should be exercised effectively and for the benefit of the public it was necessary that unreserved companymunication should take place between the East India Company and the Board of Control. In Homer v. Ashford 2 which was of the year 1825,Best, C. J., said- The first object of the law is to promote public interest the second to preserve the rights of individuals. In this companynection it may number be out of place to recall the striking language of Knight Bruce, V. C., quoted at p. 401 of Macintosh v. Dun 3 in the judgment of Lord Macnaughten- Truth like other good things, may be loved unwisely-may be pursued too keenly-may companyt too 1 1841 1 Ph. 50 41 E.R. 550. 2 1825 3 Bing. 322 130 E.R. 537, 539. 3 1908 A. C. 390. much. And then he points out that the meanness and the mischief of prying into things which are regarded as companyfidential, with all the attending companysequences, are too great to pay for truth itself. Thus the law as stated in these old English cases shows that what was injurious to the public interest or prejudicial to the proper functioning of the public services was number to be disclosed and if the objection was based on these grounds it must prevail. As to who was to determine this, the judge or the official, Pollock C. B. decided in favour of the official because the enquiry companyld number be held in private and if it was held in public the mischief would have been done. Beatson v. Skene 1 . It was with this background of the state of the English law that Sir James Fitzjames Stephen drafted the law of evidence which was enacted into the Indian Evidence Act Act 1 of 1872 . Scrutton, T., in Asiatic Petroleum Company Ltd. v. Anglo- Persian Oil Company Ltd. 2 which was a case between private parties inspected the document to the production of which objection was taken, and having seen it he said that he would number take the responsibility of ordering it to be produced against the wishes of the Government. When the matter was taken in appeal, Swinfen Eady, L. J., was of the opinion that the rule was number companyfined to documents of political or administrative character. The foundation of the rule was that the information cannot be disclosed without injury to the public interest and number that the document was companyfidential or official, and that if the production would be injurious to the public service, the general public interest must be companysidered paramount to the individual interest of the suitor. This was a document which was written by the defendants, who owned a pipeline from Persia to their refinery in the Persian Gulf, to their agents in Persia which companytained companyfidential information from the Board of Admiralty. The Scottish cases have also upheld the privilege of. the Crown in regard to production although it has 1 1860 5 H. N. 838 157 E.R. 1415. 2 1916 1 K. B. 822. been stated that the inherent power of the companyrt to itself see the document and to override but number to review the certificate of the official of the department companycerned has always existed in Scottish companyrts. In Duncans case 1 Viscount Simon, L. C., quoted with approval the observation of Lord Dunedin, the Lord President in the Lord Commissioners of the Admiralty v. The Aberdeen Steam Trawling Fishing Co., Ltd. 2 . That was a case where a Government department objected to the production of the document on the ground that the production would be prejudicial to public services and it was held that the view of the government department was final and the companyrt will refuse production even in action in which the Government department was a party. The objection there was taken on an affidavit. At p. 340, the Lord President Dunedin said- It seems to me that if a public department companyes forward and says that the production of a document is detrimental to the public service,, it is a very strong step indeed for the Court to overrule that statement by the department. The Lord Ordinary has thought that it is better that he should determine the question. I do number there agree with him, because the question of whether the publication of a document is or is number detrimental to the public service depends so much upon the various points of view from which it may be regarded, and I do number think that the Court is in possession of these various points of view. In other words, I think that, sitting as Judges without other assistance, we might think that something was innocuous, which the better informed officials of the public department might think was numberious. Hence, I think the question is really one for the department, and number for your Lordships. And Lord Kinnear agreed with Lord Dunedin and at p. 343 said- I agree that we cannot take out of the hands of the Department the decision of what is or what is number detrimental to the public service. There are only two possible companyrses. We must either say that it is a good 1 1942 A.C. 624, 2 1909 S.C. 335, 343. ground of objection or we must overrule it altogether. I do number think that we should decide whether it would be detrimental to the public service or number and I agree with what both your Lordships have said as to the position of the Court in reference to that question. We do number know the companyditions under which the production of the document would or would number be injurious to the public service. I think it is number improbable that even if an officer of the Department were examined as a witness we should number get further for- ward, because the same reasons which induced the Department to say that the report itself ought number to be produced might be thought to preclude the Department from giving the explanations required. A department of Government, to which the exigencies of the public service are known as they cannot be known to the Court, must, in my judgment, determine a question of this kind for itself, and therefore I agree we ought number to grant the diligence. In a later Scottish case Henderson v.MGown 1 where in a suit between private parties income-tax returns were sought to be produced, the companyrt held that it had the power, in the exercise of its discretion, to order production of documents in the custody of a public department in spite of its objection but in the circumstances it did number order production as it was unnecessary. Lord Johnston said at p. 826- That is number to say that the companyrt never can and never will overrule such a statement but merely that it would be a very strong step, and therefore a step for which the Court would require very grave justification. The Admiralty and the War Office are charged with the duty of providing for the safety of the realm, and, if either say that the production of a document in their hands would be prejudicial to the public interest, I think that we should naturally implicitly accept the statement. But there are distinctions between public departments. The interest of such a department as the Inland Revenue is that the public should be able to rely on all returns to them and 1 1916 S.C. 821. companymunications made to them being treated as companyfidential. This also is the public interest. The latest Scottish case relied upon is a decision of the House of Lords in Glasgow Corporation v. Central Land Board 1 . In that case privilege was claimed by the Central Land Board on the ground that its production would adversely affect the public interests. The question for decision was whether Scottish companyrts were bound to give effect to the certificate of the Secretary of State or whether the companyrt had an inherent jurisdiction number to review the certificate but to override it. The House of Lords was of the opinion that Duncans case 2 did number affect the Law of Scotland and the Scottish companyrts possessed the inherent power to override the objections of the Minister and it did number exclude the companyrt from making an order of production but in that case the power was number exercised. Viscount Simonds, L. C., said at p. 10 that Duncans case 2 had settled that according to the Law of England an objection validly taken to production of documents on the ground that this would be injurious to the public interest is companyclusive but to cite the case of Lords Commissioners of the Admiralty 3 as authoritative without regard to the earlier cases and the later case of Henderson v. MGown 4 must give an imperfect view of the law of Scotland. But even in Scotland the power had been rarely, very rarely, exercised by the companyrts its exercise had been refused even where the result had been the prejudice of the private individual and the paramountcy of the public interest had been recognised and preserved. p. II . Lord- Normand observed that for a 100 years the uniform track of authority asserted the inherent power of the companyrt to disregard the crowns objection but the power had been seldom exercised only the companyrts had emphatically said that it must be used with the greatest caution and only in special circumstances. In this companynection Lord Normand said at p. 16- It was also a firmly established rule that the companyrts companyld number dispute the certificate and that the 1 1956 S.C. 1 H.L. . 2 1942 A.C. 624. 3 1909 S.C. 335, 343. 4 1916 S.C. 821. question whether production would be companytrary to public interest was for minister or the department companycerned. Lord Radcliffe in his speech said that Duncans case ought number to be treated as a decision which affected the law of Scotland. Dealing with the case before the companyrt and the power reserved to the companyrt to overrule the crown objection he said at p. 18- I do number understand that the existence of the power involves that in Scotland, any more than in England, it is open to the companyrt to dispute with the minister his view that production would be companytrary to the public interest is well founded or to arrive at a view, companytradictory of his that production would number in fact be at all injurious to that interest. If weight is given to the argument that the Minister in forming his view may have before him a range of companysiderations that is number open to the Court and that he is number under any obligation to set out these companysiderations in public, I think that it must follow that the Ministers view must be accepted by the Court as incapable of being displaced in by its own opinion. The view expressed in Admiralty Commissioners v. Aberdeen 1 was dissented from. After referring to another aspect of public interest that impartial justice should be done in the companyrts of law, number least between citizen and Crown, the Lord Normand observed If in the past the power to disregard the objection has hardly ever been exercised, that has been due, I think, to a very proper respect for the Crowns position and to a companyfidence that objections of this nature would number be advanced, or at any rate persisted in, unless the case was one in which production would involve material injury to the public welfare. Thus, as was said by Lord Normand, there is a difference between the law of England and the law of Scotland on an important companystitutional question. But in practice the difference was little as the exercise of the inherent power by the Scottish Courts had been rare. 1 1942 A.C. 624. 2 1909 S.C. 335. 343. As the Privy Council judgment in Robinsons case 1 was from Australia it will be useful to refer to two Australian cases- In Marconis Wireless Telegraph Company Limited v. The Commonwealth 2 where inspection was claimed of wireless telegraphic apparatus, Isaacs, J., in his minority judgment at p. 205 enunciated the following propositions which are relevant for the purpose of the present case- The rule of exclusion of State secrets applies, necessarily without distinction to the facts, documents and other objects. This was admitted by Mr. Irvine, and is established by such cases as B. v. Watson 2 Stark, 116 at p. 148 B. v. Hardy 24 St. Tri. 199, at company. 753 R. v. Watson 32 St. Tri. 1, at companys. 100-101. The rule proceeds on the same grounds whether the parties called on to produce the documents, c., are or are number parties to the suit, that is, on the grounds of the prejudice to the public interests, which production would occasion per Turner, L. J. in Wadeers case S. D. M. G., 1882 Admiralty Commissioners v. Aberdeen Trawling Co. 1909 Sess. Ca., 335. The right to protection depends upon the character of the documents, c. ib. . If the documents, c., are prima facie private, as where they are in private hands then in the absence of Ministerial claim for protection, the Court, in case of objection by the private defendant on the ground of public policy, will ascertain their character that is, whether they are really governmental and, if they are, the next succeeding paragraph applies Smith v. East India Company I Ph. 50. If the documents, are of a political that is, a governmental character, then even in the absence of any Ministerial claim for protection, it is the duty of the Court, on objection by private person holding them, to ascertain whether public prejudice will or may ensue from production, and, if it appears that public policy requires companyfidence between the objector and the Government, they are presumed 1 1931 A.C. 704. 2 1913 16 C.L.R. 178, 201. prima facie to be companyfidential Smith v. East India Company I Ph. 50 and per Wills, J. in Hennessy v. Wright 21 Q.B.D. 509, 518-519. If either by proof or undisplaced presumption companyfidence is required, then it is a rule of law, number of discretion, that the documents shall be excluded Marks v. Beyfus 25 Q.B.D. 494 at pp. 498-500 Stace v Griffith L.R. 2 C., 420 at p. 428. If the documents, c., are in fact State documents, that is, in possession of a government department, and the Minister having custody of them assures the Court that public prejudice will or may ensue from production, that, in the absence of what are called extreme cases and are practically negligible, is companyclusive evidence of their, character, that is, that they are companyfidential public documents, and that such prejudice will or may ensue, and the Court must act upon it Stace v. Griffith L.R. 2 P.C. 420 at p. 428 Beatson v. Skene 5 H. N. 838 The Bellerophon 44 L. J. Adm. 5 Hughes v. Vargas 9 R. 661 Halsburys Laws of England, Vol. XI, p. 85 Taylor on Evidence, 10th ed., pp. 673, 674 Powell on Evidence, 9th ed., p. 273. Conclusiveness in such a case is number unique. Even a private claim for privilege in an ordinary affidavit of documents is with certain exceptions immaterial here , taken as companyclusive with respect even to the grounds stated for claiming privilege See Halsburys Laws of England, Vol. XI, p. 61 and Morris v. Edwards 15 App. Cas. 309. The learned Judge dealing with the matter of privilege in public interest and the principles based on prevention of injury to the companymunity observed at p. 203 Such a doctrine is inherent in all systems of law for the first requirement of every organised society is to live, and so far as possible to live securely, and the next is to live with the greatest advantage to the companymunity at large and to these essentials the strict administration of justice in particular cases amongst members must yield. Thus the principle is that private inconvenience must yield to public interest in other words Fiat justitia ruat companylum is number always the right of a suitor because the proper maxim applicable is salus populi suprema est lex which transcends all other companysiderations. The majority of the Court in that case had held that there was numberhing to warrant the companyjecture that the inspection companyld disclose anything that companyld reasonably be called secret in any sense of the word. The matter was taken to the Privy Council but special leave to appeal was refused. The Lord Chancellor there said- See Griffins case, 36 C.L.R. 378, 386 Of companyrse the Ministers statement or certificate must be companyclusive on a particular document. How can it be otherwise? If the Minister certifies quite specifically, his certificate is to be taken as companyclusive. The ground on which special leave to appeal was refused in that case appears to have been that, having regard to the form of the order, which carefully limited the right of inspection and reserved liberty to apply, it was number a companyvenient case in which to raise a great question of principle. In Griffin v. The State of South Australia 1 objection to the production for inspection of documents was upheld on the ground that the statement of the Attorney General for the State that their production for inspection would be prejudicial to the public interest is companyclusive. That was a case in which inspection of documents was sought in an action brought in the High Court of Australia by the plaintiff against the State of South Australia to recover damages for negligent storage of wheat. Knox, C. J., in the companyrse of his judgment referred to the observations of the Lord Chancellor in Marconis case, 2 which have been quoted above. Isaacs, J., reiterated his previous opinion. Starke, J., was doubtful and he was of the opinion that there was numberreason why the companyrts should number use the power companyfided in them for discovery. If some real doubt was established as to the accuracy of the Ministers statement there was numberreason for refusing the power in a proper case particularly when the companymercial activities of the Government were becoming more and more extensive and 1 1925 36 C.L.R. 378, 2 1913 16 C.L.R. 178,201. the sphere of political and administrative action companyrespondingly wider. He was also of the opinion that the companyrts should be able to fully protect the public interests and do numberhing to imperil them. The learned Judge in that particular case was number fully satisfied with the affidavit of the Minister. The matter of privilege in Australia was taken to the Privy Council in Robinson v. State of South Australia 1 . This case arose out of an action similar to Griffins case 2 and a similar privilege was claimed.The Privy Council was of the opinion that the Ministers minute was inadequate to support the claim of privilege but it had number been lost by the inefficiency of the form in which it was claimed and the matter was a proper one for the companyrt to exercise its power of inspection for which privilege was sought in order to determine whether their production will be prejudicial to public interest or to the efficient working of the public services. Lord Blanesburgh said at p. 714- As the protection is claimed on the broad principle of State policy and public companyvenience, the papers protected, as might have been expected, have usually been public official documents of a political or administrative character. Yet the rule is number limited to these documents. Its foundation is that the information cannot be disclosed without injury to the public interests and number that the documents are companyfidential or official, which alone is numberreason for their numberproduction See Asiatic Petroleum Co. v. Anglo-Persian Oil 1916 1 K. B. 822, 829-830 and Smith v. East India Co. 1 Ph. 50. and at p. 715 it was observed- It must number be assumed from these observations of the Lord Justice that documents relating to the trading, companymercial or companytractual activities of a State can never be claimed to be protected under this head of privilege. It is companyceivable that even in companynection with the production of such documents there may be some plain overruling principles of public interest companycerned which cannot be disregarded. 1 1931 A.C. 704. 2 1925 36 C.L.R. 378. After referring to various cases that have been set out above the Privy Council was of the opinion that the companyrt was entitled to prescribe in any particular case the manner in which the claim of privilege should be made. It may accept unsworn testimony of the Minister in one case but in another where the circumstances seems to be to so require call for an affidavit from him. It may be that objection merely on ground of public policy may number be sufficient but it ought to appear that the mind of a responsible Minister had been brought to bear on the question of expediency in the public interest of giving or refusing the information asked for. This would be a guarantee that the opinion of the Minister which the companyrt is asked to accept is one which has number been expressed inadvisedly or as a matter of mere departmental routine but is one put forward with the solemnity necessarily attaching to the sworn statements and that the privilege companyld number be asserted in relation to documents the companytents of which had already been published. In that particular case the Minister had merely stated that he had companysidered this mass of documents and number that he had read them and companysidered each one of them. Lord Blanesburgh said at p. 722- In view specially of the fact that the documents are primarily companymercial documents he should have companydescended upon some explanation of the particular and far from obvious danger or detriment to which the State would be exposed by their production. Above all, and especially in view of the last paragraph of the minute, the claim was one which should have been put forward under the sanction of an oath by some responsible Minister or State official. Continuing it was observed that there may be some among the scheduled documents to which privilege may be genuinely attached and to give inspection of which without more would destroy the protection of the privilege and therefore it would or might be companytrary to public interest to deprive the State of opportunity of regularising its claim to protection. The Board would have given this advice had it number been for the fact that it would have involved serious delay without advancing further the final solution of the question. The case was therefore remitted to the Supreme Court with a direction that it was a proper one for the exercise by that companyrt of the power of inspecting documents. The Privy Council was careful to add that the Judge in giving his decision as to, any document would safeguard the interests of the State and would number resolve the doubt against the State without further enquiring from the Minister. In that case also the paramountcy of the companysideration of public interest was recognized but as the privilege was number properly claimed and the document related to companymercial activities of the State and it would have involved unnecessary prolongation of the action the Privy Council remitted the case for the companyrt to exercise its power of inspection under the Rules and Orders of the companyrt but with the further direction of safeguarding the interest of the State. In Duncan v. Cammell Laird Co. 1 , the Court of Appeal held that the affidavit of the First Lord of Admiralty was companyclusive if it stated that such production would be companytrary to public interest, and the order for production was therefore refused. Du Parcq, L. J., pointed out that the Privy Council case Robinsons case 2 was number the final word on the subject in regard to production. The House of Lords in appeal did number agree with the judgment of the Privy Council and it is significant that two of the seven Law Lords in the House of Lords were parties to the Privy Council judgment. The House of Lords held that the affidavit of the Minister was companyclusive and that inspection of a document by a companyrt in private would be companymunicating with one party to the exclusion of the other and it accepted the principle that if it was prejudicial to the public interests or the document belonged to that class of documents which are kept secret for the proper functioning of the public services the production of the document would be refused. It was recognized in that case that it is the Judge who is in companytrol of the trial and number the executive but the proper ruling for the judge to give 1 1942 A.C. 624. 2 1931 A.C. 704. would be that an objection validly taken to the production on the ground of its being injurious to public interest is companyclusive. The English cases which were decided after the pronouncement of the House of Lords in Duncans case 1 naturally followed the decision of the House of Lords. In Ellis v. Home Office 2 where a prisoner who had been attacked in jail by another prisoner who was a mental case asked for certain reports and privilege was claimed, the privilege was upheld but it was said that although it was essential that Government department should be entitled to claim privilege against disclosure of documents on the ground of public interest the ambit of privileges should be carefully scrutinized and each document should be examined. It may be mentioned that in that case Devlin, J., felt grave companycern about the claim of this privilege because the result was that documents were to be treated as destroyed and numbersecondary evidence companyld be led and this companycern of the trial judge was shared by the Court of Appeal. In Broome v. Broome 3 which was a defended suit for divorce, the wife wanted certain documents of the Soldiers, Sailors and Airmens Families Association but the Secretary of State issued a certificate in which he stated that the production would number be in public interest. It was held that Crown privilege from disclosure attached to all documents irrespective of where they originated or in whose custody they reposed provided that they had emanated from or came into the possession of some servant of the Crown. In Auton v. Rayner Ors. 4 it was pointed out at page 572 that the sole companycern of the Minister was whether the interests of the State in the sphere for which he was responsible would be affected and therefore the documents or evidence should be withheld from the companyrt. It was added that the Minister should accept and recognize that the proper administration of justice would be impeded or may be unattainable if any document or any evidence was withheld. In that case an action was brought against the 1 1942 A.C. 624. 2 1953 2 All E.R. 149. 3 1955 1 All E.R. 201. 4 1958 3 All E.R. 566. defendants, one of whom was a Police Officer, charging them with companyspiracy to injure and defraud him, false imprisonment and malicious prosecution. The documents required by the plaintiff were reports made by the Police Officer to his superior officers and the companymunication which passed between the Metropolitan Police Force and other police force and the Secretary of State swore an affidavit indicating that the document should be withheld from production and that he had formed an impartial judgment that in the public interest and for the proper functioning of the public services the document should be withheld. The Court of Appeal held that the determination of the Secretary of State ought reasonably to be accepted and that the affidavit was, in the circumstances, companyclusive. The law in England may thus be summed up-- That a document need number be produced for inspection either on discovery or at the trial when objection is taken by the Minister that disclosure of the document would be companytrary to public policy or detrimental to public interest or services. This privilege attaches irrespective of where the document originates or in whose custody it is provided it emanated from or came into possession of some servant of the crown 2 the privilege can be claimed or waived by the authority of the Minister or the head of the department 3 secondary evidence may number be given of a document for which privilege is established 4 official companyrespondence per se is number privileged on the ground of its being companyfidential or official number is it a valid ground that production would involve the Government in criticism or expose want of efficiency in the administration or open up claims to companypensation but the ground for privilege is that the production would be detrimental to the interest of the public or interfere with the efficient working of the public service or it belongs to class of documents which it is the practice of the department to keep secret 5 the ministers objection may be companyveyed by a letter or by the official who attends at a trial but the companyrt may require an affidavit by or the attendance of the Minister 6 before a privilege is claimed it is desirable that each document should be examined by the department companycerned and inspection permitted of all documents which cannot harm the public interest 7 if a minister claims privilege the companyrt will accept his statement and ought number to examine the document to see if the objection is well founded 8 public interest must number be put in jeopardy by the production of a document which companyld injure it and the companyrt should, if necessary, prohibit the production even though numberobjection has been taken by the Government department. It may be pointed out that the privilege was expressly reserved when by the Civil Proceedings Act, 1947, the Crown was made liable to. give discovery in civil proceedings. It is numberdoubt true and it must be recognized that the administration of public justice is also a part of public interest but as was pointed out by Viscount Simon L. C. in Duncans case 1 the interest of the State is the interest of the citizen and if the former suffers the interest of the litigant also suffers and therefore public interest transcends the individual interest of a citizen. In Duncans case 1 it was emphasised that the Minister in deciding whether it was his duty to object should bear in mind the companysiderations which justify withholding production, i.e., the public interest would otherwise be damnified, i.e., the disclosure would be injurious to national defence, or to good diplomatic relations or where the practice of keeping a class of documents secret is necessary for the pro-per functioning of the public service. And that is the safeguard which both in England and India the law seems to have found sufficient for the protection of an individuals rights. Even in Scotland where the inherent right of the companyrts to override official discretion has been recognized the occasions for the exercise of that power have indeed been rare and even in the 1 1942 A.C. 624. latest case Glasgow Corporation v. Land Board 1 that position was reiterated. Although the companysensus of opinion in India is that under the second part of s. 162 the companyrt will number inspect the document if it relates to matters of State yet there is a track of decision which has taken the view that it is number for the head of the department claiming the privilege but for the companyrt to decide whether the document falls within the category mentioned in s. 123. But in some other cases a different view has been taken. A reference to cases which fall on both sides of the line will be helpful. In Irwin v. Reid 2 Mukherjea, A. C. J., held that the language of s. 123 showed that the companyrt cannot be invited to discuss the nature of the document and the public official companycerned and number the companyrt is to decide whether the evidence referred to shall be given or withheld. If any other view were taken, the mischief intended to be averted would take place, as the judge companyld number determine the question without ascertaining the companytents of the document, and such inquiry, if it did take place must, for obvious reasons, take place in public Beatson v. Skene 3 , Hennessy v. Wright 4 , Jehangir v. Secretary of State 5 . The result practically is, that if the objection is raised by a proper authority the companyrt cannot companypel disclosure by primary or by secondary evidence. The Lahore High Court in Khawja Nazir Ahmad v. Emperor 6 held that the head of the department who is in possession of the documents is the sole judge of the fact whether the documents should be protected from production on the ground of their being related to affairs of State and therefore though the decision would be that of the companyrt, it would have to rule in favour of the privilege claimed by the head of the department. It was also held that the interests of the State must number be put in jeopardy by production of documents which would injure them and that was a principle to be observed in administering justice and 1 1956 S.C. 1 H. L. 2 1921 I.L.R. 48 Cal. 304. 3 1860 5 H. N. 838 157 E.R. 1415. 4 1888 21 Q.B.D. 509. 5 1903 6 Bom. L.R. 131, 160. I.L.R. 1945 Lah. 219. indeed a rule on which the judge should insist even though numberobjection is taken at all. In that case there were certain companyfidential files of the Special Enquiry Agency companytaining numberes, companyrespondence etc., relating to the case and companytaining a record of statements of various persons and a proper affidavit had been filed by the head of the department stating that the production would be injurious to public interests. Abdul Rahman, J., said I feel companyvinced in my mind that the objection as to its production apart from its admissibility e.g., for want of registration or companytravening the rule as to when secondary evidence of a document can be admitted-if the document is merely a companyy and number original can only be decided by its inspection by the Court followed as it must necessarily have been by an order for its production, although number in the sense of its companytents having been disclosed to the party summoning the document at any rate at that stage. If the Court is debarred under the statute from inspecting it, I cannot see how the objection as to its production can otherwise be decided. In I. M. Lal v. Secretary of State 1 this privilege was upheld. In that case it was held that s. 162 divided the privilege of documents into two categories. At p. 212 Abdul Rashid, J. as he then was observed- The Court can inspect documents for the purpose of deciding the question of privilege only if those documents do number refer to matters of State. In other words an exception is made in respect of documents that refer to matters of State. Such documents cannot be inspected by the Court while all other documents for which privilege is claimed are open to inspection by the Court for the purpose of deciding the validity of the objection regarding privilege. The Bombay High Court in re Mantubhai Mehta in companystruing ss. 123, 124 and 162 has held that the officer summoned to produce the document is bound to bring it and if he takes objection to its production it is for the companyrt to decide whether the objection is well founded or number but the companyrt is number entitled to inspect it. This track of reasoning suffers from the A.I.R. 1944 Lah. 209. 2 I.L.R. 1945 Bom. 122. same difficulty that has been pointed out that without looking at the document and taking into companysideration the wide words of s. 123 it becomes difficult to hold that the companyrt can decide as to whether the document relates to affairs of State and whether it should or should number be produced. In that Bombay judgment the learned Judge referred to the observations of Viscount Simon, L.C., in Duncans case 1 . Besides the learned Judge also referred to s. 124 the effect of which is number the same as of s. 123 of the Evidence Act. Bhagwati J. as a Judge of the Bombay High Court in R.M.D. Chamarbaghwala v. Y. R. Parpia 2 held that the companyrt cannot inspect the document in order to determine whether they are unpublished official records relating to any affairs of State, but its jurisdiction to determine is number taken away by s. 162 and it is for the companyrt to decide the question of production by taking all the circumstances into companysideration barring inspection of the document. The learned Judge mainly referred to Robinsons case 3 and it appears that the learned Judge was number satisfied as to the documents being unpublished but the criterion he laid down was that only such documents are privileged which relate to affairs of State and the disclosure of which would be detrimental to public interest. The question really is the same as to who is to decide whe- ther it is matters of affairs of State. The Calcutta High Court in a later judgment in Ijjat Ali Talukdar v. Emperor 4 took a companytrary view different from its older view and held that the companyrt is to decide whether companyditions precedent to ss. 123 124 have been established. That was a case under the Excise Act and the Excise Commissioner was called upon to produce certain documents. The Commissioner claimed privilege under s. 123 on the ground that the files companytained unpublished official records relating to affairs of State and Das J., as he then was, was of the opinion that the occasion for claiming privilege under s. 123 arose when it was sought to give evidence derived from unpublished official records 1 1942 A.C. 624. 2 A.I.R. 1950 Bom. 230. 3 1931 A.C. 704. 4 I.L.R. 1944 1 Cal. 410. relating to any public affairs which was a companydition precedent. He then referred to s. 124 of the Evidence Act. The second part of s. 162 provided the method or means to enable the companyrt to decide the question, namely, by inspecting the document or by taking other evidence. Although the companyrt was disentitled from inspecting the document, the duty of deciding the question was still on the companyrt. At p. 419 the learned Judge observed- In case of documents relating to affairs of State it may be difficult for the Court to decide the question, yet it need number be necessarily impossible for the Court to do it. Ordinarily numberdifficulty will arise, because heads of departments or public officers are number expected to act capriciously and ordinarily the Court will accept their statement. If necessary, the Court will require the officer to claim the privilege in the manner indicated in the Judgment of Lord Blanesburgh in the Australian case. If, however, the Court finds that an over-zealous officer is capriciously putting forward a claim of privilege, the Court will decide, as best as it can, by the means available to it, whether the claim is well founded. As has already been said above the second part does number afford the means or methods to the Court to decide the question of privilege. The only method is inspection and that is denied to the companyrt in cases falling under s. 123. The second case which is on the other side of the line is the judgment of Bose J., as he then was, in Bhaiya Saheb v. Ramnath Rampratap Bhadupote 1 . In that case the learned Judge was of the opinion that the insertion of the words unless it refers to matters of State in the middle of the paragraph seemed to indicate that the companyrt might number inspect the document in respect of which the privilege was claimed until it had opportunity of determining upon its admissibility and for that purpose it companyld take other evidence which meant evidence other than the document produced. This line of reasoning is similar to that adopted in Ijjat Alis 2 case. I.L.R. 1940 Nag. 240, 247. I.L.R. 1944 1 Cal. 410. The Andhra Pradesh High Court in Public Prosecutor, Andhra Damera Venkata Narsayya 1 was of the opinion that when an objection under s. 123 is taken the companyrt has numberpower to inspect the document but may take other evidence for the purpose of deciding the objection and if it companyes to the companyclusion that the evidence will be derived from the unpublished records relating to the affairs of the State the objection will have to be upheld and it will be left to the head of the department to give or withhold the permission and the criterion for the head of the department was whether or number the disclosure would cause injury to public interest and he was the sole judge of the matter with which the companyrt cannot interfere. This case does number support the companytention of the respondent. The Patna High Court in Lakhuram Hariram v. The Union of India 2 held that the head of the department must first examine the document and he may then raise an objection but he is number absolved from the obligation of appearing in companyrt and satisfying the companyrt that the objection taken is valid and the companyrt may require him to give an affidavit or further questions may be put in regard to the validity of the claim but the companyrt is number entitled to inspect the docu- ment. P. Srivastava, J., in Tilka Ors. v. State, 3 held that under s. 162 of the Evidence Act the companyrt may inspect a document unless it relates to affairs of State and in such a case it will have to take other evidence relating to the nature of the document. The words of s. 123 are very wide and the discretion to produce or number to produce a document is given to the head of the department and the companyrt is prohibited from permitting any evidence to be given which is derived from any unpublished documents relating to affairs of State. Section 162 does number give the power to the companyrt to call for other evidence which will indicate the nature of the document or which will I.L.R. 1957 And. Prad. 174. A.I.R. 1960 Pat. 192. A.I.R. 1960 All. 543. have any reference to the reasons impelling the head of the department to withhold the document or documents. In the very nature of things when the original cannot be looked at and numbersecondary evidence is allowable the companyrt will only be groping in the dark in regard to the nature of the document or the evidence. The companyrect way of looking at the Indian statute, therefore, is to interpret in the manner which is in accord with the English law, i.e., the companyrt has number the power to override ministerial certificate against production. It is permissible for the companyrt to determine the companylateral facts whether the official claiming the privilege is the person mentioned in s. 123, or to require him to file proper affidavit or even to cross-examine him on such matters which do number fall within the enquiry as to the nature of the document or nature of the injury but he may be cross- examined as to the existence of the practice of the department to keep documents of the class secret but beyond that ministerial discretion should be accepted and it should neither be reviewed number overruled. For these reasons I companycur in the decision that this appeal must be allowed. SUBBA RAO, J.-I have perused the judgments prepared by my learned brethren, Kapur and Gajendragadkar, JJ. I agree with them in maintaining the claim of privilege in regard to the three items described as original orders passed by the PEPSU Government, but regret my inability to agree with them in regard to the report of the Service Commission. This appeal raises the question of the scope and companytent of the law of privilege attached to affairs of State and the procedure to be followed for ascertaining it. The facts are fully stated in the said judgments and I need number restate them but I would prefer to give my own reasons for my companyclusion. It would be companyvenient at the outset to clear the ground. The arguments at the Bar have companyered a wide field, but we are number companycerned here with the law of privilege pertaining to the field of discovery and inspection of documents. We are called upon only to decide its scope during the trial of a suit when a witness, who is summoned to produce a document, claims privilege on the ground that the document relates to affairs of State. I should number be understood to have expressed any opinion on the difficult question whether when the defendant is a State, the Court is number entitled to inspect the documents under 0. XI, rule 19 2 , Code of Civil Procedure. The question falls to be companysidered on a true companystruction of two of the provisions of the Indian Evidence Act, 1872 hereinafter called the Act , namely, ss. 123 and 162. They read Section 123 No one shall be permitted to give any evidence derived from unpublished official records relating to any affairs of State, except with the permission of the officer at the head of the department companycerned, who shall give or withhold such permission as he thinks fit. Section 162 A witness summoned to produce a document shall, if it is in his possession or power, bring it to Court, numberwithstanding any objection which there may be to its production or to its admissibility. The validity of any such objection shall be decided on by the Court. The Court, if it sees fit, may inspect the document, unless it refers to matters of State, or take other evidence to enable it to determine on its admissibility. If for such a purpose it is necessary to cause any document to be translated, the Court may, if it thinks fit, direct the translator to keep the companytents secret, unless the document is to be given in evidence and if the interpreter disobeys such direction, he shall be held to have companymitted an offence under section 166 of the Indian Penal Code 45 of 1869 . The relevant parts of the foregoing sections may be summarized thus-. Section 123 prohibits the giving of any evidence derived from unpublished official records relating to affairs of State except with the permission of the officer at the head of the department while s. 162 enjoins on a witness summoned to produce a document to bring it to Court and empowers the Court to decide on the validity of any objection raised in respect of its production or admissibility. The argument of the Advocate-General is that the words affairs of State mean the business of State, and, therefore, evidence derived from any unpublished official document relating to that business cannot be given as evidence except with the permission of the head of the department companycerned, and that the Court under s. 162 of the Act must automatically accept the affidavit filed by the head of the department claiming such a privilege. Learned companynsel for the respondent, on the other hand, defines the words affairs of State only to take in documents whose production would be against public interest, companyfines the power of the head of a department to permit or withhold the user of such a document in evidence, and sustains the Courts power to decide the question of privilege in respect of such a document on relevant materials without inspecting the document. The crucial words in s. 123 are, unpublished official records relating to any affairs of State. Under that section numberone shall be permitted to give any evidence derived from such records except with the permission of the officer at the head of the department companycerned. The words affairs of State have number been defined. Though in s. 123 the words used are affairs of State, in s. 162 the words used are matters of State. There does number appear to be any practical difference between the two sets of words. In Shorter Oxford Dictionary, III edition 1956 , matter has been defined as a thing, affair, companycern and affairs of State as public business. These Dictionary meanings do number help to decide the companytent of the said words. The companytent of the said words, therefore, can be gathered only from the history of the provision. It has been acknowledged generally, with some exceptions, that the Indian Evidence Act was intended to and did in fact companysolidate the English Law of Evidence. It has also often been stated with justification that Sir James Stephen has attempted to crystallize the principles companytained in Taylors work into substantive propositions. In case of doubt or ambiguity over the interpretation of any of the sections of the Evidence Act we can with profit look to the relevant English companymon law for ascertaining their true meaning. In English companymon law the words affairs of. State do number appear. The basis of the doctrine of Crown privilege is the injury to the public interests. The Judicial Committee in Robinson v. State of South Australia 1 says at p. 714, The principle of the rule is companycern for public interest, and the rule will accordingly be applied numberfurther than the attainment of that object requires. The House of Lords in Duncan v. Cammell Laird Co. 2 restated the same idea when it observed that the State should number withhold the production of documents except in cases where the public interest would otherwise be damnified. The earlier decisions of the English companyrts indicate that the Crown privilege was sustained only in regard to documents pertaining to matters of administration, defence, and foreign relations whose disclosure would be against the public interest see Home v. Lord F. C. Bentinck 3 , Smith The East India Company 4 and Beatson v. Skene, 5 . The decisions of the High Courts in India over a long period of time companysistently gave the same meaning to the said words. It may also be stated that in and about the time when the Evidence Act was passed, the companycept of a welfare State had number evolved in India and as such the words affairs of State companyld number have been, at that time, intended to take in the companymercial or the welfare activities of the State. But when the words are elastic there is numberreason why they should number be so companystrued as to include such activities also, provided the companydition of public injury is also satisfied. It is, therefore, clear that the words affairs of State have acquired a secondary meaning, namely, those matters of State whose disclosure would cause injury to the public interest. 1 1931 A.C. 704. 2 1942 A.C. 624. 3 1820 2 Brod. B. 130 129 E.R. 907. 4 1841 1 Ph. 50 41 E.R. Chancery 550. 5 1860 5 H. . N. 838. The learned Advocate-General companytends that this companystruction, if accepted, would give a meaning to the provisions of s. 123 of the Act which would be companytrary to its tenor. He classifies documents relating to affairs of State into numberious and innocuous documents, and companytends that documents, whose disclosure would affect the public interest, are numberious documents and that if the records which relate to the affairs of State mean only numberious documents, the said companystruction would bring out a result directly opposite to that companytemplated by the section. When the section intends to prohibit the disclosure of numberious documents, the argument proceeds, the companystruction enables their disclosure if the head of the department permits it. Shortly stated, his companytention is that the expression affairs of State, that is, business of State, is the genus and the document, the disclosure of which is against the public interest, is the species, and that the head of the department is only empowered to permit the disclosure of documents falling outside the said species. This argument is apparently logical and rather attractive, but it is an oversimplification of the problem and is based upon a disregard of the legislative history and the long track of decisions of this companyntry. If accepted, it enlarges the scope of the said privilege to such an extent that in effect and substance the companytrol of the admissibility of documents shifts from the Court to the State or its subordinate officers, for every document relating to the business of State would be a privileged document unless the head of the department in his discretion permits the giving of evidence derived therefrom. Nor can I accept the companystruction that an absolute privilege is attached to every numberious document, i.e., to every State document the disclosure of which may cause injury to the public interest. This is giving too narrow a meaning to the words public interest. If the number-disclosure of a particular State document is in public interest, the impartial and uneven dispensation of justice by Courts is also in public interest. They are indeed two aspects of public interest. There is numberconflict or dichotomy between the two. In particular circumstances one aspect may be paramount and in a different set of circumstances the other may be given precedence. In the last analysis, it is the question of balancing of the two aspects having regard to the circumstances of a particular case. The head of a department may as well permit the disclosure of a document even if ordinarily its disclosure affects public interest, if in his opinion the companynter-balancing circumstances are in favour of disclosure rather than number-disclosure. I cannot, therefore, give a wide meaning to the words records relating to affairs of State so as to take in every unpublished document pertain- ing to the entire business of State, but companyfine them only to such of the documents whose disclosure would be injurious to public interest. The next question is, who is empowered to decide the said question whether a particular document relates to affairs of State ?-whether it is the Court or the State. That is found in s. 162 of the Act. The learned Advocate-General companytends that the first part of s. 162 makes a distinction between the production of a document and the admissibility of a document and that the first limb of the second part of the section provides for the production of a document and the second limb for its admissibility. He illustrates his argument thus privilege may be raised in respect of production of a document on the ground that it pertains to matters of State, or on the ground that it is inadmissible for want of registration deficiency of stamp, or similar other defects. The first clause of the second part of s. 162, the argument proceeds, enables the Court to inspect a document when the objection is to its production unless the document refers to a matter of State, and the second clause thereof empowers the Court to take evidence only when the objection is number to its production but to its admissibility. If this companytention be accepted, it will lead to an anomaly, for grammatically companystrued the two limbs of the second part can be applied only to the question of admissibility and in that event, on the hypothesis suggested by the learned companynsel, the Court will be entitled to look into a document even if it relates to a matter of State if the objection is only to its production and number to its admissibility. The more reasonable companystruction of the section is to give a wider meaning to the word admissibility so as to companyprehend both production as well as admissibility, for the question of admissibility arises only after the document is produced and a party seeks to get it admitted in evidence. In this view, the second part of s. 162 can only mean that when an objection is raised either to the production or to the admissibility of a document, a Court can inspect the document and if it thinks necessary other evidence may be taken to decide on the objection raised. By the express terms of the section the Court is precluded from inspecting a document if it refers to matters of State. But in other respects the jurisdiction of the Court to decide on the objection raised is number different from that it possesses in respect of other privileged documents. If so understood there cannot be any ambiguity in the scope of s. 162 of the Act. It says in express terms that when an objection is raised to the production of a document or to its admissibility, the validity of any such objection shall be decided by the companyrt. The second part of the section states the material on the basis of which such an objection can be decided. It can either inspect the document or take other evidence to enable it to decide the validity of any objection raised. The only limitation in the case of a document referring to matters of State is that the companyrt cannot inspect it. It is implicit in the limitation that in the case of documents pertaining to matters of State the companyrt is precluded number only from inspecting the documents but also from permitting parties to adduce secondary evidence of their companytents. The other evidence must necessarily be de hors the companytents of the documents. Even in England there is numberdivergence of view on the question who has to decide, when an objection to the production of a document is raised on the ground of privilege, the validity of the objection. In Robinsons case 1 , the Judicial Committee observed at p. 716 thus 1 1931 A.C. 704. The result of the discussion has been wherein effect he companycludes that the Court has in those cases always had in reserve the power to inquire into the nature of the documents for which protection is sought, and to require some indication of the nature of the injury to the State which would follow its production. The existence of such a power is in numberway out of harmony with the reason for the privilege provided that its exercise be carefully guarded so as number to occasion to the State the mischief which the privilege, where it exists, is designed to guard against. The House of Lords in Duncans case 1 , also recognized this power though it whittled down its scope by holding that the judge had to accept automatically the affidavit filed by a minister. Viscount Simon, L. C., states at p. 642 as follows Although an objection validly taken to production, on the ground that this would be injurious to the public interest, is companyclusive, it is important to remember that the decision ruling out such documents is the decision of the judge It is the judge who is in companytrol of the trial, number the executive, but the proper ruling for the judge to give is as above expressed. On the other hand, in Scotland the inherent right of companyrts to override official discretion is recognized. The House of Lords in Glasgow Corporation v. Land Board 2 gave a clear exposition of the law of that companyntry. Viscount Simonds derives the principle of the companyrts power from the fact that the fair administration of justice between subject and subject and the Crown is a public interest of higher order and the protection is the care of the companyrts. Lord Radcliffe finds it on the doctrine that the interest of the Government for which the minister should speak with authority does number exhaust the public interest, for another aspect of that interest is seen in the need that impartial justice should be done in companyrts of law. These judgments of the high authority also recognized the fact that it is the companyrt that has to decide an objection 1 1942 A.C. 624. 2 1956 S.C. H.L. 1. raised by the State on the ground of privilege. There is a strong current of Indian decisions taking the same view see Khawja Nazir Ahmad v. Emperor 1 , re Mantubhai Mehta 2 , M. D. Chamarbaugwala v.Y. R. Parpia 3 , Lijat Ali Talukdar v. Emperor Bhaiya Saheb v. Ramnath Rampratap Bhadupote Public Prosecutor, Andhra v. Damera Venkata Narasayya Lakhuram Hariram v. The Union of India Tilka v. State 8 . In a few cases a different view is expressed. It may, therefore, be stated without companytradiction that the preponderance of authority is in favour of a companyrt deciding the question of State privilege. Some objections are raised in decided cases in England and restated in Duncans case 9 against companyferring such a power on companyrts. Apart from the fact that the statute expressly companyfers such a power, there are numbermerits in the objections raised. The objections are i the judges are number well qualified to appreciate the highly technical matters which may arise with regard to some kinds of State secrets ii if a judge is allowed to decide on evidence the question of privilege, it may prejudice a fair trial and iii it is a first principle of justice that the judge should have numberdealings on the matter in hand with one litigant save in the presence of and to the equal knowledge of the other. The objections raised have numbersubstance. The first objection, if accepted, disqualifies a judge from deciding companyplicated technical questions that arise before him. A judge is trained to look at things objectively and can certainly decide, without inspecting the documents on the material supplied whether the production of a document will affect the public interest having regard to the circumstances of each case. Nor are there any merits in the second objection. In the words of Sir C. K. Allen, a judge worthy of his office can put out of his mind all issues except those which are raised and decided by the forensic process. It is companymon place that a judge is trained to decide a case only on I.L.R. 1945 Lah. 219. 2 I.L. R. 1945 BOM. 122. A.I.R. 1950 Bom. 230. 4 I.L.R. 1944 1 Cal. 410. I.L.R. 1940 Nag. 240. 6 I.L.R. 1957 P. 174. A.L.R. 1960 Pat. 192. 8 A.I.,R. 1960 All, 543, 9 1942 A.C. 624. the admissible evidence actually adduced before him and number on any extraneous companysiderations. The third objection also has numberbasis in fact. So long as a judge takes care to rule out any question on the companytents of a document in respect whereof privilege is claimed, he can certainly decide the question in the presence of both the parties. The objections have, therefore, numbersubstance. On the other hand, there is every reason why the duty to decide on the question of State privilege must be left to a judge and number to the State. That is the reason why the legislature rightly companyferred that power on the companyrt. A judge is as much a part of a department of the State as an executive officer. But unlike the executive officer, a judge is trained to decide cases objectively number only between indi- viduals inter se but also between the State and individuals. He can, therefore, be trusted to decide impartially on the question whether the production of a document in a case will affect the public interest. State documents in a secretariat, I presume, will be looked into by many officers dealing with the said documents, sometimes from the lowest to the highest in the department. It would be unrealistic to suggest that the disclosure of a State document to any one of those officers would number affect the public interest whereas the decision of its character by a judge would do so. It is, therefore, the duty of the companyrt, whenever an objection is raised on the ground of State privilege to decide on relevant evidence whether the document relates to affairs of State. Even if the wide companystruction of the words affairs of State, namely, business of State, be accepted, the result will number be different. The section says that numberone shall be permitted to give any evidence derived from unpublished official records relating to affairs of State, except with the permission of the officer at the head of the department companycerned. The expression affairs of State in its ordinary significance is of the widest amplitude and will mean the entire business of State. It takes in the routine day-to-day administration and also highly companyfidential acts involving defence and foreign relations, and also in modern times the multifarious activities of a welfare State. The object of the section is simply to prohibit the use of undisclosed documents of State in evidence by persons who in the companyrse of their duties deal with or look into those documents, without the permission of the officer at the head of the department companycerned. The words used in the section as he thinks fit companyfer an absolute discretion on the head of the department to give or withhold such permission. The section does number lay down that the head of the department companycerned should refuse permission only if the disclosure injures public interests, though ordinarily he may refuse permission on such matters affecting the State. One can visualize a situation when the officer in exercise of his absolute discretion refuses to give permission for the use of number only numberious documents but even of innocuous ones. The only limitation on his power is his reason and experience. The absolute discretion is capable of giving rise to mistake or even companyscious abuse. The section does number really involve any doctrine of State privilege but is only a rule of companymonsense and propriety. If the officer gives permission, there is an end of the matter but, if he refuses, the party affected may take out necessary summons to the State Government to produce the document. The State Government may depute one of its officers to produce the document in companyrt. Then only the occasion for raising the question of privilege arises and s. 162 governs that situation. An overriding power in express terms is companyferred on a companyrt under s. 162 of the Act to decide finally on the validity of the objection raised on the ground of privilege. The companyrt will disallow the objection if it companyes to the companyclusion that the document does number relate to affairs of State or that the public interest does number companypel its number-disclosure, or that the public interest served by the administration of Justice in a particular case overrides all other aspects of public interest. This companyclusion flows from the fact that in the first part of s. 162 of the Act there is numberlimitation on the scope of the companyrts decision, though in the second part the mode of enquiry is hedged in by companyditions. In England, in the absence of a provision or a rule of companymon law similar to that of s. 162, there was room for companyflict of views on the scope of the companyrts power. On the other hand, in Scotland the companymon law companyresponding to s. 162 was invoked and the House of Lords recognized the inherent power of the Court to reject a claim of Privilege if the Court companyes to a companyclusion that the paramount interest of the administration of justice demands or companypels such a disclosure. Section 162 of the Act in terms companyfers a similar power on companyrts and though it may have to be used with circumspection, it is a real and effective power. There is numberconflict between s. 123 and s. 162 of the Act the former companyfers a power on a head of a department to withhold permission from the stand- point of State administration, whereas s. 162 recognizes the overriding power of a companyrt in the interest of higher public interest to overrule the objection of privilege. The next point is, what is the procedure to be followed by a judge for deciding on the said objection? When an officer of the State is summoned as a witness to produce a document, if the State seeks to take a plea of privilege then it is the duty of the minister in charge of the department companycerned to file an affidavit at the first instance. The affidavit so filed shall ex facie show that the minister companycerned has read and companysidered each of the documents in respect of which the privilege is claimed. It shall also companytain the general nature of the document and the particular danger to which the State would be exposed by its production. If the companyrt is number satisfied with the companytents of the affidavit, to enable it to decide whether the document in question refers to the affairs of State, it can summon the minister to appear as a witness. In effect and substance the said procedure has been suggested in Robinsons case 1 at p. 722. The same procedure is also indicated in Duncans case 2 at p. 638. In the second case above referred, Viscount Simon L.C. says at p. 638 thus 1 1931 A.C. 704. 2 1942 A.C. 624. If the question arises on subpoena at the hearing it is number uncommon in modern practice for the ministers objection to be companyveyed to the companyrt, at any rate in the first instance, by an official of the department who produces a certificate which the minister has signed, stating what is necessary. I see numberharm in that procedure, provided it is understood that this is only for companyvenience and that if the companyrt is number satisfied by this method, it can request the ministers personal attendance. It may be suggested that this procedure may cause some inconvenience to the minister companycerned. But if one realizes that every act of the exercise of the right of privilege detracts from the fair disposal of a case before the companyrt and that the administration of justice is also part of the general companyduct of the affairs of any State and that its impartiality and purity are as important as any other public interests, one will also appreciate that the requirement of the personal attendance of a minister, if necessary, to support his affidavit would be to a large extent a guarantee against unjust objections that may other- wise be raised. It is suggested that an affidavit of the head of a department, such as the Secretary, would do as well as that of a minister, but there is an essential distinction between a Secretary and a minister the former may be frequently tempted to take the opposite view, particularly in cases where a claim against the State seems to him to be harsh or unfair, while the latter, being the political head subject to parliamentary companytrol, may be expected, if he carefully scrutinizes a particular document, number to take such objection which obstructs the cause of justice unless absolutely necessary. I would, therefore, hold that the affidavit which states that a particular document relates to affairs of State must be sworn to only by a minister in charge of the department wherefrom the document or documents are summoned. The next point is, what are the well established rules which help the companyrt to decide whether a particular document pertains to affairs of State or number? The following relevant rules may be extracted from the decision of the Judicial Committee in Robinsons case 1 1 the privilege is a narrow one most sparingly to be exercised 2 the principle of the rule is companycern for public interest and the rule will accordingly be applied numberfurther than the attainment of that object requires 3 as the protection is claimed on the broad principle of State policy and public companyvenience, the papers protected, as might have been expected, have usually been public official documents of a political or administrative character 4 its foundation is that the information cannot be disclosed without injury to the public interests and number that the documents are companyfidential or official, which alone is numberreason for their number-production 5 even in the case of documents relating to the trading, companymercial or companytractual activities of a State, it is companyceivable that there may be some plain overruling principle of public interest. companycerned which cannot be disregarded though in times of peace such cases must be very rare. The House of Lords in Duncans case 2 has laid down the following negative and positive tests for deciding the question of privilege of the State. The negative tests are 1 it is number a sufficient ground that the documents are State documents or official or marked companyfidential 2 it would number be a good ground that, if they were produced, the companysequences might involve the department or the government in parliamentary discussion or in public criticism, or might necessitate the attendance as witnesses or otherwise of officials who have pressing duties elsewhere 3 neither would it be good ground that production might tend to expose a want of efficiency in the administration or tend to lay the department open to claims of companypensation. The positive test is, where the public interest would otherwise be damnified, for example, where disclosure would be injurious to national defence, or to good diplomatic relations, or where the practice of keeping a class of documents secret is necessary for the proper functioning of the public service. The last test has given rise to mild but definite protests within the limits of judicial propriety by the learned judges who 1 1931 A.C. 704. 2 1942 A.C. 624. had the occasion to deal with the question of privilege and to vehement protests from jurists. Sir C. K. Allen, in his book Law and Orders 2nd edition , has observed at p. 384 thus Everybody is agreed that public security and foreign relations are necessary heads of privilege. Both are wide in scope, and it is doubtful whether any other head needs to be specified It would be of great advantage if statute companyld put an end to the pernicious doctrine that privilege can be claimed for classes of documents. The argument of the learned Advocate-General is based upon an apprehension, which in my view is unfounded, that the companyrt may always refuse the affidavit of a minister and insist on his personal attendance. The unpublished documents relating to defence, foreign relations and other documents of great public importance rarely companye before municipal companyrts. Occasionally documents of day-to-day administration of the State may be relevant evidence, but very often documents pertaining to mercantile or welfare activities of the State would be summoned to establish a particular claim. In the case of documents of undoubted public importance, when the minister swears to an affidavit that in his discretion their production is against public interest, it may reasonably be expected that the judge would accept the statement. But the real difficulty is in the case of other documents, where the interests of private individuals and the State companye into companyflict, the judge should be in a position to examine the minister and others to ascertain by evidence companylateral to the companytents of the documents whether the assertion of the minister is justi- fied. The aforesaid discussion yields the following propositions 1 under s. 162 of the Evidence Act the companyrt has the overriding power to disallow a claim of privilege raised by the State in respect of an unpublished document pertaining to matters of State but in its discretion, the companyrt will exercise its power only in exceptional circumstances when public interest demands, that is, when the public interest served by the disclosure clearly outweighs that served by the number- disclosure. One of such instances is where the public interest served by the administration of justice in a particular case overrides all other aspects of public interest. 2 The said claim shall be made by an affidavit filed by the minister in charge of the department companycerned describing the nature of the document in general and broadly the category of public interest its number-disclosure purports to serve. 3 Ordinarily the companyrt shall accept the affidavit of a minister, but in exceptional circumstances, when it has reason to believe that there is more than what meets the eye, it can examine the minister and take other evidence to decide the question of privilege. 4 Under numbercircumstances can a companyrt inspect such a document or permit giving of secondary evidence of its companytents. 5 Subject to the overriding power of the companyrt to disallow the claim of privilege in exceptional cases, the following provide working rules of guidance for the companyrts in the matter of deciding the question of privilege in regard to unpublished documents pertaining to matters of State a records relating to affairs of State mean documents of State whose production would endanger the public interest b documents pertaining to public security, defence and foreign relations are documents relating to affairs of State e unpublished documents relating to trading, companymercial or companytractual activities of the State are number, ordinarily, to be companysidered as documents relating to affairs of State but in special circumstances they may partake of that character d in cases of documents mentioned in c supra, it is a question of fact in each case whether they relate to affairs of State or number in the sense that if they are disclosed public interest would suffer. Bearing the aforesaid principles in mind, I shall companystrue the nature of the documents in respect of which privilege is claimed in the present appeal. The so called order of the PEPSU Government is really the minutes recorded in the companyrse of cabinet discussions. Under Art. 163 3 of the Constitution, the question whether any, and if so what, advice was tendered by ministers to the Governor shall number be inquired into in any companyrt. In view of the companystitutional protection, and the reason underlying such protection, I hold that in the present case the district companyrt was right in sustaining the claim of privilege in regard to the said document. In regard to the report of the Service Commission, on the assumption that it is a relevant document, I cannot see how public interest suffers by its disclosure. Service Commission is a statutory body companystituted with definite powers companyferred on it under the Constitution. Under Art. 320 3 c of the Constitution the State Public Service Commission shall be companysulted on all disciplinary matters affecting a person serving under the Government of a State. This is one of the companystitutional protections companyferred on public servants. I cannot visualize how public interest would suffer if the report submitted by the Service Commission to the Government is disclosed, and how the disclosure of such a report prevents the Service Commission from expressing its views on any other case in future passes my companyprehension. It may expose the Government if it ignores a good advice but such an exposure is certainly in public interest. The Constitution does number put a seal of secrecy on the document number, in my view, public interest demands such secrecy. In a companyflict between the administration of justice and the claim of privilege by the State, I have numberhesitation to overrule the claim of privilege. Before closing, I must numberice one fact. In this case, the Chief Secretary filed an affidavit. But, in my view, the minister should have done it. The respondent did number object to this either in the district companyrt or in the High Court. In the circumstances, I would number reject the claim of privilege on the basis of this procedural defect. In the result, I would allow the appeal in respect of the minutes of the cabinet and dismiss it in other respects. As the parties have succeeded and failed in part, I direct them to bear their own companyts throughout.

Case appeal was accepted by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 173/1956. Appeal from the judgment and order dated May 23, 1956, of the Punjab High Court in Criminal Revision No. 1058/1954. L. Arora, for the appellant. S. Bindra and R. H. Dhebar, for the respondent. 1960. November 11. The Judgment of the Court was delivered by AYYANGAR J.-This appeal on a certificate under Arts. 132 and 134 1 of the Constitution granted by the High Court of Punjab raises for companysideration the companystitutionality of s. 7 1 of the Punjab Trade Employees Act, 1940. The appellant-Manohar Lal--has a shop at Ferozepore Cantt. in which business is carried on under the name and style of I Imperial Book Depot. Section 7 of the Punjab Trade Employees Act, 1940 hereinafter called the Act , enacts 7. 1 Save as otherwise provided by this Act, every shop or companymercial establishment shall remain closed on a close day. 2 i . The choice of a close day shall rest with the occupier of a shop or companymercial establishment and shall be intimated to the prescribed authority within two months of the date on which this Act companyes into force. to extract the provision relevant to this appeal. The appellant had chosen Friday as the close day , i.e., the day of the week on which his shop would remain closed. The Inspector of Shops and Commercial Establishments, Ferozepore Circle, visited the appellants shop on Friday, the 29th of January, 1954, and found the shop open and the appellants son selling articles. Obviously, if s. 7 1 were valid, the appellant was guilty of a companytravention of its terms and he was accordingly prosecuted in the Court of the Additional District Magistrate, Ferozepore, for an offence under s. 16 of the Act which ran Subject to the other provisions of this Act, whoever companytravenes any of the provisions of this Act shall be liable on companyviction to a fine number exceeding twenty-five rupees for the first offence and one hundred rupees for every subsequent offence . The appellant admitted the facts but he pleaded that the Act would number apply to his shop or establishment for the reason that he had engaged numberstrangers as employees but that the entire work in the shop was being done by himself and by the members of his family, and that to hold that s. 7 1 of the Act would apply to his shop would be unconstitutional as violative of the fundamental rights guaranteed by Arts. 14, 19 1 f and g of the Constitution. The additional District Magistrate rejected the plea raised by the appellant regarding the companystitutionality of s. 7 1 in its application to shops where numberemployees were engaged and sentenced him to a fine of Rs. 100 and simple imprisonment in default of payment of the fine since the appellant had been companyvicted once before . The appellant applied to the High Court of Punjab to revise this order, but the Revision was dismissed. The learned Judges, however, granted a cer- tificate of fitness which has enabled the appellant to file the appeal to this Court. Though the validity of s. 7 1 of the Act was challenged in the High Court on various grounds, learned Counsel who appeared before us rested his attack on one point. He urged that the provision violated the appellants right to carry on his trade or business guaranteed by Art. 19 1 g and that the restriction imposed was number reasonable within Art. 19 6 because it was number in the interest of the general public. Learned Counsel drew our attention to the long title of the Act reading An Act to limit the hours of work of Shop Assistants and Commercial Employees and to make certain regulations companycerning their holidays, wages and terms of service and pointed out that the insistence on the appellant to close his shop, in which there were numberemployees , was really outside the purview of the legislation and companyld number be said to subserve the purposes for which the Act was enacted. In short, the submission of the learned Counsel was that the provision for the companypulsory closure of his shop for one day in the week served numberinterests of the general public and that it was unduly and unnecessarily restrictive of his freedom to carry on a lawful trade or business, otherwise in accordance with law, as he thought best and in a manner or mode most company- venient or profitable. We are clearly of the opinion that the submissions of the learned Counsel should be repelled. The long title of the Act extracted earlier and on which learned Counsel placed companysiderable reliance as a guide for the determination of the scope of the Act and the policy underlying the legislation, numberdoubt, indicates the main purposes of the enactment but cannot, obviously, companytrol the express operative provisions of the Act, such as for example the terms of s. 7 1 . Nor is the learned companynsel right in his argument that the terms of s. 7 1 are irrelevant to secure the purposes or to subserve the underlying policy of the Act. The ratio of the legislation is social interest in the health of the worker who forms an essential part of the company- munity and in whose welfare, therefore, the companymunity is vitally interested. It is in the light of this purpose that the provisions of the Act have to be scrutinized. Thus,, S. 3 which lays down the restrictions subject to which alone I young persons , defined as those under the age of 14, companyld be employed in any shop or companymercial establishment, is obviously with a view to ensuring the health of the rising generation of citizens. Section 4 is companycerned with imposing restrictions regarding the hours of work which might be extracted from workers other than young persons . Section 4 1 enacts Subject to the provisions of this Act, numberperson shall be employed about the business of a shop or companymercial establishment for more than the numbermal maximum working hours, that is to say, fifty-four hours in any one week and ten hours in any one day. bringing the law in India as respects maximum working hours in line with the numberms suggested by the International Labour Convention. Sub-clauses 4 and 5 of this section are of some relevance to the matter number under companysideration No person who has to the knowledge of the occupier of a shop or companymercial establishment been previously employed on any day in a factory shall be employed on that day about the business of the shop or companymercial establishment for a longer period than will, together with the time during which he has been previously employed on that day in the factory, companyplete the number of hours permitted by this Act. No person shall work about the business of a shop or companymercial establishment or two or more shops or companymercial establishments or a shop or companymercial establishment and a factory in excess of the period during which he may be lawfully employed under this Act. It will be seen that while under sub-cl. 4 employers are injuncted from employing persons who had already worked for the maximum number of permitted hours in another establishment, sub-cl. 5 lays an embargo on the worker himself from injuring his health by overwork in an endeavour to earn more. From this it would be apparent that the Act is companycerned-and properly companycerned-with the welfare of the worker and seeks to prevent injury to it, number merely from the action of the employer but from his own. In other words, the worker is prevented from attempting to earn more wages by working longer hours than is good for him. If such a companydition is necessary or proper in the case of a worker, there does number seem to be anything unreasonable in applying the same or similar principles to the employer who works on his own business. The learned Judges of the High Court have rested their decision on this part of the case on the reasoning that the terms of the impugned section might be justified on the ground that it is designed in the interest of the owner of the shop or establishment himself and that his health and welfare is a matter of interest number only to himself but to the general public The legislation is in effect the exercise of social companytrol over the manner in which business should be carried on-regulated in the interests of the health and welfare number merely of those employed in it but of all those engaged in it. A restriction imposed with a view to secure this purpose would, in our opinion, be clearly saved by Art. 19 6 . Apart from this, the companystitutionality of the impugned provision might be sustained on another ground also, viz., with a view to avoid evasion of provisions specifically designed for the protection of workmen employed. It may be pointed out that acts innocent in themselves may be prohibited and the restrictions in that regard would be reasonable, if the same were necessary to secure the efficient enforcement of valid provisions. The inclusion of a reasonable margin to ensure effective enforcement will number stamp a law otherwise valid as within legislative companypetence with the character of unconstitutionality as being unreasonable. The provisions companyld, therefore, be justified as for securing administrative companyvenience and for the proper enforcement of it without evasion. As pointed out by this Court in Manohar Lal v. The State 1 when the appellant challenged the validity of this identical provision but on other grounds The legislature may have felt it necessary, in order to reduce the possibilities of evasion to a minimum, to encroach upon the liberties of those who would number otherwise have been affected To require a shopkeeper, who employs one or two men, 1 1951 S.C.R. 671, 675. to close and permit his rival, who employs perhaps a dozen members of his family, to remain open, clearly places the former at a grave companymercial disadvantage. To permit such a distinction might well engender discontent and in the end react upon the relations between employer and employed. We have, therefore, numberhesitation in repelling the attack on the companystitutionality of s. 7 1 of the Act.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 181 to 184 of 1960. Appeals. from the judgment and order dated March 16, 1955, of the Madras High Court in Case Referred No. 43 of 1950. V. Viswanatha Sastri, R. Ganapathy Iyer and G. Gopalakrishnan, for the appellants. Hardayal Hardy and D. Gupta, for the respondent. 1960, December 14. The Judgment of the Court was delivered by SHAH, J.-These appeals relate to Excess Profits Tax liability of the appellants in respect of two chargeable accounting periods April 1. 1944, to March 31., 1945, and April 1, 1945, to March 31, 1946. The appellants were under an agreement dated July 11, 1945, appointed managing agents for 20 years of the Coimbatore Spinning and Weaving Co, Ltd.-hereinafter referred to as the companypany. Prior to October 1, 1944, the appellants were the Managing Agents of the Coimbatore Mills Agency Ltd--hereinafter referred to as the Agency Company who were the Managing Agents of the companypany. The year of account of the appellants ended on March 31, of the companypany on June 30, and of the Agency Company on September 30. Under the agreement by which the appellants were appointed managing agents, the following remuneration was provided Office allowance at Rs. 1,500 per mensem Commission at 1 on all purchases of companyton and stores and 21/2 on all capital expenditure incurred from time to time and Commission at 10 on the net profits of the companypany due and payable yearly immediately after the accounts of the companypany were closed. For the assessment year 1945-46, the appellants submitted a return of their income inclusive of the following items Remuneration from the Agency Company Rs. 36,000. Commission at 10 on profits from the Agency Company upto 30-9-1944 Rs. 37,953. Remuneration from companypany from 1-10-1944 to 31-3-1945 Rs. 9,000. Commission at 1 on companyton and stores purchased during this period Rs. 21,704. This return was accepted by the Additional Income-tax Officer, Coimbatore I II Circles, and the appellants were assessed to income-tax. Excess Profits Tax was also worked out on the same basis for the chargeable accounting period ending March 31, 1945. For the assessment year 1946-47, the appellants submitted a return of their income which included the following items Remuneration from the companypany for one year from 1-4-1945 Rs. 18,000. Commission at 10 on the profits of the companypany paid in December 1945 1-10-1944 to 30-6-1945 Rs. 1,90,889. Commission at 1 on purchases of companyton and stores from 1-4-1945 to 30-6-1945 Rs. 16,777. Commission at 2 12/ on capital expenditure from 1-10-1944 to 30-6-1945 Rs. 1,690. The Tax Officer in charge of the assessment directed that the companymission on purchases and capital expenditure be taken into account for the year April 1, 1945, to March 31, 1946, and that the receipts-be companyputed accordingly. The amount of Rs. 1,127 attributable out of item 4 was accordingly taken into the account of the previous year after reopening the assessment under s. 34 of the Income-tax Act, and the companymission on the profits of the companypany was apportioned between the period October 1, 1944, to March 31, 1945, and April 1, 1945, to June 30, 1945, by the application of r. 9 of Sch. 1 of the Excess Profits Tax Act. The Tax Officer also determined the proportionate companymission payable under items 3 and 4, for the period ending March 31, 1946, and as a result of the apportionment, the liability of the appel- lants, original and revised, for income tax and Excess Profits Tax for the assessment year 1945-46 and chargeable accounting period April 1, 1944, to March 31, 1945, stood as follows Original assessment of income taxRs. 1,04,654. Excess Profits TaxRs. 45,292. Revised figures Income-tax loss Rs. 36,182. Excess Profits TaxRs. 1,41,962-11-0. For the assessment year 1946-47 and chargeable accounting period April 1, 1945, to March 31, 1946, tax liability was companyputed at Income-tax Rs. 1,66,271. Excess Profits Tax Rs. 1,13,163-5-0. The orders of assessmentfor income tax and Excess Profits Tax were companyfirmed by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. On the applications of the appellants for reference under s. 66 1 of the Income-tax Act and s. 21 of the Excess Profits Tax Act, the Tribunal drew up a statement of the case and submitted the following four questions to the High Court of Judicature at Madras Whether on the facts and in the circumstances of the case, the Income-tax Officer Excess Profits Tax Officer was right in taking action under s. 34 and 15 of the Income-tax and the Excess Profits Tax Act ? Whether on the facts and in the circumstances of this case, the provisions of r. 9, s. 1, were properly applied ? Whether on the facts and in the circumstances of the case, the Income-tax Officer Excess Profits Tax Officer was companyrect in including the proportionate companymission income of Rs. 1,127 for income-tax assessment 1945-46 and Rs. 1,43,163 plus Rs. 1,127 for Excess Profits Tax assessment Tax for the chargeable accounting period ending 31st March 1945, and Whether on the facts and in the circumstances of the case, the proportionate companymission of Rs. 37,129 and Rs. 2,299 were rightly assessed for the assessment year 1946-47 The High Court answered all the questions against the appellants and in favour of the Department. Against the order passed by the High Court, these appeals have been preferred with certificate granted under s. 66A 2 of the Income-Tax Act read with s. 21 of the Excess Profits Tax Act. Two questions were canvassed in these appeals Whether it was open to the Taxing Officer to re-open the assessment for 1945-46 and Whether the companymission received by the appellants was liable to be apportioned under r. 9 of Sch. 1 of the Excess Profits Tax Act. The appellants maintained their books of account on cash basis and companymission received from the companypany was credited after the accounts of the companypany were closed. The amounts received by the appellants from the companypany were included in their return and assessment for the year 1945-46 was companypleted for the purposes of the Excess Profits Tax by the Tax Officer without apportionment appropriate to the chargeable accounting periods. In so doing, the Tax Officer companymitted an error. He overlooked the fact that the chargeable accounting period for the as assessment of Excess Profits Tax and the year of account of the companypany did number tally. Under s. 15 of the Excess Profits Tax Act, if the Tax Officer discovers, in companysequence of definite information which has companye into his possession that profits of any chargeable accounting period chargeable to excess profits tax have escaped assessment, or have been under assessed, he may serve on the person liable to pay such tax a numberice companytaining all or any of the requirements which may be included in a numberice under s. 13 and may proceed to assess or reassess the profits. The provision is substantially similar to s. 34 1 of the Income-tax Act before it was amended in the year 1948. It is manifest that by the assessment of income made on the assumption that the chargeable accounting period and the accounting period of the companypany tallied, there resulted under assessment in the companyputation of tax liability for Excess Profits Tax, and it was open to the Tax Officer to take action under s. 15 of the Excess Profits Tax Act. Determination of the second question depends upon r. 9, Sob. 1, of the Excess Profits Tax Act. By s. 2 19 of the Excess Profits Tax Act, the expression profits means profits as determined in accordance with Sch. 1. That schedule sets out rules for companyputation of profits for the purpose of the Excess Profits Tax Act and by r. 9, it is provided in so far as it is material that Where the performance of a companytract extends beyond the accounting period, there shall unless the Excess Profits Tax Officer, owing to any special circumstances, otherwise directs be attributed to the accounting period such proportion of the entire profits or loss which has resulted, or which it is estimated will result, from the companyplete performance of the companytract as is properly attributable to the accounting period, having regard to the extent to which the companytract was performed therein. The performance of the companytract of managing agency extended beyond the period of account of the companypany which was July 1, 1945, to June 30, 1946 it companyered parts of two accounting periods. The Tax Officer was therefore obliged to apportion to the, chargeable accounting periods the entire profits resulting from the companyplete performance of the companytract in proportions properly attributable to the accounting periods and this, he proceeded to do. Counsel for the appellants companytends that the companytracts companytemplated by r. 9 are those of the nature of engineering or works companytracts and the like where execution of the companytract involves a profit making operation de die in diem and number companytracts where remuneration is payable at a certain time for services performed throughout the stipulated period. It is true that remuneration was paid to the appellants after the expiry of the year of account of the companypany but the companytract was one the performance of which extended throughout the year of account of the companypany. The appellants were the managing agents of the companypany and they had to perform their duties as managing agents for the whole year. It is number disputed that the companytract of agency for 20 years is to be regarded for assessment of excess profits tax as an annual companytract. The performance of the companytract unmistakably cut across the accounting period is also manifest. The remuneration for performance of the companytract is number companyputed at a daily rate, but is companyputed on a percentage of the companymission on the profits of the companypany for the whole year, but on that account, the companytract is number one in which performance does number extend throughout the year of account. Normally in a managing agency companytract, the managing agent may number suffer loss, but that does number rule out the application of r. 9 to managing agency companytracts. The terms in which r. 9 is enacted are general the rule is applicable to all companytracts which are intended to be operative for a fixed period. If, for the performance of the entire companytract, remuneration is payable at rates stipulated, the profit earned out of that remuneration must be apportioned in the manner provided by r. 9 if the performance of the companytract extends beyond the accounting period The judgment of this Court in E. D. Sassoon Co., Ltd. v. The Commissioner of Income Tax, Bombay City 1 on which strong reliance was placed by the appellants has numberapplication to this case. In that case, M s. E. D. Sassoon Co., Ltd. who were managing agents of three different companypanies transferred the managing agencies to three other companypanies on several dates during the accounting year. A question arose in the companyputation of income-tax payable by M s. E. D. Sassoon Co., Ltd. whether the managing agency companymission was liable to be apportioned between M s. E. D. Sassoon Co., Ltd. and their respective transferees in the proportion of the services rendered as managing agents for the respective periods of the accounting year. It was held by this companyrt Jagannadhadas, J., dissenting that on a true interpretation of the managing agency agreements in each case, the companytract of service between the companypanies and the managing agents was entire and indivisible and the remuneration or companymission became due by the companypanies to the managing agents only on companypletion of definite periods of service and at stated intervals that companyplete perfor- mance was a companydition precedent to the recovery of wages or salary in respect thereof and the remuneration payable companystituted a debt only at the end of each period of service companypletely performed, numberremuneration or companymission being payable to the managing agents for broken periods that numberincome was earned by or accrued to M s. E. D. Sassoon Co., Ltd. and as the transfer of the agencies did number include any income which E. D. Sassoon Co., Ltd. had earned, they were number liable to be taxed under the Income- Tax Act. But that was a case dealing with liability of the assessees who did number receive any income and to whom numberincome had accrued to pay 1 1955 1 S.C. R. 313. income tax on the amounts of remuneration paid to their transferees. The companyrt was number called upon to apply to income received by the assessee the principle of apportionment under r. 9 of Sch. 1 of the Excess Profits Tax Act, or any provision similar thereto. It is r. 9 of Sch. I which attracts the principle of apportionment. The rule enunciated in M s, E. D. Sassoon Co.s case 1 has therefore numberapplication to this case, and the High Court was right in holding that the assessment made by the Excess Profits Tax Officer by apportionment of the companymission income between the chargeable accounting periods was companyrect. The appeals therefore fail and are dismissed with companyts.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 243 of 1959. Appeal by special leave from the judgment and order dated April 24, 1958, of the Bombay High Court in Special Civil Application No. 874 of 1958. C. Setalvad, Attorney-General for India, G. P. Vyas and N. Shroff, for the appellant Vithalbhai Patel, S. S. Shukla, C. T. Daru and E. Udayarathnam, for the respondent No. 1. 1960. December 12. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-The principal question which this appeal by special leave raises for our decision relates to the nature and extent of the jurisdiction companyferred on the authority by s. 15 of the Payment of Wages Act, 1936 Act 4 of 1936 hereafter called the Act . This question arises in this way. The appellant Shri Ambica Mills Co. Ltd., is a textile mill working at Ahmedabad. Three of its employees named Punamchand, Shamaldas and Vishnuprasad made an application to the authority under s. 16 of the Act and prayed for an order against the appellant to pay them their delayed wages. In order to appreciate the companytentions raised by the appellant disputing the validity of the respondents claim it is necessary to set out the background of the dispute in some detail. It appears that an award called the Standardisation Award which companyered the mill industry in Ahmedabad was pronounced by the Industrial Tribunal on April 21, 1948, in Industrial Reference No. 18 of 1947. This award fixed the wages for different categories of workers working in the textile mills at Ahmedabad, but left over the question of clerks for future decision. Amongst the operatives whose wages were determined by the award the case of hand-folders was specifically argued before the Industrial Tribunal. The Labour Association urged that the rate of Rs. 36-9-0 awarded to them was too low and it was pointed out on their behalf that they did the same work as cut-lookers did in Bombay where a head cut-looker was given Rs. 52 and a cut-looker Rs. 42-4-0. On the other hand the mill owners companytended that the rate should have been fixed at Rs. 34-2-0 instead of Rs. 36-9-0. The Tribunal found it difficult to decide the point because enough evidence had number been produced before it to show the kind of work that hand-folders were doing at Ahmedabad that is why the Tribunal was unable to raise the wage of hand-folders to that of out-lookers in Bombay. However, it made a significant direction in that behalf in these words At the same time, it was observed, we desire to make it clear that if there are persons who are doing cut-looking as well as folding, they should be paid the rate earned by the out-lookers in Bombay. This question has been companysidered by the Tribunal in paragraph 16 of its award. The question of clerks, the decision of which had been adjourned by the Tribunal was later companysidered by it and an award pronounced in that behalf. However, the said award was later terminated by the clerks in 1949, and that led to an agreement between the Ahmedabad Mill Owners Association and the Textile Labour Association in the matter of wages payable to clerks. This agreement was reached on June 22, 1949. Clauses 2 and 5 of this agreement are material for the purpose of this appeal. Let us therefore read the two clauses That this agreement shall apply to all the Clerks employed in the local mills, i.e., persons doing clerical work, that is those who do routine work of writing, companyying or making calculations and shall also include companypounders and assistant companypounders who are qualified and who are employed in the local mills. A separate scale for those of the employees who occupy the position lower than that of a full-fledged Clerk but higher than that of an operative will be provided as under- Rs. 40-3-70-EB-4-90-5-105. This scale will be applicable in case of ticket-boy, ticket-checker, companypons-seller, talley-boy, scale-boy, production-checker, thread-counter, cloth-measurer or yard- companynter, fine-reporter, cloth yarn-examiner, department store man, cut-looker and those others who have number been included above but who can properly fall under the above category. After this agreement was thus reached persons doing the work of cut-lookers began to feel that they were entitled to the benefit of cl. 5 and some claims were put forth on that basis against the employers. Vishnuprasad and Punamchand applied before the authority Applications Nos. 39 and 40 of 1954 and claimed delayed wages against the appellant on the ground that they were entitled to higher wages under paragraph 16 of the award in Reference No. 18 of 1947. This claim was resisted by the appellant. The appellant urged that the applications were number maintainable under the Act, that they were barred in view of an arbitration award which was then in operation and that on the merits the applicants were number doing the work of cut-looking. All these companytentions were rejected by the authority. It examined the duties performed by the applicants, and it came to the companyclusion that both the applicants were folders doing cut-looking, and companysequently they were entitled each to Rs. 42-4-0 per month in other words, the authority came to the companyclusion that the applicants properly, fell under the category specified in paragraph 16 of the award referred to above and as such they were entitled to recover the difference between Rs. 36-9-0 per month which was paid to each one of them and Rs. 42-4-0 which was due to each one of them. This decision was announced on September 2, 1954. On July 11, 1955, the present respondents moved the authority under s. 16 of the Act. They urged that they were semi-clerks and occupied a position lower than that of a full-fledged clerk and higher than that of an operative, and as such they were governed by cl. 5 of the agreement and were entitled to increment provided by the said clause. This claim was resisted by the appellant on several grounds. It was urged that the present applications were barred by res judicata, that the authority had numberjurisdiction to entertain the applications, and that on the merits the respondents were number semi-clerks as companytemplated by cl. 5 of the agreement. On these companytentions the authority raised four issues. It held against the respondents and in favour of the appellant on issues 1 and 2 which related to the plea of res judicata and the status of the respondents. In view of the said findings it thought it unnecessary to decide the two remaining issues which dealt with the quantum of amount claimed by the respondents. It appears that the question of jurisdiction, though urged in its pleading by the appellant, was number raised as an issue and has number been companysidered by the authority. The finding of res judicata was recorded against Punamchand and Vishnuprasad. Shamaldas had number made any previous application and so numberquestion of res judicata arose against his application. His application was dismissed only on the ground that he companyld number claim the status of a semi-clerk. The same finding was recorded against the two other respondents. It appears that at the trial before the authority the parties filed a joint Pursis which enumerated the duties performed by the respondents in paragraphs 2 to The authority took the view that the duties performed by them cannot be said to be the duties of persons doing the routine work of writing, companyying and making calculations. In the result it was held that the respondents were governed by the Standardisation Award and did number fall under the subsequent agreement. This decision was challenged by the respondents before the District Judge who was the appellate authority under the Act. The appellate authority also was asked to companysider the question of jurisdiction. It examined the relevant provisions of the Act and held that the authority had jurisdiction to entertain the applications made before it by the respondents. On the question of res judicata it agreed with the finding of the authority, and held that the claims made by Punamchand and Vishnuprasad were barred by res judicata. Similarly, on the question of the status of the respondents it agreed that they were number semi clerks. It is clear from the judgment of the appellate authority that in determining the status of the respondents, the appellate authority applied the same test as was invoked by the authority, and it companysidered the question as to whether the duties performed by the respondents were similar to the duties performed by clerks. It is obvious that the tests applied are tests relevant to the employees falling under cl. 2 of the agreement, and since the application of the said tests led to the companyclusion that the respondents did number fall under el. 2 the appellate authority held that el. 5 was inapplicable to them in other words, the judgments of both the authority and the appellate authority clearly show that they took the view that el. 2 was wholly determinative of the issue, and that unless an. employee fell under cl. 2 he cannot claim to be companyered by any part of the agreement including el. 5. That is why the appeals preferred by the respondents were dismissed by the appellate authority on September 2, 1954. These appellate decisions were challenged by the respondents by filing a writ petition under Arts. 226 and 227 of the Constitution before the Bombay High Court. The Bombay High Court has held that the decision of the appellate authority was patently erroneous in law in that it proceeded on the assumption that unless cl. 2 of the agreement was satisfied cl. 5 would be inapplicable. It also held that the finding companycurrently recorded by the authorities below on the question of res judicata against two of the respondents was manifestly erroneous. On these findings the High Court allowed the writ petition filed by the respondents, set aside the orders of the authorities below and sent the case back to the authority for dealing with it in accordance with law in the light of the judgment delivered by the High Court. It is against this decision that the appellant has preferred the present appeal by special leave. The first companytention which the learned Attorney-General has raised before us on behalf of the appellant is that the High Court has exceeded its jurisdiction under Arts. 226 and 227 in interfering with the decision of the appellate authority. He companytends that at the highest the error companymitted by the appellate authority is one of law but it is number an error apparent on the face of the record, and he argues that it was number within the companypetence of the High Court to sit in appeal over the judgment of the appellate authority and examine meticulously the companyrectness or the propriety of the companyclusions reached by it. The question about the nature and extent of the jurisdiction of the High Courts in issuing a writ of certiorari under Art. 226 has been the subject-matter of several decisions of this Court. It is number well settled that the said writ can be issued number only in case, of illegal exercise of jurisdiction but also to companyrect errors of law apparent on the face of the record. In this companynection it may be pertinent to refer to the observations made by Denning, J., in Rex v. Northumberland Compensation Appeal Tribunal The 1 1952 1 K.B. 338. writ has been supposed to be companyfined to the companyrection of excess of jurisdiction, observed Lord Justice Denning, and number to extend to the companyrection of errors of law and several judges have said as much. But the Lord Chief Justice has, in the present case, restored certiorari to its rightful position and shown that it can be used to companyrect errors of law which appear on the face of the record even though they do number go to jurisdiction. There is numberdoubt that it is only errors of law which are apparent on the face of the record that can be companyrected, and errors of fact, though they may be apparent on the face of the record, cannot be companyrected Vide Nagendra Nath Bora v. The Commissioner of Hills Division and Appeals, Assam 1 . It is unnecessary for us to companysider in the present appeal whether or number a certiorari can issue to companyrect an error of fact on the ground that the impugned finding of fact is number supported by any legal evidence. Thus it would be seen that the true legal position in regard to the extent of the Courts jurisdiction to issue a writ of certiorari can be stated without much difficulty. Difficulty, however, arises when it is attempted to lay down tests for determining when an error of law can be said to be an error apparent on the face of the record. Sometimes it is said that it is only errors which are self-evident, that is to say, which are evident without any elaborate examination of the merits that can be companyrected, and number those which can be discovered only after an elaborate argument. In a sense it would be companyrect to say that an error of law which can be companyrected by a writ of certiorari must be self-evident that is what is meant by saying it is an error apparent on the face of the record, and from that point of view, the test that the error should be self-evident and should number need an elaborate examination of the record may be satisfactory as a working test in a large majority of cases but,, as observed by Venkatarama Ayyar, J., in Hari Vishnu Kamath v. Syed Ahmad Ishaque, 2 there must be cases in which even this test might break down because judicial opinions also differ, and an error that may be companysidered by one 1 1958 S.C.R. 1240. 2 1955 1 S.C.R. 1104, 1123. judge as self-evident might number be so companysidered by another. Judicial experience, however, shows that, though it cannot be easy to lay down an unfailing test of general application it is usually number difficult to decide whether the impugned error of law is apparent. on the face of the record or number. What then is the error apparent on the face of the record which the High Court has companyrected by issuing a writ of certiorari in the present case? According to the High Court the companystruction placed by the appellate authority on cls. 2 and 5 of the agreement is patently and manifestly erroneous. The appellate authority held on a companystruction of the said two clauses that cl. 2 was the determinative clause, and that unless an employee satisfied the requirements of the said clause he companyld number claim the benefit of cl. 5. In deciding whether the High Court should have issued the writ or number it is necessary to examine the said two clauses. On looking at the two clauses it seems to us that the companyclusion is inescapable that the error companymitted by the appellate authority is manifest and obvious. Clause 2 applies to clerks employed in the local mills, and as such it describes the nature of the work which is required to be done by persons falling under that clause. Clause 5, on the other hand, obviously provides for a separate scale for those employees who are number clerks number operatives these em- ployees occupied a position higher than that of an operative and below that of a full-fledged clerk. Therefore there is numberdoubt that persons falling under cl. 5 cannot fall under el. 2, and should number therefore be expected to satisfy the test prescribed by the said clause. A bare perusal of the list of employees specified by designation as falling under el. 5 will show that the application of the test which is relevant under el. 2 would in their case be wholly inappropriate and irrelevant. Therefore, in our opinion, the error companymitted by the appellate authority was of such a manifest character that the High Court was justified in companyrecting the said error by the issue of a writ of certiorari. The question involved in the decision of the dispute is number so much of companystruction of the document as of giving effect to the plain terms of the document. If el. 5 expressly provides for employees ,,not falling under el. 2, and if that intention is clarified by the list of designations which fall under el. 5 and yet the appellate authority reads that clause as subject to cl. 2, that must be regarded as an error patent on the face of the record. It is number a case where two alternative companyclusions are possible it is a case of plain misreading of the two provisions ignoring altogether the very object with which the two separate provisions were made. In our opinion, therefore, the companytention raised by the learned Attorney- General that by issuing the writ the High Court has exceeded its jurisdiction is number well-founded. That takes us to the second, and in fact the principal, companytention which has been seriously argued before us by the learned Attorney-General. He urged that the applications made by the respondents Union on behalf of the three employees were incompetent under s. 15 of the Act and the authority exceeded its jurisdiction in entertaining them. It is true that this point was number specifically urged before the authority, but it appears to have been argued before the appellate authority and the High Court, and it is this companytention which raises the problem of companystruing s. 15 of the Act. The case for the appellant is that the jurisdiction companyferred on the authority under s. 15 is a limited jurisdiction, and it would be unreasonable to extend it on any inferential ground or by implication. The scheme of the Act is clear. The Act was intended to regulate the payment of wages to certain classes of persons employed in industry, and its object is to provide for a speedy and effective remedy to the employees in respect of their claims arising out. of illegal deductions or unjustified delay made in paying wages to them. With that object s. 2 vi of the Act has defined wages. Section 4 fixes the wage period. Section 5 prescribes the time of payment of wages and s. 7 allows certain specified deductions to be made. Section 15 companyfers jurisdiction on the authority appointed under the said section to hear and decide for any specified area claims arising out of deductions from wages, or delay in payment of wages, of persons employed or paid in that area. It is thus clear that the only claims which can be entertained by the authority are claims arising out of deductions or delay made in payment of wages. The jurisdiction thus companyferred on the authority to deal with these two categories of claims is exclusive for s. 22 of the Act provides that matters which lie within the jurisdiction of the authority are excluded from the jurisdiction of ordinary civil companyrts. Thus in one sense the jurisdiction companyferred on the authority is limited by s. 15, and in another sense it is exclusive as prescribed by s. 22. In dealing with claims arising out of deductions or delay made in payment of wages the authority inevitably would have to companysider questions incidental to the said matters. In determining the scope of these incidental questions care must be taken to see that under the guise of deciding incidental matters the limited jurisdiction is number unreasonably or unduly extended. Care must also be taken to see that the scope of these incidental questions is number unduly limited so as to affect or impair the limited jurisdiction companyferred on the authority. While companysidering the question as to what companyld be reasonably regarded as incidental questions let us revert to the definition of wages prescribed by s. 2 vi . Section 2 vi as it then stood provided, inter alia, that wages means all remuneration capable of being expressed in terms of money which would, if the terms of the companytract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and it includes any bonus or other additional remuneration of the nature aforesaid which would be so payable and any sum payable to such person by reason of the termination of his employment. It also provided that the word wages did number include five kinds of payments specified in clauses a to e . Now, if a claim is made by an employee on the ground of alleged illegal deduction or alleged delay in payment of wages several relevant facts would fall to be companysidered. Is the applicant an employee of the opponent? and that refers to the subsistence of the relation between the employer and the employee. If the said fact is admitted, then the next question would be what are the terms of employment? Is there any companytract of employment in writing or is the companytract oral? If that is number a point of dispute between the parties then it would be necessary to enquire what are the terms of the admitted companytract. In some cases a question may arise whether the companytract which was subsisting at one time had ceased to subsist and the relationship of employer and employee had companye to an end at the relevant period. In regard to an illegal deduction a question may arise whether the lock-out declared by the employer is legal or illegal. In regard to companytracts of service some times parties may be at variance and may set up rival companytracts, and in such a case it may be necessary to enquire which companytract was in existence at the relevant time. Some of these questions have in fact been the subject-matter of judicial decisions. Vide A. R. Sarin v. C. Patil 1 , Vishwanath Tukaram v. The General Manager, Central Railway, V. T. Bombay 2 and Maharaja Sri Umaid Mills, Ltd. v. Collector of Pali 5 but we do number propose to companysider these possible questions in the present appeal, because, in our opinion, it would be inexpedient to lay down any hard and fast or general rule which would afford a determining test to demarcate the field of incidental facts which can be legitimately companysidered by the authority and those which cannot be so companysidered. We propose to companyfine our decision to the facts in the present case. What are the facts in the present case? The relationship of employer and employee is number in dispute. It is admitted that the three workmen are employed by the appellant, and do the work of bleach-folders. These folders are classified into Uttarnars and Chadhavnars. Indeed, the items of work assigned to these categories of folders are admitted. The appellant companytends that the employment of the three workmen is governed by the Award which is in operation, 1 1951 53 Bom. L.R. 674. 2 1957 Bom.L.R. 892. 3 1960 11 L.L.J. 364. whereas the respondent Union companytends that they are governed by cl. 5 of the subsequent agreement. It is companymon ground that both the Award and the agreement are in operation in respect of the persons governed respectively by them, so that it is number disputed by the appellant that the persons who are specified by their designation under cl. 5 would be entitled to, the benefit of the said clause and would number be governed by the Award. If an employee is called a cut-- looker by any mill he would naturally fall under cl. 5 in other words, all the specified categories of employees named by designation in that clause would number be governed by the Award though at one stage they were treated as operatives but they would be governed by cl. 5 of the agreement and if a person bearing that designation applied under s. 15 of the Act his application would be companypetent. The appellants argument, however, is that when the last part of el. 5 refers to other employees who have number been included above but who can properly fall under the above category numberdesignation is attached to that class, and in such a case it would be necessary to enquire whether a particular employee can properly fall under the said category, and that, it is urged, means that such an employee cannot apply under s. 15 but must go to the industrial companyrt under the ordinary industrial law. Thus the companytroversy between the parties lies within a very narrow companypass. An employee designated as a cut-looker can apply under s. 15 and obtain relief from the authority an employee number so designated but falling under the said category by virtue of the work assigned to him, it is said, cannot apply under s. 15 because the authority cannot deal with the question as to whether the said employee properly falls under the said category or number. In our opinion, on these facts, the question as to whether a particular employee is an operative falling under the Award or one who is above an operative and below the clerk falling under cl. 5 is a question which is so intimately and integrally companynected with the problem of wages as defined under s. 2 vi that it would be unreasonable to exclude the decision of such a question from the jurisdiction of the authority under s. 15. If a companytract of employment is admitted and there is a dispute about the companystruction of its terms, that obviously falls within s. 15 of the Act. If that is so, what is the difference in principle where a companytract is admitted, its terms are number in dispute, and the only point in dispute is which of the two subsisting companytracts applies to the particular employee in question. If the appellants argument were to prevail it would lead to this anomalous position that if a general companytract of employment provides for payment of wages to different categories of employees and describes the said categories by reference to the duties discharged by them, numbere of the employees can ever avail himself of the speedy remedy provided by s. 15 of the Act. In such a case every time a dispute may arise about the duties assigned to a particular employee before his wages are determined. In our opinion, to place such an artificial limitation on the limits of the jurisdiction companyferred on the authority by s. 15 is wholly unreasonable. That is the view taken by the High Court in the present case and we see numberreason to differ from it. The question about the nature and scope of the limited jurisdiction companyferred on the authority under s. 15 has been companysidered by this Court in the case of A. V. DCosta v. B. Patel 1 . In that case the scheme of the Act has been examined by Sinha, J., as he then was, who spoke for the majority view, and it has been held that if an employee were to say that his wages were Rs. 100 per month which he actually received as and when they fell due but that he would be entitled to higher wages if his claims to be placed on the higher wages scheme had been recognised and given effect to, that would number be a matter within the ambit of the authoritys jurisdiction. The authority has the jurisdiction to decide what actually the terms of the companytract between the parties were, that is to say, to determine the actual wages but the authority has numberjurisdiction to determine the question of potential wages. The Court took the view that the employees 1 1955 1 S.C.R. 1353. companyplaint in that case fell within the latter illustration. It would thus be seen that according to this, decision the authority has jurisdiction to determine what the terms of companytract between the parties are, and if the terms of the companytract are, admitted and the only dispute is whether or number a particular employee falls within one category or another, that would be incidental to the decision of the main question as to what the terms of the companytract are, and that precisely is the nature of the dispute between the parties in the present case. The learned Attorney-General has relied very strongly on the decision of the Bombay High Court in Anthony Sabastin Almeda R. M. T. Taylor 1 . In that case the employer and the employee went before the Court on the basis of different companytracts and the Court held that it was number within the jurisdiction of the authority to decide which of the two companytracts held the field, which of them was subsisting, and under which of them the employer was liable to pay wages. It would be clear from the facts in that case that two rival companytract, were pleaded by the parties, according to whom only one companytract was subsisting and number the other, and so the question for decision was which companytract was really subsisting. We do number propose to express any opinion on the companyrectness of the view taken by the Bombay High Court on this question. All we are companycerned to point out is that in the present appeal the dispute is substantially different. Both companytracts admittedly are subsisting. The only point of dispute is do the three workmen fall within the category of cut-lookers or do they number If they do then cl. 5 applies if they do number the Award will companye into operation. That being so, we do number see how the decision in Almedas case 1 can really assist the appellant. In this companynection we may point out that it is companymon ground that in Ahmedabad textile mills do number have a class of employees called cut-lookers as in Bombay. The work of cut- looking along with other kind of work is done by bleach- folders and other 1 1956 Bom. L.R. 899. folders. That was the finding made by the authority on an earlier occasion when Punamchand and Vishnuprasad had moved the authority under s. 15 of the Act. The learned Attorney- General has strenuously companytended that it is unfair to give the same pay to the three workmen who are doing the work of cut-lookers only for a part of the time and were substantially doing the work of bleach-folders that, however, has numberrelevance in determining the present dispute. The only point which calls for decision is whether or number the work done by the three respondents takes them within the category of cut-lookers specified under cl. 5, and as we have already pointed out, on an earlier occasion the authority has found in favour of two of the three respondents when it held that they were folders doing cut- looking. If the said finding amounts to res judicata it is in favour of the two respondents and number in favour of the appellant that is why the learned Attorney-General did number seriously dispute the companyrectness of the decision of the High Court on the question of res judicata.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 63 of 1957. Appeal from the judgment and order dated March 2, 1956, of the Bombay High Court in Cr. A. No. 1258 of 1955. R. Khanna and R. H. Dhebar, for the appellant. S. Bindra, for the respondents Amicus curiae . 1960. December 9. The following Judgment of the Court was delivered by AYYANGAR, J.-This appeal on a certificate under Art. 134 1 of the Constitution granted by the High Court of Bombay, principally raises for companysideration the application and scope of Art. 20 2 of the Constitution and s.26 of the General Clauses Act. The facts necessary for the appreciation of the points involved in this appeal are few and may be briefly stated. The two respondents-S. L. Apte and Miss Dwarkabai Bhat-were respectively the Managing Director, and the Managing Director of the Womens department, of an insurance Company by name The Long Life Insurance Company which had its headquarters at Poona. A power of attorney had been executed by the companypany in favour of the first respondent in June, 1942, under which he was vested with the power, companytrol and possession inter alia of the moneys belonging to the companypany with a view to have them invested in proper securities. The second respondent as Manaaing Director also acted under another power of attorney executed by the companypany in her favour in or about June, 1942, and by virtue thereof she was assisting the first respondent in main- taining the accounts of the companypany. While the respondents were thus functioning, an audit companyducted in 1952 disclosed that companysiderable sums of money amounting to over Rs. 55,000 were shown as cash balances with the first respondent. Further enquiries made by the Directors showed that moneys aggregating to over Rs. 95,000 had from time to time been withdrawn from the companypany by the first respondent with the assistance and sanction of the second respondent, professedly for the expenses of the companypany. Among the papers of the companypany was a voucher dated August 9, 1952, evidencing the withdrawal of this amount by the first respondent and signed by him and this also bore the signature of the second respondent in token of her sanction. The respondents, however, companyld furnish numberproper account of the legitimate expenses of the companypany for which the amount was purported to be taken. Both the respondents were thereupon prosecuted for an offence under s. 409 of the Indian Penal Code and also for an offence under s. 105 of the Indian Insurance Act in Criminal Case 82 of 1953. The learned Magistrate companyvicted and sentenced both the respondents for both the offences with which they were charged. The respondents thereupon filed appeals to the Court of the Sessions Judge, Poona and the learned Sessions Judge, by his order dated May 3, 1954, while companyfirming the companyviction and sentence on the respondents under s. 409 of the Indian Penal Code set aside their companyviction under s. 105 of the Indian Insurance Act. The reason for the latter order was the finding of the learned Sessions Judge that the sanction required by s. 107 of the Indian Insurance Act which was a prerequisite for the initiation of the prosecution under s. 105 had number been obtained before the companyplaint in respect thereof had beed filed. The companyviction and sentence under s. 409 of the Indian Penal Code which had been affirmed by the Sessions Judge in both the cases have number become final. Subsequetly the Insurance Company obtained the sanction of the Advocate-General of Bombay under s. 107 of the Indian Insurance Act and filed a companyplaint in the Court of the Judicial Magistrate, Poona, on January 18, 1955, against the two respondents charging each of them with an offence under s. 105 of the Indian Insurance Act. The Magistrate took the case on file and directed the issue of process. Thereupon the two respondents made an application before the Magistrate on March 22, 1955, praying that the companyplaint against them may be dismissed as being barred by s. 403 1 of the Criminal Procedure Code, by reason of their previous companyviction by the Magistrate for the same offence under the Insurance Act and their acquittal in respect thereof by the Sessions Judge, pleading in addition that when the companyviction by the Magistrate stood, they had even undergone a portion of the sentence imposed. The learned Magistrate overruled this plea on the ground that the acquittal of the respondents was number on the merits of the case, but for lack of sanction under s. 107 of the Indian Insurance Act which rendered the Magistrate without jurisdiction to entertain the companyplaint. The trial was then proceeded with and evidence was led. But finally the Magistrate acquitted the respondents on the ground that Art. 20 2 of the Constitution and s. 26 of the General Clauses Act were a bar to their companyviction and punishment. The State of Bombay thereupon filed an appeal to the High Court under s. 417 of the Criminal Procedure Code. The appeal was dismissed by the learned Judges who however granted a certificate on the strength of which this appeal has been preferred. As the prosecution against the respondents under s. 105 of the Insurance Act has been held to be barred by reason of the provisions companytained in Art. 20 2 of the Constitution and s. 26 of the General Clauses Act, it would be companyvenient to set out these provisions before entering on a discussion of their companytent and scope. Article 20 2 of the Constitution runs No person shall be prosecuted and punished for the same offence more than once. Section 26 of the General Clauses Act enacts Where an act or omission companystitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall number be liable to be punished twice for the same offence. As the application of these two provisions is companyditioned by the identity of the two offences which form the subject of the prosecution or prosecutions, we might as well reproduce the relevant provisions companystituting the two offences, viz., s. 409 of the Indian Penal Code and s. 105 of the Indian Insurance Act Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, companymits criminal breach of trust in respect of that property, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine. Criminal breach of trust referred to in the section is defined in s. 405 of the Indian Penal Code in these terms Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or companyverts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged. or of any legal companytract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, companymits criminal breach of trust. The offence created by the Indian Insurance Act is as follows 105. 1 Any director, managing agent, manager or other officer or employee of an insurer who wrongfully obtains possession of any property of the insurer or having any such property in his possession wrongfully withholds it or wilfully applies it to purposes other than those expressed or authorised by this Act shall on the companyplaint of the Controller made after giving the insurer number less than fifteen days numberice of his intention, or, on the companyplaint of the insurer or any member or any policy-holder thereof, be punishable with fine which may extend to one thousand rupees and may be ordered by the Court trying the offence to deliver up or refund within a time to be fixed by the Court any such property improperly obtained or wrong- fully withheld or wilfully misapplied and in default to Buffer imprisonment for a period number exceeding two years. This section shall apply in respect of a provident society as defined in Part III as it applied in respect of an insurer. Before addressing ourselves to the arguments urged before as by the Yearned Counsel for the appellant State it is necessary to set out one matter merely to put it aside. The entire argument on behalf of the State before the High Court proceeded on denying that the order of a Criminal Court passed under s. 105 of the Indian Insurance Act directing the accused to deliver up or refund any such property improperly withheld or wilfully misapplied was a punish- ment within either Art. 20 2 of the Constitution or s. 26 of the General Clauses Act. The learned Judges of the High Court rejected this companytention. Though learned Counsel for the appellant originally submitted that he was companytesting this companyclusion of the High, Court, he did number address us any argument under that head and we do number therefore find it necessary to dwell on this point any further, but shall proceed on the basis that a direction by the Magistrate to replace the moneys of the insurer with a penalty of imprisonment in default of companypliance therewith was a punishment within Art. 20 2 of the Constitution and s. 26 of the General Clauses Act. Turning to the main points urged before us, we may premise the discussion by stating that it was number disputed before us by learned Counsel for the State, as it was number disputed before the learned Judges of the High Court, that the allegations to be found in the original companyplaint in Criminal Case 82 of 1953 on which the companyviction under s. 409 of the Indian Penal Code was obtained were similar to the allegations to be found in the companyplaint under s. 105 of the Indian Insurance Act. It should, however, be mentioned that there was number any companyplete identity in the statement of facts which set out the acts and omissions on the part of the respondents which were alleged to companystitute the two offences-s. 409 of the Indian Penal Code and s. 105 of the Insurance Act. For instance, in the companyplaint which has given rise to this appeal, the crucial paragraphs detailing the allegations are 12 and 13 of the companyplaint which run The companypany submits that the accused has thus wrongfully obtained possession of Rs. 95,000 or having that property in his possession wrongfully withheld it or wilfully applied it to purposes other than those expressed or authorised by the Insurance Act, 1938, and companymitted an offence on the 9th August, 1952, under Sectionof the Insurance Act, 1938. The companypany through their Solicitorscalled upon the accused to explain his companyduct within7 days from the receipt of the letter. The accused has failed and neglected to reply to the said letters. It is obvious that on these allegations alone the offence of criminal breach of trust companyld number be established as they lack any reference to any entrustment or to the dishonest intent which are the main ingredients of the offence of criminal breach of trust. But to this point about the difference in the ingredients of the two offences we shall revert a little later. Even assuming that the allegations to be found in the two companyplaints were identical, the question, however, remains whether to attract the ban imposed by either Art. 20 2 of the Constitution or s. 26 of the General ClausesAct on a second punishment, it is sufficient that the allegations in the two companyplaints are substantiallythe same or whether it is necessary further that theingredients which companystitute the two offences should be identical. We shall first take up for companysideration Art. 20 2 of the Constitution whose terms we shall repeat 20. 2 No person shall be prosecuted and punished for the same offence more than once. To operate as a bar the second prosecution and the companysequential punishment thereunder, must be for the same offence. The crucial requirement therefore for attracting the Article is that the offences are the same, i.e., they should be identical. If, however, the two offences are distinct, then numberwithstanding that the allegations of facts in the two companyplaints might be substantially similar, the benefit of the ban cannot be invoked. It is, therefore, necessary to analyse and companypare number the allegations in the two companyplaints but the ingredients of the two offences and see whether their identity is made out. It would be seen from a companyparison of s. 105 of the Insurance Act and a. 405 of Indian Penal Code a. 409 of the Indian Penal Code being only an aggravated form of the same offence that though some of the necessary ingredients are companymon they differ in the following Whereas under a. 405 of the Indian Penal Code the accused must be entrusted with property or with dominion over that property, under s. 105 of the Insurance Act the entrustment or dominion over property is unnecessary it is sufficient if the manager, director, etc. obtains possession of the property. The offence of criminal breach of trust s. 405 of the Indian Penal Code is number companymitted unless the act of misappropriation or companyversion or the disposition in violation of the law or companytract, is done with a dishonest intention, but s. 105 of the Insurance Act postulates numberintention and punishes as an offence the mere withholding of the property-whatever be the intent with which the same is done, and the act of application of the property of an insurer to purposes other than those authorised by the Act is similarly without reference to any intent with which such application or misapplication is made. In these circumstances it does number seem possible to say that the offence of criminal breach of trust under the Indian Penal Code is the same offence for which the respondents were prosecuted on the companyplaint of the companypany charging them with an offence under s. 105 of the Insurance Act. This aspect of the matter based on the two offences being distinct in their ingredients, companytent and scope was number presented to the learned Judges of the High Court, possibly because the decisions of this Court companystruing and explaining the scope of Art. 20 2 were rendered later. In Om Prakash Gupta v. State of U.P. 1 the accused, a clerk of a municipality had been companyvicted of an offence under s. 409 of the Indian Penal Code for having misappropriated sums of money received by him in his capacity as a servant of the local authority and the companyviction had been affirmed on appeal, by the Sessions Judge and in revision by the High Court. The plea raised by the accused before this Court, in which the matter was brought by an appeal with special leave, was that s. 409 of the Indian Penal Code had been repealed by implication by the enactment of sub-ss. 1 c and 2 of s. 5 of the Prevention of Corruption Act because the latter dealt with an offence of substantially the same type. This Court repelled that companytention. It 1 1957 S.C.R. 423. analysed the ingredients of the two offences and after pointing out the difference in the crucial elements which companystituted the offences under the two provisions, held that there was numberrepeal of s. 409 of the Indian Penal Code implied by the companystitution of a new offence under the terms of the Prevention of Corruption Act. It was the application of this decision and the ratio underlying it in the companytext of Art. 20 2 ,of the Constitution that is of relevance to the present appeal. The occasion for this arose in State of Madhya Pradesh v. Veereshwar Rao Agnihotry 1 . The res- pondent was a tax-collector under a municipality and was prosecuted for offences among others under s. 409 of the Indian Penal Code and s 5 2 of the Prevention of Corruption Act for misappropriation of sums entrusted to him as such tax-collector. By virtue of the provision companytained in s. 7 of the Criminal Law Amendment Act, XLVI of 1952, the case was transferred to a Special Judge who was appointed by the State Government after the prosecution was companymenced before a Magistrate. The Special Judge found the accused guilty of the offence under s. 409 of the Indian Penal Code and companyvicted him to three years rigorous imprisonment but as regards the charge under S. 5 2 of the Prevention of Corruption Act, he acquitted the accused on the ground of certain procedural number-compliance with the rules as to investigation prescribed by the latter enactment. The respondent appealed to the High Court against this companyviction and sentence under s. 409 of the Indian Penal Code and there urged that by reason of his acquittal in res- pect of the offence under s. 5 2 of the Prevention of Corruption Act, his companyviction under s. 409 of the Indian, Penal Code companyld number also be maintained, the same being barred by Art. 20 2 of the Constitution. The High Court of Madhya Bharat accepted this argument and allowed the appeal and the State challenged the companyrectness of this decision by an appeal to this Court. Allowing the appeal of the State, Govinda Menon, J., delivering the judgment of the Court observed 1 1957 S.C.R. 868 This Court has recently held in Om Prakash Gupta v. The State of U.P. that the offence of criminal misconduct punishable under s. 5 2 of the Prevention of Corruption Act, 11 of 1947, is number identical in essence, import and companytent with an offence under s. 409 of the Indian Penal Code In view of the above pronouncement, the view taken by the learned Judge of the, High Court that the two offences are one and the same, is wrong, and if that is so, there can be numberobjection to a trial and companyviction under s. 409 of the Indian Penal Code, even if the respondent has been acquitted of an offence under s. 5 2 of the Prevention of Corruption Act, II of 1947 The High Court also relied on Art. 20 of the Constitution for the order of acquittal but that Article cannot apply because the res- pondent was number prosecuted after he had already been tried and acquitted for the same offence in an earlier trial and, therefore, the well-known maxim Nemo debet bis vexari, si companystat curiae quod sit pro una et eadem causa No man shall be twice punished, if it appears to the companyrt that it is for one and the same cause embodied in Art. 20 cannot apply Before leaving this part of the case we might also point out that a similar view of the scope of the rule as to double-jeopardy has always been taken by the Courts in America. The words of the Vth Amendment where this rule is to be found in the American Constitution are Nor shall any person be subject, for the same offence, to be twice put in jeopardy of life or limb. and it will be numbericed that there as well, the ban is companyfined to a second prosecution and punishment for the same offence. Willoughby after referring to the words quoted in the Fifth Amendment says Cases may occur in which the same act ma render the actor guilty of two distinct offences In such cases the accused cannot plead the trial and acquittal, or the companyviction and punishment for one offence in bar to a companyviction for the other 1 . In Albrecht v. Constitution of the United States, Vol.II.- p. 1158., United States 1 Brandeis, J., speaking for a unanimous Court said There is a claim of violation of the Vth Amendment by the imposition of double punishment. This companytention rests upon the following facts. Of the nine, companynts in the information four charged illegal possession of liquor, four illegal sale and one maintaining a companymon nuisance. The companytention is that there was double punishment because the liquor which the defendants were companyvicted for having sold is the same that they were companyvicted for having possessed. But possessing and selling are distinct offences. One may obviously possess without selling and one may sell and cause to be delivered a thing of which he has never had possession or one may have possession and later sell, as appears to have been done in this case. The fact that the person sells the liquor which he possessed does number render the possession and the sale necessarily a single offence. There is numberhing in the Constitution which prevents Congress from punishing separately each step leading to the companysummation of a transaction which it has power to prohibit and punishing also the companypleted transaction. If, therefore, the offences were distinct there is numberquestion of the rule as to double-jeopardy as embodied in Art. 20 2 of the Constitution being applicable. The next point to be companysidered is as regards the scope of s. 26 of the General Clauses Act. Though s. 26 in its opening words refers to the act or omission companystituting an offence under two or more enactments, the emphasis is number on the facts alleged in the two companyplaints but rather on the ingredients which companystitute the two offences with which a person is charged. This is made clear by the companycluding portion of the section which refers to shall number be liable to be punished twice for the same offence,. If the offences are number the same but are distinct, the ban imposed by this provision also cannot be invoked. It therefore follows that in the present case as the respondents are number being sought to be punished for the 1 1927 273 TT.S. I 71 Law. Ed. 505. same offence twice but for two distinct offences company- stituted or made up of different ingredients the bar of the provision is inapplicable. In passing, it may be pointed out that the companystruction we have placed on Art. 20 2 of the Constitution and s. 26 of the General Clauses Act is precisely in line with the terms of s. 403 2 of the Criminal Procedure Code which runs 403. 2 A person acquitted or companyvicted of any offence may be afterwards tried for any distinct offence for which a separate charge might have been made against him on the former trial under section 235, sub-section 1 . It would be numbericed that it is because of this provision that the respondents before us were originally charged before the Magistrate in Criminal Case 82 of 1953 with offences under s. 409 of the Indian Penal Code as well as s. 105 of the Indian Insurance Act. The respondents in this case did number appear in this Court and as the appeal had to be heard ex parte Mr. N. S. Bindra was requested to appear as amicus curiae to assist the Court at the hearing of the appeal.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 475 of 1960. Appeal by special leave from the Award dated March 31, 1960, of the Industrial Tribunal, Bombay, in Reference I. T. No. 227 of 1959. MC. Setalvad, Attorney-General for India, G. B. Pal and B. Dadachanji, for the appellant. N. Shroff, for the respondents. 1960. December 15. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-This appeal by special leave arises from an industrial dispute between the appellant, the Alembic Chemical Works Co. Ltd., and the respondents, its workmen. The said dispute related to a single demand made by the respondents with regard to leave. This demand companysisted of three parts, a one months privilege leave with full salary and dearness allowance on companypletion of eleven months service in a year with a right to accumulate upto six months, b one months sick leave with full salary and dearness allowance for each year of service with right to accumulate for the entire period of service, and c every workman should be entitled to take leave in proportion to the number of days he is in service of the companypany at the time of his application for the same. This dispute was referred by the Government of Bombay for adjudication before the Industrial Tribunal under s. 10 1 d of the Industrial Disputes Act XIV of 1947. The Tribunal companysidered the companytentions raised by the appellant against the respondents demands, took into account awards or agreements between employers and their employees in companyparable companycerns and made its award. In regard to privilege leave the Tribunal has ordered that leave should be granted to the staff members companyered by the reference as follows Privilege leave upto 3 16 days as at present companypleted years of service per year. Up to 9 companypleted years 22 days per year. And thereafter One month for every 11 months of service. The award allows accumulation of privilege leave upto three years. As regards sick leave, the Tribunal has ordered that the appellant should give its staff companyered by the present award 15 days sick leave in a year with full pay and dearness allowance with a right to accumulate upto 45 days. It has also directed that numbermedical certificate should be demanded if sick leave for three days or less is asked for. In regard to the third item of demand companycerning leave in proportion the Tribunal has made appropriate direction which it is unnecessary to set out for the purpose of this appeal. Before the Tribunal the main companytention raised by the appellant was in regard to the propriety and reasonableness of the demand and in regard to the practice prevailing in companyparable companycerns. Before this Court, however, the provision made by the award in regard to privilege leave has been attacked mainly on the ground that the Tribunal had numberjurisdiction to make such an award having regard to the provisions of s. 79 of the Factories Act, 1948 63 of 1948 hereafter called the Act . It is urged that s. 79 of the Act has made exhaustive and self-contained provisions with regard to the granting of annual leave with wages to the employees to whom the said Act applies, and the effect of s. 79 is to introduce standardisation in the matter of leave which means neither the employer voluntarily, number an Industrial Tribunal by its award, can add to the leave prescribed by the, said section. In the matter of leave s. 79 is a companyplete companye, and numberadditions to the said leave can be made either by a companytract or by an award. It is companymon ground that the respondents are governed by the pro- visions of the Act. This point was number raised before the Tribunal, but since it is a point of law which arises on admitted facts we have permitted the learned Attorney- General to argue it before us. The Act was first enacted in 1934 as Act 25 of 1934. Since then it has been amended from time to time. Its main object is to companysolidate and amend the law regulating labour in factories. For the purpose of determining which companycerns and which employees would be governed by the Act s. 2 m and 1 define factory and worker respectively. Even a broad view of the scheme of the Act and a perusal of its provisions would clearly indicate that the Act is a beneficent measure and its policy is to make reasonable provisions for the preservation of health of the workmen, their safety and their welfare. With that object in view, the Act has made provisions for the regulation of working hours of adults, has regulated the employment of young persons, and has also provided for annual leave with wages to the workmen. The amendments made in the relevant provisions of the Act from time to time indicate that the Act has been pursuing its beneficent policy slowly but steadily and is attempting to provide for the workmen better and larger amenities in their employment. It is in the light of this obvious policy and object of the Act that we have to decide the question raised before us by the appellant. Section 79 1 occurs in Chapter VIII which deals with annual leave with wages. It provides thus 79. 1 . Every worker who has worked for a period of 240 days or more in a factory during a calendar year shall be allowed during the subsequent calendar year, leave with wages for a number of days calculated at the rate of- if an adult, one day for every twenty days of work performed by him during the previous calendar year if a child, one day for every fifteen days of work performed by him during the previous calendar year. Explanation 1--For the purpose of this sub- section- a any days of lay off, by agreement or companytract or as permissible under the standing orders b in the case of a female worker, maternity leave for any number of days number exceeding twelve weeks and c the leave earned in the year prior to that in which the leave is enjoyed shall be deemed to be days on which the worker has worked in a factory for the companyputation of the period of 240 days or more, but he shall number earn, leave for these days. This section has 11 other sub-sections which deal with different aspects and make relevant provisions in regard to annual leave with wages. It is number disputed that the award purports to make provisions for privilege leave in excess of the annual leave sanctioned by s. 79. Can the Industrial Tribunal direct the appellant to provide such additional privilege leave to its employees? in other words, does s. 79 purport to standardise annual leave with wages so that numberdeparture from the said standard is permissible either way? The appellants companytention is that except for pre-existing awards, agreements, companytracts or except for pre-existing law numberdeparture from the standardised provision is permissible after s. 79 was enacted. This argument raises the question of companystruing s. 79 in the light of the other relevant provisions of the Act. It may be companyceded that the provisions made by s. 79 are elaborate, and in that sense may be treated as self-contained and exhaustive. It is also clear that s. 79 1 does number use the expression number more than or number less than as it might have done if the intention of the Legislature was to make its provisions companyrespond either to the minimum or the maximum leave claimable by the employees but even so, when s. 79 1 provides that every worker shall be allowed leave as therein prescribed, the provision prima facie sound, like a provision for the minimum rather than for the maximum leave which may be awarded to the worker. If the intention of the Legislature was to make the leave permissible under s. 79 1 the maximum to which a workman would be entitled, it would have used definite and appropriate language in that behalf. We are, therefore, inclined to think that even on a plain companystruction of s. 79 1 it would be difficult to accede to the argument that it prescribes standardised leave which inevitably would mean the maximum permissible until s. 79 1 itself is Even on the basis that s. 79 1 is capable of the companystruction sought to be placed on it by the appellant, the question would still remain whether the Raid companystruction should be preferred to the alternative companystruction which, as we have just indicated, is reasonably possible. The answer to this question must be in the negative for two reasons first, having regard,to the obvious policy and object of the Act, if s. 79 1 is capable of two companystructions that companystruction should be preferred which furthers the policy of the Act and is more beneficial to the employees in whose interest the Act has been passed. It is well settled that in companystruing the provisions of a welfare legislation companyrts should adopt what is sometimes described as a beneficent rule of companystruction but, apart from this general companysideration about the policy and object of the Act, ss. 78 and 84 occurring in the same Chapter as s. 79 clearly indicate that s. 79 1 is number intended to standardise leave provisions as companytended by the appellant, and that is the second reason why the appellants argument cannot be accepted. Let us then companysider the provisions of Bs. 78 and 84. Section 78 1 provides that the provisions of Chapter VIII shall number operate to the prejudice of any right to which a worker may be entitled under any other law, or under the terms of any award, agreement or companytract of service. There is a proviso to this sub-section which lays down that when such award, agreement or companytract of service provides for longer annual leave with wages than provided in this Chapter the worker shall be entitled only to such longer annual leave. Section 78 2 exempts specified workers from the operation of Chapter VIII. The first difficulty which this section raises against appellants argument is that it undoubtedly recognises exceptions to the leave prescribed by s. 79 1 . It is well-known that standardisation of companyditions of service in industrial adjudication generally does number recognise or permit exceptions if the hours of work are standardised, for instance, or the wage-structure is standardised, it is intended to make hours of work and wages uniform in the whose industry brought under the working of standardisation Standardisation thus inevitably means levelling up of those whose terms and companyditions of service were less favourable than the standardised ones, and levelling down those of such others whose terms and companyditions were more favourable than the standardised ones. That being so, if s. 79 1 intended to standardise annual leave with wages it would numbermally number have made provisions in regard to exceptions as s. 78 1 obviously does. Besides, the scope and extent of the exceptions recognised by s. 78 1 are decisively against the appellants companystruction of s. 79 1 . The learned Attorney-General has strenuously companytended that the saving provision of s. 78 1 applies only to existing law and existing awards, agreements or companytracts of service in other words, his argument is that the Legislature has deliberately decided to except pre-existing arrangements and in that sense it is a departure from the usual companycept of standardisation. In our opinion, the assumption that s. 78 1 is companyfined to existing arrangements is plainly inconsistent with a fair and reasonable companystruction of the said provision. When s.78 1 refers to any other law it companyld number have been intended that it is only to existing laws that the reference is made and that the idea underlying the provision was that numberlaw can be passed in future which would grant more generous leave to the employees. Such a restriction on the legislative activities of the appropriate Legislatures cannot obviously have been intended. If the reference to law is number companyfined only to existing law there is numberreason why reference to any award, agreement or companytract of service should be similarly circumscribed or limited. We feel numberdifficulty in holding that what s. 78 1 protects are laws, awards, agreements or companytracts of service which were then existing or which would companye into existence later that is to say s. 78 1 does number affect preexisting arrangements and does number also prohibit future arrangements which would be more generous than s. 79 1 . A law may be passed making more generous provisions, or agreements or companytracts may be entered into or awards made with the same result. If that be the true position s. 78 1 clearly negatives the theory that s. 79 1 provides for standardisation of annual leave with wages. The provisions of s. 84 would also lead to the same result. Section 84 provides that where the State Government is satisfied that the leave rules applicable to workers in a factory provide benefits which in its opinion are number less favourable than those for which Chapter VIII makes provision it may by written order exempt the factory from all or any of the provisions of Chapter VIII subject to such companyditions as may be specified in the order. Now, the power to exempt factories has to be exercised having regard to the effect of the totality of the benefits which may be afforded to the workers by their respective factories. This power to exempt also necessarily postulates the existence of better amenities than those guaranteed by Chapter VIII, and that means that if a factory provides better leave amenities to its employees, the State Government may in the interest of the employees exempt the factory from the operation of this Chapter. The scope of s. 84, like the scope of s. 78, cannot be limited only to the more favourable benefits which may be existing at the date when the Act was passed. What is true about the existing benefits would be equally true about the benefits which may be granted by an employer to the employees in future. Let us illustrate what the company- sequence would be if the appellants argument is accepted. Take the case of an employer who has been exempted under s. 84 on the ground that the benefits of leave companyferred by him on his employees are more favourable to them. In such a case, the employer may make his benefits still more favourable after exemption is accorded to him but an employer who has already number provided more favourable benefits would be effectively precluded from making any such provisions in future. It is difficult to imagine that such a companysequence companyld have been intended by the provisions of this welfare legislation. The history of the amendments made in the relevant provisions of the Act also indicates that the Act has been gradually making more liberal provisions in the interest of workmen to whom it applies. In the original Act as it was passed 25 of 1934 s. 34 provided for weekly holiday but numberprovision was made for holidays with pay. When the said Act was amended by Act 3 of 1945, s. 49A which is equivalent to present s. 78 1 without the proviso was inserted and s. 49B provided, inter alia, that every worker who has companypleted a period of twelve months companytinuous service in a factory shall be allowed during the subsequent period of twelve months holidays for a period of ten days. That is how provision for holidays came to be made. By the amending Act 63 of 1948, s. 78 with the present proviso was enacted and s. 79 made a provision for annual leave with wages. While making provision for annual leave with wages the section then prescribed a minimum of ten days subsequently, by amending Act 25 of 1954, s. 79 as it stands at present was enacted and in s. 78 the word annual has been added to qualify leave in the proviso. We have thus briefly referred to some changes made in the Act from time to time in order to show that subsequent amendments have sought to make the provisions more liberal. There is one more point which may incidentally be mentioned whilst we are companysidering the amendments made in the Act from time to time. Section 49A which broadly companyresponds to s. 78 of the present Act saved other laws and terms of any award, agreement or companytract of service just as s. 78 1 does. Now, if the said section is companystrued on the lines which the appellant wants us to companystrue s. 78 1 it would only be arrangements existing at the date when the said amending Act came into force on January 1, 1946, that would be protected and saved, and numberhing that happened either by way of legislation or by way of awards or companytracts subsequent to the said date would attract the provisions of the said s. 49A or s. 78 which subsequently took its place. This obviously is number intended by the Legislature which incidentally shows that s. 78 1 cannot be companyfined to existing arrangements or laws, but takes within its sweep future laws, agreements, companytracts or awards. Therefore, the challenge to the validity of the award based on the assumption that s. 79 1 provides for standardised award of annual leave with wages fails. Then it is urged that the provision made by the award for privilege leave introduces discrimination between the clerical staff companyered by the present reference and operatives companyered by the earlier awards made by the same Tribunal. We were told that operatives had made a similar claim for privilege leave before the same Tribunal, and the said claim had been rejected. The argument is that the provision for privilege leave made by the present award would create discontent amongst the operatives to whom similar leave has been denied, and that would disturb industrial peace. We are number impressed by this argument. It is number seriously disputed that a distinction has generally been made between operatives who do manual work and clerical and other staff in fact the appellants standing orders themselves make different relevant provisions for the two categories of its employees. It is also number disputed that in practice such distinction is made by companyparable companycerns, and awards based on the same distinction are generally made in respect of the two separate categories of employees. We are, therefore, unable to appreciate the argument that in granting privilege leave to the present staff the Tribunal has either overlooked its earlier award or has made a decision which suffers from the vice of discrimination. The practice prevailing in companyparable companycerns and the trend of awards both seem to show that a distinction is generally made between the two categories of employees, and since the said distinction is perfectly justifiable numberquestion of discrimination can arise. It is then argued that making liberal provisions for privilege leave and sick leave are really opposed to the modern trend in industrial thought, and so such liberal awards should be discouraged and companyrected. There is numberdoubt that when industrial adjudication seeks to do social justice it cannot ignore the needs of national economy and so in companysidering matters of leave, either in the form of privilege leave or sick leave, the Tribunals should number ignore the companysideration that unduly generous or liberal leave provisions would affect production and obviously production of essential companymodities is in the interest of number only the employers and the employees but also of the general companymunity but it is difficult for us to accept the argument that we should make suitable modifications in the provisions made by the award in regard to privilege leave or sick leave. These are matters primarily for the Industrial Tribunal to companysider and decide. The Tribunal is more familiar with the trend prevailing in companyparable companycerns, and unless it appears that the impugned provisions cannot be sustained on any reasonable ground or that they mark a violent departure from the prevailing practice or trend, we would be reluctant to interfere with the decision of the Tribunal. After all, in deciding what ,would be a reasonable provision for privilege leave or sick leave, the Tribunal has to take into account all relevant factors and companye to its own decision. As we have already indicated, in making the present award the Tribunal has companysidered previous decisions which were relevant and prevailing agreements in companyparable companycerns. We have carefully companysidered the criticism made by the learned Attorney-General against the provisions companytained in the award, but we are number satisfied that a case has been made out for interference in an appeal under Art. 136.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 366 of 1959. Appeal from the judgment and order dated September 18, 1958, of the Calcutta High Court in Income Tax Reference No. 9 of 1955. Mitra and S. N. Mukherjee, for the appellant. N. Rajagopal Sastri and D. Gupta, for the respondent. 1960. December 8. The Judgment of the Court was delivered by. K. DAS, J.-This is an appeal on a certificate of fitness granted by the High Court of Calcutta under s. 66A 2 of the Indian Income-tax Act, 1922. The assessee, Provat Kumar Mitter, is the appellant before us. He was a registered holder of 500 Ordinary shares. of the Calcutta Agency Ltd. By a written instrument, dated January 19, 1953, he assigned to his wife, Ena Mitter, the right, title and interest to all dividends and sums of money which might be declared or might become due on account or in respect of those shares for the term of her natural life. We may read here the material portion of the instrument This Deed Witnesseth that for effecting the said desire and in companysideration of the natural love and affection of the Settlor for the Beneficiary the Settlor as the beneficial owner assigns unto the Beneficiary the right, title and interest to every dividend and sum of money which may be declared or become due and payable on account of or in respect of the said shares number being the price or value thereof and further hereby companyenants with the Beneficiary to hand over and or endorse over to the Beneficiary any dividend Warrant or any other document of title to such dividend or sum of money as aforesaid and to instruct the said Company to pay any such dividend or such sum of money to the Beneficiary To Hold the same unto the Beneficiary absolutely during the term of her natural life. And It Is Hereby Agreed And Declared that the Beneficiary shall remain entitled to and shall receive and stand possessed absolutely of every dividend and sum of money which she may receive on account of the said shares during the term of her natural life and that the Settlor shall have numberright, title or interest therein or derive any benefit therefrom during the said period. It is to be numbericed that under the terms quoted above the shares themselves remained the property of the assessee, and it was only the income arising therefrom which was sought to be settled or assigned to his wife. During the accounting year which ended on March 31, 1953, the dividend declared on the shares amounted to Rs. 12,000. In assessing the as- sessee for the assessment year 1953-54 the Income-tax Officer included the said sum of Rs. 12,000 in his income under the provisions of s. 16 1 c and s. 16 3 of the Act, as he said in his assessment order. The companytention of the assessee was that since the settlement was for the lifetime of his wife, the third proviso to s. 16 1 c applied and the dividend which his wife received companyld number be deemed to be his income under s. 16 1 c as to s. 16 3 of the Act the assessee companytended that it did number apply, because there was numbertransfer of the shares to his wife. The assessee, accordingly, appealed to the Appellate Assistant Com- missioner. Before that authority a somewhat unusual companytention was put forward on behalf of the Department, viz., that the third proviso to s. 16 1 c should be ignored inasmuch as it was repugnant to the main provisions companytained in s. 16 1 c and the general scheme of the Act. A further companytention urged on behalf of the Department was that since the shares companytinued to stand in the name of the assessee and the dividends had been declared in his name, the transfer of the dividend to the beneficiary was only an application of the dividend income and, therefore,, the assessee companyld number claim exemption from being taxed on it as a part of his own income. The Appellate Assistant Commissioner accepted both the aforesaid companytentions and dismissed the appeal. In a further appeal to the Income-tax Appellate Tribunal, the assessee again relied on the third proviso to s. 16 1 c of the Act and the Departmental Representative urged the same two companytentions plus a new one to the effect that the deed by which the dividend had been transferred was altogether invalid inasmuch as it was an unregistered instrument and, therefore, numbervalid transfer of the dividend income had been effected by it. The Tribunal rejected the Departments companytention that the third proviso was in companyflict with the main provisions of s. 16 1 c or the scheme of the Act. As to the second companytention that the transfer of the dividend income was a mere application of it by the assessee after it had accrued to him, the Tribunal apparently expressed numberopinion. It gave effect, however, to the third companytention of the Department, namely, that the deed being an unregistered instrument did number operate as a valid transfer of the dividend income in favour of the assessees wife. Both the assessee and the Commissioner then moved the Tribunal to refer to the High Court the questions which had respectively been decided adversely to them. The Tribunal acceded to the request and referred three questions to the High Court, two at the instance of the Commissioner and one at the instance of the assessee. The questions referred were as follows Whether the deed dated January 19, 1953, assigning the dividends to accrue, merely on account of natural love and affection, is void as it is number registered? Whether the third proviso to section 16 1 c is repugnant to the main clause 16 1 c and the general scheme of the Act, and should number be given effect to? Whether, on the facts and in the circum- stances of the case, the payment of dividend income to the assessees wife, Ena Mitter, under the companyenant in the deed of assignment dated January 19, 1953, was merely a case of application of the assessees income? The High Court answered the first two questions in favour of the assessee. It answered the third question, however, against the assessee and in favour of the Department. The High Court expressed its companyclusion on the third question in the following words the companyclusion must be that there being only a voluntary companyenant entere into by the settlor to pay over the dividends received by him to the wife or to instruct the companypany to pay them to her and the income number having been made the wifes income from the beginning, what the settlement provides for is only an application of the income and therefore the income is assessable in the hands of the settlor, irrespective of whether the wife is also assessable on her receipts. The case is outside the main clause of section 16 1 c and, therefore, the third proviso to the section is also number relevant. The appeal before us is limited to the question of the companyrectness or otherwise of the answer given by the High Court to the third question. The first two questions having been answered in favour of the assessee and the Department number having filed any appeal with regard to them, we are number companycerned with the companyrectness or otherwise of the answers given by the High Court to those questions and we express numberopinion as respects those answers. On behalf of the appellant it has been argued that the High Court should number have answered the third question, because it did number arise out of the order of the Tribunal. The argument is that under s. 66 of the Income-tax Act, the Tribunal companyld refer to the High Court any question of law which arose out of its order, but it was number open to the Tribunal to refer a question which did number so arise. We are unable to accept the companytention that the question did number arise out of the Tribunals order. Indeed, it is true as we have stated earlier, that the Tribunal did number state its specific finding on this question but in the statement of the case drawn up by the Tribunal under s. 66 it has stated that though numberspecific finding was given the question was raised by the Department and by implication was decided against the respondent. In its application to the Tribunal for a reference, the present respondent specifically mentioned the question as one decided adversely to it and though the appellant submitted that the question did number arise, the Tribunal held that the question did arise out of its order. No objection appears to have been taken in the High Court to the reference made by the Tribunal on the three questions including the one number under companysideration before us. In these circumstances it is number open to the appellant to companytend number that the question did number arise out of the Tribunals order. We must, therefore, overrule this companytention. - Now, as to the companyrectness of the answer given by the High Court. Learned companynsel for the appellant has companytended that the High Court did number companyrectly companystrue the instrument of January 19, 1953, and on a proper companystruction, the High Court should have held that a right of property in present was assigned in favour of the wife. Learned companynsel has submitted that the assessee as a registered holder of 500 Ordinary shares of the Calcutta Agency Ltd., had a bundle of rights in the Company 1 a right to vote 2 a right to participate in the distribution of assets on dissolution or liquidation of the Company and 3 a right to participate in the profits, e.g., dividends which might be declared. It is companytended that the aforesaid third right was assigned to the wife by the assessee, and that the High Court ignored the said assignment while it emphasised the other companyenants for endorsing or handing over the dividend warrants, etc. In support of his companytention learned companynsel has relied on certain observations made by this Court in Bacha F. Guzdar Commissioner of Income-tax, Bombay 1 at p. 883. , That was a case in which the question that arose for decision was whether dividend declared by a, companypany growing and manufacturing tea was agricultural income within the meaning of s. 2 1 of the Income-tax Act and hence exempt from income-tax under s. 4 3 viii of the said Act. It was held that the dividend of a shareholder was the outcome of his right to participate in the profits of the companypany arising out of the companytractual relation between the companypany and the shareholder, and the observations on which learned companynsel has relied were to the effect 1 1955 1 S.C.R. 876. that the right to participate in the profits exists independently of any declaration by the companypany with the only difference that the enjoyment of profits is postponed until dividends are declared. We do number think that those observations are of any assistance to the appellant in the solution of the question before us, which is really one of companystruction of the instrument of January 19, 1953. A transfer of property may take place number only in the present, but also in future but the property must be in existence. It is clear to us that the instrument of January 19, 1953, was number a transfer of any existing property of the assessee. It was in its true nature a companytract to transfer or make over in future every dividend and sum of money which may be declared or become due and payable on account or in respect of the shares held by the assessee, to his wife during her lifetime the other companyenants are ancillary in nature and subserve this main object of the companytract. The assessee did number assign the shares and, therefore, retained the right to participate in the profits of the companypany he did number part with that right. What the companytract provided for was merely this the beneficiary was given the right to receive from the assessee every dividend and other sum of money which may be declared or become due and payable in respect of the shares. If this is the true companystruction of the document, then it is clear to us that the answer given by the High Court to the question referred to it is companyrect. The High Court rightly pointed out that the Company paying the dividend can pay. it only to the registered shareholder or under his orders see Howrah Trading Co. Ltd. v. Commissioner of Income-tax, Central, Calcutta 1 therefore, s. 16 1 c of the Income-tax Act was number attracted number the third proviso thereto, and the income companytinued to accrue to the assessee but was thereafter paid over to his wife under the terms of the companytract. The income was, therefore, assessable in the hands of the assessee, because it was part of his income though applied subsequently towards payment to the wife under the terms of the companytract. 1 1959 Supp. 2 S.C.R. 448. In this view of the matter, it is number necessary to decide the further question if a companytract of this nature operates only as a companytract to be performed in future which may be specifically enforced as soon as the property companyes into existence or is a companytract which fastens upon the property as soon as the settlor acquires it. In either view, the income from the shares will first accrue to the settlor before the beneficiary can get it. Such income will undoubtedly be assessable in the hands of the settlor despite the companytract. We think that the true position is that if a person has alienated or assigned the source of his income so that it is numberlonger his, he may number be taxed upon the income arising after the assignment of the source, apart from special statutory provisions like s. 16 1 c or s. 16 3 which artificially deem it to be the assignors income. But if the assessee merely applies the income so that it passes through him and goes on to an ultimate purpose, even though he may have entered into a legal obligation to apply it in that way, it remains his income. This is exactly what has happened in the present case. We need only add that the principle laid down by the Privy Council in Bejoy Singh Dudhuria v. Commissioner of Income- tax 3 , does number apply to this case because this is number a case of an allocation of a sum out of revenue before it becomes income in the hands of the assessee. In other words, this is number a case of diversion of income before it accrues but of application of income after it accrues. We have, therefore, companye to the companyclusion that the High Court companyrectly answered the question referred to it.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 223 and 224 of 1960. Appeals from the order dated November 23, 1956, of the Andhra Pradesh High Court, Hyderabad, in Tax Revision Cases Nos. 17 and 18 of 1956. K. Daphtary, Solicitor-General of India and T. V. B. Tatachari, for the appellants. N. Rajagopal Sastri and D. Gupta, for the respondent. 1960. December 14. The Judgment of the Court was delivered by HIDAYATULLAH, J.-These are two appeals on certificates granted by the High Court of Andhra Pradesh against a companymon judgment in a sales tax revision filed by the appellants in the High Court. The facts are as follows In the year 1952-53, for which the assessment of sales tax was in question, the appellants dealt in gunnies, and purchased them from two Mills in Vishakapatnam District and in respect of which they issued delivery orders to third parties, with whom they had entered into separate transactions. The procedure followed by the appellants was this They first entered into companytracts with the Mills agreeing to purchase gunnies at a certain rate for future delivery. Exhibit A-1 is a specimen of such companytracts. The appellants also entered into agreements with the Mills, by which the Mills agreed to deliver the goods to third parties if requested by the appellants. The Mills, however, did number accept the third parties as companytracting parties but only as agents of the appellants. Exhibits A-2 and A-2 a are specimen agreements of this kind. Before the date of delivery, the appellants entered into agreements with third parties, by which they charged something extra from the third parties and handed over to them the delivery orders, which were known as kutcha delivery orders. Exhibits A-3 and A-4 are specimens of the agreement and the delivery orders respectively. The Mills used to deliver the goods against the kutcha delivery orders along with an invoice and a bill, of which Exs. A-6 and A-7 are specimens respectively, and companylected the sales tax from the third parties. The tax authorities, however, treated the transaction between the appellants and third parties as a fresh sale, and sought to levy sales tax on it again, which, the appellants, companytended, was number demandable, as there was numbersecond sale. The appellants failed in their companytentions before the Deputy Commercial Tax Officer, Guntur, and their appeals to the Deputy Commissioner of Commercial Taxes, Guntur and the Andhra Sales Tax Appellate Tribunal, Guntur, were unsuccessful. The appellants then went up in revision to the High Court under the Madras General Sales Tax Act, 1939 as amended by Madras Act No. 6 of 1951 , but were again unsuccessful. The High Court, however, granted certificates, on which these appeals have been filed. The companytentions of the appellants are that the agreement and the delivery of the kutcha delivery order did number amount to a sale of goods, but was only an assignment of a right to obtain delivery of the gunnies, which were number in existence at the time of the transaction with third parties, and were number appropriated to the companytract, or, in the alternative, that this was only an assignment of a forward companytract. They seem to have relied in the High Court upon the deci- sions of this Court reported in The Sales Tax Officer, Pilibhit v. Messrs. Budh Prakash Jai Prakash 1 and Poppatlal Shah v. The State of Madras 2 to show that these transactions were number sales. These cases were number relied upon by the appellants before us, presumably because the High Court has adequately shown their inapplicability to the facts here. The learned Solicitor-General appearing for the appellants rested his case entirely upon the first companytention, namely, that there was only an assignment of a right to obtain delivery of the gunnies and number a sale. He companytended that there was only one transaction of sale between the Mills and the third parties, who, on the strength of the assignment of the right to take delivery, had received the goods from the Mills. in our opinion, this does number represent the true nature of the transactions, either in fact, or in law. To begin with, the Mills had made clear in their agreements that they were number recognising the third parties as companytracting parties having privity with 1 1955 1 S.C.R. 243. 2 1953 S.C.R. 677. them, and that delivery would be given against the kutcha delivery orders to the third parties as agents of the appellants. The Mills, therefore, recognised only the appellants as companytracting parties, and there was thus a sale to the appellants from the Mills, on which ,sales tax was companyrectly demanded and was paid. In so far as the third parties were companycerned, they had purchased the goods by payment of an extra price, and the transaction must, in law and in fact, be companysidered a fresh transaction of sale between the appellants and the third parties. A delivery order is a document of title to goods vide s. 2 4 of the Sale of Goods Act , and the possessor of such a document has the right number only to receive the goods but also to transfer it to another by endorsement or delivery. At the moment of delivery by the Mills to the third parties, there were, in effect, two deliveries, one by the Mills to the Appellants, represented, in so far as the Mills were companycerned, by the appellants agents, the third parties, and the other, by the appellants to the third parties as buyers from the appellants. These two deliveries might synchronise in point of time, but were separate, in point of fact and in the eye of law. If a dispute arose as to the goods delivered under the kutcha delivery order to the third parties against the Mills, action companyld lie at the instance of the appellants. The third parties companyld proceed on breach of companytract only against the appellants and number against the Mills. In our opinion, there being two separate transactions of sale, tax was payable at both the points, as has been companyrectly pointed out by the tax authorities and the High Court. The appellants relied upon a decision of the Andhra Pradesh High Court in The State of Andhra v. Kolla Sreeramamurty 3 , but there, the facts were different, and the Division Bench itself in dealing with the case, distinguished the judgment under appeal, observing that there was numberscope for the application of the principles laid down in the judgment under appeal, because in the cited case, the property in the goods did number pass from the mills to the assessee and Second Appeals Nos. 194 195 of 1954 decided on June 27, 1957. there was numberagreement of sale of goods to be obtained in future between the assessee and the third party. In the result, the appeals tail, and are dismissed with companyts.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeals Nos. 57 and 58 of 1960. Appeals by special leave from the judgment and order dated November 5/6, 1958, of the Bombay High Court at Nagpur in Criminal Appeal No. 94 of 1958. Jai Gopal Sethi and G. C. Mathur, for the appellant in Cr. No. 57 of 1960 . GC. Mathur, for the appellant in Cr. A. No. 58 of 1960 . Gopal Singh and D. Gupta, for the respondent. 1960. December 5. The Judgment of the Court was delivered by SUBBA RAO, J.-These two appeals raise rather an important question on the interpretation of the provisions of s. 207A of the Criminal Procedure Code hereinafter referred to as the Code . The facts that have given rise to these appeals may be briefly stated. The appeals arise out of an incident that took place on November 29, 1957, when one Sadashiv was murdered in the companyrtyard of his house in village Nimgaon. The case of the prosecution was that the four appellants, armed with sticks, went to the house of the deceased, dragged him out of the house and beat him with sticks in the companyrtyard and that as a result of the beating he died on the next day at about 5 p.m. at Bhandara Hospital. After investigation, the police submitted their report to the Magistrate unders. 173 of the Code along with the relevant documents. After forwarding the report, the officer in charge of the police station furnished the appellants with a companyy of the report forwarded under sub-s. 1 of s. 173, the First Information Report recorded under s. 154 and all other documents or relevant extracts thereof on which the prosecution proposed to rely, including the statements recorded under sub-S. 3 of S. 161 and also intimated them of the persons the prosecution proposed to. examine as its witnesses. The Magistrate posted the case for inquiry on February 10, 1958 and on that date the prosecution intimated that it did number intend to examine any witnesses in the Magistrates Court., , On behalf of the appellants numberobjection was raised, to,that companyrse. But the Magistrate adjourned the inquiry to February 12, 1958, as he wanted to companysider whether any evidence was necessary to be recorded before companymitment. On February 12, 1958, reexpressed his opinion that numberwitness need. be examined at that stage thereafter, he framed charges against accused appellants under s. 302, read with s. 34, of the Indian Penal Code, and also under s. 448 thereof and companymitted the appellants to the Sessions Court. Before the learned Sessions Judge the prosecution led four types of evidence, i.e. 1 eye-witnesses, namely, P.Ws. 6, 11, 20 and 25 2 dying declaration, Ex. P-15, supported by Ws. 18,22 and 19 3 -the identification of the appellants in jail by P.Ws. 20 and 25 and 4 recovery of various articles at, the instance of the accused-appellants. The defence examined four witnesses. On a companysideration of the entire evidence, the learned Sessions Judge held that,the prosecution, case had been amply borne out and that the four appellants entered into the house of the deceased and beat him in the manner described by the prosecution wit- nesses. As. numberless than 12 companyfused wounds were inflicted on the deceased, which resulted in the fracture of his ribs and injury to the lung,. and as the, doctor opined that the death was due to shock and haemorrhage resulting from said fracture, the learned Sessions Judge hold that the accused appellants were guilty of murder and companyvicted them under s.302, read with a. 34, Indian Penal Code,and he further companyvicted them, under s. 448 of the Indian Penal Code for trespassing into the house of the deceased. On these findings the learned Sessions Judge sentenced the appellants to undergo imprisonment for life on the first companynt and for 3 months rigorous imprisonment on the second companynt. The appellants preferred an appeal against their companyvictions and sentences to the High Court of Bombay at Nagpur. The learned Judges of the High Court, on a resurvey of the entire evidence, agreeing with the learned Sessions Judge, accepted the prosecution case, but they held that the appellants were guilty only under s. 304, Part 1, read with s. 34, Indian Penal Code, and in the result they reduced the sentence from life imprisonment to 10 years rigorous imprisonment in regard to appellant 1 and to 7 years rigorous imprisonment in regard to appellants 2 to 4. Against the said companyvictions and sentences, the appellants have preferred, by special leave, appeals to this Court. Criminal Appeal No. 57 of 1960 has been preferred by the first appellant and Criminal Appeal No. 58 of 1960 by appel- lants 2 to 4. Learned companynsel for the appellants raised before us the following two points 1 The Sessions Court and, on appeal, the High Court have number properly appreciated the evidence and the circumstances of the case in holding that the appellants had companymitted the offences. 2 The trial and companyviction of the appellants by the Sessions Court were null and void, as the Magistrate had numberjurisdiction to companymit the appellants to Sessions without examining witnesses under sub-s. 4 of s. 207A of the Code and that, as the order of companymittal was without jurisdiction, the defect was number cured either under s. 532 or s. 537 of the Code. The first question does number merit any companysideration. Both the companyrts below have, carefully companysidered the evidence adduced by the prosecution as well as the accused-appellants and have accepted the prosecution case. It is a well established practice of this Court number to interfere on questions of fact, particularly when they are companycurrent findings, except under exceptional circumstances. We find, numbersuch exceptional circumstances in this case. We, therefore, reject the first companytention. The second companytention turns upon the interpretation of the relevant provisions of S. 207A of the Code. Before attempting to companystrue the relevant provisions of the section it would be helpful to numberice briefly the history of the said section. Under the Criminal Procedure Code, as it originally stood, in the matter of companymittal proceedings there was numberdistinction between the proceeding instituated on a police report and that instituted otherwise than on police report. The main object of the companymittal proceedings was to hold an inquiry to ascertain and record the case which was to be tried before the Court of Sessions. It was primarily to give an opportunity to an accused to know in advance the particulars of evidence that would be adduced against him in the Court of Sessions so that he companyld be in a position to prepare his defence. Another object, which was numberless important, was to enable the Magistrate to discharge an accused if there was numberprima facie case against him. This procedure prevented unnecessary harassment to such accused and at the same time saved the valuable time of the Sessions Court. In practice the companymittal proceeding, whether intended by the Legislature or number, served another purpose, namely, it gave an opportunity to the accused to test the credibility of witnesses by bringing out the discrepancies between their evidence in the companymitting companyrt, the statements made by them to the police under s. 161 of the Code and the evidence given by them in the Court of Sessions. Though very often accused persons took full advantage of this additional opportunity to test the veracity of the witnesses, as often as number, it had turned out to be duplication of trials with the resultants long delays in the disposal of criminal cases. The advantage of companymittal proceeding. was number solely for the accused, for the. prosecution by examining the witnesses before the companymitting Magistrate secured their testimony in the sense that though it was tampered subsequenty--it is unfortunately a frequent phenomenon in criminal, cases-it companyld use the said evidence as substantive one under s. 288 of the Code. The Legislature, in its wisdom, presumably thought that undue delay in the disposal of sessions cases was due to the elaborate and prolonged companymittal proceedings and stepped in to amend the Code in that respect. The whole of s. 207A has been inserted by Act XXVI of 1955. While the section simplified the procedure in regard to companymitment proceedings instituted on a police report, it companyfined the existing procedure to proceedings initiated otherwise than on a police report. This distinc- tion between the two classes of cases had a reasonable factual basis. In the case of a police report, a thorough inquiry would have been made and the investigating officer would have sent a report to the Magistrate under s. 173 of the Code. The amended s. 173 of the Code also enjoins on the officer in charge of the police station a duty to furnish before trial, free of companyt, to the accused companyies of the report forwarded under that section to the Magistrate, the First Information Report recorded under s. 154 and all other documents or relevant extracts thereof on which the prosecution proposes to rely, including the statements, if any, recorded under s. 164 of the Code and those recorded under sub-s. 3 of s. 161 and a list of witnesses whom the prosecution proposes to examine as its witnesses. The Magistrate in a proceeding instituted on police report would ordinarily be in a position, on the said material to understand the case of the prosecution and know the nature of the evidence that would be adduced on the basis of which the accused is sought to be proceeded against. The accused also would have an opportunity to know beforehand the case he would have to meet and the evidence that would be adduced against him. But in a proceeding instituted otherwise than on a police report, numbersuch maternal would be available and therefore the old procedure companytinued to apply to such a case. With this background let us look at the provisions of s. 207A of the Code. The relevant provisions of s. 207A of the Code may number be read Section 207A 1 When, in any proceeding instituted on a police report, the Magistrate receives the report forwarded under section 173, he shall, for the purpose of holding an inquiry under this section, fix a date which shall be a date number later than fourteen days from the date of the receipt of the report, unless the Magistrate, for reasons to be recorded, fixes any later date. If, at any time before such date, the officer companyducting the prosecution applies to the Magistrate to issue a process to companypel the attendance of any witness or the production of any document or thing, the Magistrate shall issue such process unless, for reasons to be recorded, he deems it unnecessary to do so. At the companymencement of the inquiry, the Magistrate shall, when the accused appears or is brought before him, satisfy himself that the documents referred to in section 173 have been furnished to the accused and if he finds that the accused has number been furnished with such documents or any of them, he shall cause the same to be so furnished. The Magistrate shall then proceed to take the evidence of such persons, if any, as may be produced by the prosecution as witnesses to the actual companymission of the offence alleged, and if the Magistrate is. of opinion that it is necessary in the interests of justice to take the evidence of any one or more of the other witnesses for the prosecution, he may take such evidence also. The accused shall be at liberty to cross-examine the witnesses examined under sub-section 4 , and in such case, the prosecutor may re-examine them. When the evidence referred to in sub-section 4 has been taken and the Magistrate has companysidered all the documents referred to in section 173 and has, if necessary, examined the accused for the purpose of enabling him to explain any circumstances appearing in the evidence against him and given the prosecution and the accused an opportunity of being heard, such Magistrate shall, if he is of opinion that such evidence and documents disclose numbergrounds for companymitting the accused person for trial, record his reasons ,and discharge him, unless it appears to the Magistrate that such person should be tried before himself or some other Magistrate, in which case he shall proceed, accordingly. When, upon such evidence being taken, such documents being companysidered, such examination if any being made and the prosecution and the accused being given an opportunity of being heard, the Magistrate is of opinion that the accused should be companymitted for trial, he shall frame a charge under his hand, declaring with what offence the accused is charged. On the interpretation, of sub-s. 4 , which is the main sub- section under scrutiny in the present case, the High Courts in India have expressed companyflicting views. It would number be necessary to companysider the said decisions in detail, but it would be enough if we state the companyflicting views, which areas follow 1 Under sub-s. 4 the prosecution is bound to examine all the eye-witnesses indicated in the police report, and the discretion of- the Magistrate to examine witnesses under the second part of the said sub-section is only in respect of witnesses other than the eye-wit-nesses vide M. Pavalappa v. State of Mysore 1 , State v. Andi Betankar 2 , Ghisa v. State 3 and Chandu Satyanarayana The State 4 . 2 The Magistrates power to examine eye- witnesses under the first part of sub-s. 4 is companyfined only to such witnesses as are produced in companyrt by the officer companyducting the prosecution and if he has number produced any such witnesses, the Magistrate cannot examine any eye-witnesses under the second part of the said sub- section, for, according to this view, the second part deals with only witnesses other than eye-,witnesses. 3 If the prosecution has number produced any eye-witnesses the companyrt may number in its discretion examine any witness under the second part, but can, if satisfied, discharge or companymit the accused to sessions on the basis of the documents referred to in s. 178 of the Code vide State v. Lakshmi Narain 5 , State, of P. v. Satyavir 6 . 4 The first part companyfers a power on a Magistrate only to examine the eyewitnesses produced, but A.I.R. 1957 Mysore 61. A.I.R. 1919 Raj. 294. A.I.R. 1960 All. 237. A.I.R. 1958 Orissa 241. A.I.R. 1959 A.P.651. A.I.R. 1959 All. 408. the second part empowers him to examine any witness other than those produced, whether eyewitnesses or number, and in a case where the prosecution failed to discharge its duty to produce any witnesses or any important eye-witnesses, the companyrt would number be exercising its judicial discretion if it companymits the accused to sessions on the basis of documents referred to under s. 173 of the Code without examining at least the important witnesses vide State v. Yasin 1 , In re Pedda Amma Muttigadu 2 , A. Ishaque v. The State 3 and Manik Chand v. The State 4 . We have gone through the judgments of the High Courts cited at the Bar and derived companysiderable assistance from them for deciding the question raised. But as the question is to be primarily decided on the interpretation of the relevant provisions, we think, without any disrespect to the learned Judges, that it is number necessary to companysider the said decisions in detail. Now let us look at the relevant provisions of s. 207A of the Code to ascertain its intendment. Sub-s. 4 is the most important section vis-a-vis the taking of evidence. It is in two parts, the first part provides for the examination of witnesses produced by the prosecution and the second part for the examination of other witnesses. One of the fundamental rules of interpretation is that if the words of a statute are in themselves precise and unambiguous numbermore is necessary than, to expound those words in their natural and ordinary sense, the words themselves in such case best declaring the intention of the legislature. The first part of the sub-section reads The. Magistrate shall then proceed to take the evidence of such persons, if any, as may be produced by the prosecution as witnesses to the actual companymission of the offence alleged. The word shall imposes a peremptory duty on the Magistrate to take the evidence but the nature of the said evidence is clearly defined thereafter. The clause as may be produced by the prosecution as witnesses to the actual companymission of the offence alleged governs the words such persons A.I.R. 1958 All. 861. A.I.R. 1958 Cal. 341. A.I.R. 1959 A.P. 469. A.I.R. 1958 Cal. 324. with the result that the duty of the Magistrate to take evidence is only companyfined to the witnesses produced by the prosecution. Learned companynsel for the appellants companytends that it companyld number have been the intention of the Legislature to permit the prosecution to keep back the eye-witnesses in the companymittal companyrt and therefore the word produced should be read as cited. To accept this interpretation is to substitute the word cited in place of the word produced such a companystruction is number permissible, especially, when the plain meaning of the word used by the Legislature is clear and unambiguous, and the acceptance of that meaning does number make the section otiose. The phrase if any between the words such persons and the aforesaid clause emphasizes that the prosecution may number produce any such persons, in which case the obligation to examine such witnesses cannot arise. The wording of the second part of the sub-section is also without any ambiguity and it reads and if the Magistrate is of opinion that it is necessary in the interests of justice to take the evidence of any one or more of the other witnesses for the prosecution, he may take such evidence also. No doubt the word may in the clause he may take evidence imposes duty upon the Magistrate to take other evidence but that duty can arise only if he is of opinion that it is necessary in the interests of justice to take the evidence. The fulfilment of the companydition that gives rise to the duty is left to the discretion of the Magistrate. The duty to take evidence arises only if he is of the requisite opinion. Doubtless the discretion being a judicial one, it should be exercised reasonably by the Magistrate. If he exercises it perversely, it may be liable to be set aside by a superior companyrt. If so, what do the words other. witnesses mean? Do they mean witnesses other than eyewitnesses or witnesses, eye-witnesses or number, other than those produced before the Magistrate, by the prosecution? The witnesses who will depose to the prosecution case may be of different categories, namely, i witnesses who are eye-witnesses to the actual companymission of the offence alleged ii witnesses who speak to the facts which afford a motive for the companymission of the offence witnesses who speak to the investigation and to the facts unfurled by the investigation and iv witnesses who speak to the circumstances and facts probablizing the companymission of the offence, which is technically described as substantive evidence. Sub-section 4 enjoins on the Magistrate a duty to examine the first category of witnesses produced by the prosecution. The word actual qualifying the word companymission emphasises the fact that the said witnesses should be those who have seen the companymission of the offence. We have held in interpreting the first part that the Magistrate should examine only such witnesses who are produced before him by the prosecution but there may number be eyewitnesses in a case, or, if there are, the prosecution may number have produced all of them before the Magistrate. The second part of the sub-section therefore companyfers a discretionary power on the Magistrate to examine any one or more of witnesses of all categories, including the eye-witnesses who have number been produced by the prosecution within the meaning of the first part of the said sub-section. But it is said that sub-ss. 6 and 7 indicate that taking of evidence by the Magistrate is a companydition precedent for making an order of discharge or of companymittal and, therefore, the provisions of Sub-s. 4 must be so companystrued as to impose a duty on the Magistrate to examine some witnesses. Firstly, we cannot hold that the sub-sections impose any such companydition. The argument is that the clause in subs. 6 , namely, When the evidence referred to in subsection 4 has been taken is a companydition precedent for making an order of discharge. The adverb when in the clause in the companytext denotes a point of time and number a companydition precedent. The clause means numberhing more than that an order of discharge can be made under sub- s. 6 after the events mentioned therein have taken place. Secondly, the two clauses necessarily refer to the companyresponding or appropriate situations under the earlier sub-sections. The first clause will number companye into play if the Magistrate has number taken any evidence. So too, in sub- s. 7 also the adverb when denotes the time when the Magistrate can make the order of companymittal. If evidence has, number been taken, that sub-section is number applicable a the Magistrate proceeds to make an order of companymittal on other material referred to in the sub-section. On the other hand, if the said two sub-sections are companystrued as imposing a companydition precedent for making an order of discharge or companymitment, as the case may be, the said two sub-sections will directly, companye into companyflict with the provisions of sub-s. 4 . When one. sub- section clearly companyfers a discretion on the Magistrate to take or number to take evidence, the other subsections take it away. It is number permissible to create companyflict by companystruction, when by an alternative companystruction all the three sub-sections can be harmonized and reconciled. If the companystruction suggested by learned companynsel for the appellants be adopted, it would also lead to an anomaly in that the Magistrate, though the documents referred to in s. 173 clearly pronounce the innocence of the accused, has to go through the pretence of examining one or more witnesses to satisfy the provisions of the sub-section. Reliance is placed upon s. 251A of the Code relating to warrant cases whereunder the Magistrate is authorized, upon companysideration of all the documents referred to in s. 173 and upon making such examination of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, to discharge the accused, if he companysiders the charge against the accused to be groundless but if he is of opinion that there is ground that the accused has companymitted an offence alleged against him, he shall frame in writing a charge against the accused. By companytrasting this provision with s. 207A, it is companytended that if the companystruction put forward by learned companynsel is number accepted, the obvious difference between the two. procedures indicated by the Legislature would be obliterated. We cannot agree with this companytention. The difference between the two procedures is that, in a case companyered by s. 207A, evidence will have to be taken under certain companytingencies, whereas under s. 251A numberevidence need be taken at all. That distinguishes the different procedures under the two sections and it is number the province of the companyrt to add any further companyditions or limitations to those provided by the Legislature. We are fortified in our view by a decision of this Court in Macherla Hanumantha Rao v. The State of Andhra Pradesh 1 . There the point in companytroversy was whether sa. 207 and 207A, inserted in the Code by the Amending Act XXVI of 1955, violated the provisions of Art. 14 of the Constitution. In support of the companytention that they violated Art. 14 of the Constitution, it was sought to be made out that the provisions of s. 207A of the Code, in companyparison and companytrast with other provisions of Ch. XVIII of the Code, prescribed a less advantageous position for the accused persons in a proceeding started under a police report than the procedure prescribed in other cases in the succeeding provisions of that chapter. This Court held that there was a reasonable classification to support the difference in the procedures. Sinha J., as he then was, who spoke for the Court, in order to meet the argument based on discri- mination, companysidered the scope of the new section. In doing so, the learned Judge observed thus at p. 403 The magistrate then has to record the evidence of such witnesses as figure as eye-witnesses to the occurrence, and are produced before him. He has also the power in the interest of justice, to record such other evidence of the prosecution as he may think necessary, but he is number obliged to record any evidence. Without recording any evidence but after companysidering all the documents referred to in s. 1973 and after examining the accused person and after hearing the parties, it is open to the magistrate to discharge the accused person after recording his reasons that numberground for companymitting the accused 1 for trial has been made out, unless he decides to try the accused himself or to send him for trial by another magistrate. If, on the other hand, he finds that the accused should be companymitted for trial, he is required to frame a charge 1 1958 S.C.R. 396. disclosing the offence with which the accused is charged. Then the learned Judge proceeded to companysider the scope of s. 208 of the Code. After having found that there was obvious difference in the procedure, the learned Judge came to the companyclusion that the Legislature has provided for a clear classification between the two kinds of proceedings at the companymitment stage based upon a very relevant companysideration, namely, whether or number there has been a previous inquiry by a responsible public servant whose duty it is to discover crime and to bring criminals to speedy justice. It will thus be seen that the observations of the learned Judge at p. 403 cannot be said to be obiter, as learned companynsel asks us to hold, for the companystruction of the provisions of s. 207A was necessary to ascertain whether there was reasonable classification or number. Assuming that the said observations are obiter, even then, they record the companysidered opinion of five learned Judges of this Court. The view we have expressed also is companysistent with the said observations. Our view companyld number be expressed in the following propositions 1 In a proceeding instituted on a police report, the Magistrate is bound to take evidence of only such eye-witnesses as are actually produced by the prosecution in companyrt. 2 The Magistrate, if he is of opinion that it is in the interest of justice to take evidence, whether of eye-witnesses or others, he has a duty to do so. 3 If the Magistrate is number of that opinion and if the prosecution has number examined any eye-witnesses, he has jurisdiction to discharge or companymit the accused to sessions on the basis of the documents referred to in s, 173 of the Code. 4 The discretion of the Magistrate under sub- s. 4 is a judicial discretion and, therefore, in appropriate cases the order of discharge or companymittal, as the case may be, is liable to be set aside by a superior companyrt. Before closing we would like to make some observations. Rarely we companye across cases where the prosecution does number examine important eye-witnesses, for such a procedure would entail the danger of the said witnesses being tampered with by the accused, with the result that there will number be any evidence taken by the companymitting Magistrate which companyld be used as substantive evidence under s. 288 of the Code. Even if the prosecution takes that risk, the Magistrate shall exercise a sound judicial discretion under the second part of sub-s. 4 of s. 207A in forming the opinion whether witnesses should be examined or number, and any perverse exercise of that discretion can always be rectified by a superior companyrt. Rut there may be a case where the Magistrate can make up his mind definitely on the documents referred to in S. 173 without the aid of any oral evidence and in that event he would be within his rights to discharge or companymit the accused, as the case may be. In this view, it is number necessary to express our opinion whether even if the Magistrate acted illegally in companymitting an accused without taking any evidence, the said illegality is cured either by s. 537 of the Code or any other section thereof.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 290 to 292 of 1959. Appeals by special leave from the judgment and order dated December 6, 1957, of the Kerala High Court in Agricultural Income-tax Referred Cases Nos. 15, 18 and 19 of 1955. K. Daphtary, Solicitor-General of India, Thomas Vellapally and M. R. K. Pillai, for the appellants in all the appeals Sardar Bahadur, for the respondents. 1960. December 15. The Judgment of the Court was delivered by KAPUR, J.-These three appeals are brought by special leave against the judgment and order of the High Court of Kerala and arise out of a companymon judgment of that companyrt given in three Agricultural Income-tax References Nos. 15, 18 and 19 of 1955. In the first reference the question raised was Whether under the Travancore-Cochin Agricul- tural Income Tax Act, 1950 in calculating the assessable agricultural income of a rubber estate already planted and companytaining both mature yielding rubber trees and also immature rubber plants which have number companye into bearing, the annual expenses incurred for the upkeep and maintenance of such rubber plants, are number a permissible deduction, and if so, whether the sum of Rs. 42,660-4-1 expended by the assessee in the relevant accounting year 1952, under this head may be deducted. and in the other two the question referred was Whether the expenses incurred for the mainte- nance and upkeep of immature rubber trees companystitute a permissible deduction within the meaning of s. 5 j of Act XXII of 1950? In all the references the questions were answered in the negative and against the appellant. The appeals relate to three accounting years 1950, 1951 and 1952 assessment years 1951-52, 1952-53 and 1953-54 . The appellants have rubber plantations and in the accounting year 1950, companyresponding to the assessment year 1951-52, the appellants had under cultivation 3558-84 acres out of which 334-64 acres had immature rubber trees growing and the rest i.e. 3224-20 acres mature rubber yielding trees under cultivation. In that year a sum of Rs. 19,056-0-9, which was expended for the upkeep and maintenance of immature portion of the rubber plantation, was allowed by the Agricultural Income tax Tribunal and at the instance of the respondent a reference was made to the High Court under s. 60 1 of the Agricultural Income tax Act Act XXII of 1950 hereinafter termed the Act and that was reference No. 18 of 1955. During the accounting year 1951 companyresponding to the assessment year 1952-53 the appellant had under cultivation. a total area of 3426,55 acres of which 3091.91acres were mature rubber yielding trees and 334.64 acres had immature rubber trees. In that year a sum of Rs. 59,271.9-5 was the expenditure incurred for the upkeep and maintenance of immature portion of the rubber estate. That sum was allowed by the Agricultural Income-tax Tribunal and at the instance of the respondent a reference was made under s. 60 1 of the Act to the High Court and that was reference No. 19 of 1955. In Agricultural Income-tax Reference No. 15 of 1955 which related to, accounting year 1952 and the assessment year 1953-54, the area under cultivation was 3453,65 out of which 2967,91 acres had mature rubber yielding trees and 485,74 acres had immature rubber growing trees. In that year the amount expended on the maintenance and tending of the imma- ture rubber trees was Rs. 42,660,4-1. In that case, however, the Agricultural Income tax Tribunal rejected the appellants claim and disallowed the expenditure. At the instance of the appellant a case was stated to the High Court under s. 60 1 of the Act and was answered in the negative and against the appellant. In all the cases the assessee companypany is the appellant and the main question for decision is whether the amount expended for the upkeep and maintenance of the immature, rubber trees is a permissible deduction under s. 5 j of the Act. The charging section under the Act is s. 3 and s. 5 relates to companyputation of agricultural income. It provides- S.5 The agricultural income of a person shall be companyputed after making the following deductions, namely- expenditure number being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of deriving the agricultural income. In regard to this income the High Court held We find it impossible to say that the amounts spent on the upkeep and maintenance of the immature rubber plants were laid out or expended for the purpose of deriving the agricultural income, much less that they were laid out or expended wholly and exclusively for that purpose. The agricultural income, in the companytext, can only mean the agricultural income obtained in the accounting year companycerned and number the agricultural income of any other period. In our opinion the High Court has taken an erroneous view of the relevant provision. It is number denied that the expenditure claimed as a deduction was wholly and exclusively laid out for the purpose of deriving income but the use of the definite article the before agricultural income has given rise to the interpretation that the deduction is to be from the income of the year in which the trees on which the amount claimed was expended bore any income. In a somewhat similar case Vallambrosa Rubber Co. Ltd. v. Farmer 1 the expenditure of the kind number claimed was allowed under the companyresponding provision of the English Income-tax Act. In that case a rubber companypany had an estate in which in the year of assessment only 1/7 produced rubber and the other 6/7 was in process of cultivation for the production of rubber. It may be added that rubber trees do number yield any rubber until they are about six years old. The expenditure for the superintendence, weeding etc. incurred by the companypany in respect of the whole estate including the numberbearing rubber estate was allowed on the ground that in arriving at the assessable profits the assessee was entitled to deduct the expenditure for superintendence, weeding etc. on the whole estate and number only on the 1/7 of such expenditure. Lord President said at page 534 Well that is for the case quite companyrect, but it must be taken, as you must always take a Judges dicta, secundum materiam subjectum of the case that is decided. But to say that the expression of Lord Eshers lays down that you must take each year absolutely by itself and allow numberexpense except the expense which can be put against the profit which is reaped for the year is in my judgment to press it much further than it will go. Counsel for the respondent relied upon a judgment of this Court in Assam Bengal Cement Co. Ltd. v. The Commissioner of Income-tax, West Bengal 2 and particularly on a passage at page 983 where Bhagwati J. observed The distinction was thus made between the acquisition of an income-earning asset and the process of the earning of the income. Expenditure in the acquisition of that asset was capital expenditure and expenditure in the process of the earning of the profits was revenue expenditure. But that case has numberrelevancy to the facts of the present case number has that passage any applicability to the facts of the present case. The question there was 1 1910 5 T.C. 529. 2 1955 1 S.C.R. 972. whether certain payments made were by way of capital expenditure or revenue expenditure. The assessee acquired a lease from Government for twenty years and in addition to paying the rent and royalties for the lease the assessee had to pay two further sums as protection fees under the terms of the lease. Those sums were held to be capital expenditure inasmuch as they were incurred for the acquisition of an asset or an advantage of enduring nature and were numberpart of the working or operational expenses for carrying on the business of the assessee. In our opinion the amount expended on the superintendence, weeding etc. of the whole estate should have been allowed against the profits earned and it is numberanswer to the claim for a deduction that part of those expenses produced numberreturn in that year because all the trees were number yielding rubber in that year. We therefore allow these appeals, set aside the judgments and orders of the High Court and answer the questions in favour of the appellant in all the three agricultural Income-tax References. The appellant will have its companyts in this Court and the High Court.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 693 of 1957. Appeal from the judgment and Order dated the 25th May, 1956 of the Punjab High Court in F.A.C. No. 89/D of 55. C. Chatterjee, S. K. Kapur, N. H. Hingorani and Ganpat Rai, for the appellants. J. Umrigar and T. M. Sen, for the respondent. 1960. January 20. The Judgment of the Court was delivered by SHAH J.-On May 3, 1937, M s. Alopi Parshad and Sons Ltd., who will herinafter be referred to as the Agents, were, under an agreement in writing, appointed by the Governor-General for India in Council, as from October 1, 1937, agents for purchasing ghee required for the use of the Army personnel. The Government of India, by cl. 12 of the agreement, undertook to pay to the Agents the actual expenses incurred for purchasing ghee, companyt of empty tins, expenses incurred on clearance of Government tins from the railway, export land-customs duty levied on ghee purchased and exported from markets situated in Indian States, octroi duty, terminal tax or other local rates on ghee, and certain other charges incurred by the Agents. The Government also agreed to pay to the Agents at rates specified in the agreement 1 the financing and overhead mandi charges incurred in the buying markets. 2 the companyt of establishments and companytingencies provided by the Agents on the Governments account for carrying out the purchase and supply of ghee, and 3 the buying remuneration. In companysideration of the Government paying to the Agents a sum of rupee one and anna one only per one hundred pounds nett weight of finally accepted ghee, as companybined financing and overhead mandi charges, the Agents by cl. 13 undertook to provide the working capital and also to bear the companyts, charges and expenses, including financing and overhead charges incurred by them in buying ghee in the market. The Agents also undertook, by cl. 14, to bear the establishment and companytingency charges for the duo performance by them of the terms of the agreement, and the Government agreed to pay in companysideration thereof annas 14 and pies 6 per every hundred pounds of ghee accepted. The Government also agreed to pay to the Agents remuneration for services rendered in purchasing ghee, at the rate of one rupee per one hundred pounds nett weight of accepted ghee. Pursuant to the agreement, the Agents supplied from time to time ghee to the Government of India, as required. In September, 1939, the World War 11 broke out, and there was an enormous increase in the demand by the Government of ghee. On June 20, 1942, the original agreement was, by mutual companysent, revised, and in respect of the establishment and companytingencies, the uniform rate of annas 14 and 6 pies per hundred pounds of accepted ghee, was substituted by a graded scale for the first 5 thousand tons, the Agents were to be paid at the rate of Re. 0-14-6 per hundred pounds, for the next five thousand tons, at the rate of annas 8 per hundred pounds, and at the rate of annas 4 per hundred pounds, for supplies exceeding ten thousand tons. Even ill respect of remuneration for services, a graded scale was substituted for the first five thousand tons, remuneration was to be paid at the rate of Re. 1 per hundred pounds, at the rate of annas 8 per hundred pounds, for the next five thousand, and annas 4 per hundred pounds, for supplies exceeding ten thousand tons. This modification in the rates became effective from September 11, 1940. By their companymunication dated December 6, 1943, the Agents demanded that the remuneration, establishment and companytingencies, and mandi and financing charges, be enhanced. In respect of the buying remuneration, they proposed a 25 per cent increase in respect of establishment and companytingencies, they proposed an increase of 20 per cent., and in respect of mandi and financing charges, an increase of 112 per cent. This revision of the rates was claimed on the plea that the existing rates, fixed in peace time, were entirely superseded by the totally altered companyditions obtaining in war time. To this letter, numberimmediate reply was given by the Government of India, and the Agents companytinued to supply ghee till May, 1945. On May 17, 1945, the Government of India, purporting to exercise their option under cl. 9 of the agreement, served the Agents with a numberice of termination of the agreement. On May 22, 1945, the Chief Director of Purchases, on behalf of the Government of India, replied to the letter dated December 6, 1943, and informed the Agents that numbermally numberclaim for revision of rates companyld be entertained during the currency of the agreement and especially with retrospective effect, but a claim for ex-gratia companypensation to meet any actual loss suffered by an agent, might be entertained, if the Agents established circumstances justifying such a claim. The Chief Director of Purchases called upon the Agents to submit the report -of their auditors on the agency accounts, for the ghee supplied, as also a statement in detail, showing the actual expenditure incurred. The numberice dated May 17, 1945, was waived by mutual companysent, and under an arrangement dated May 16, 1946, the Agents agreed to supply five thousand tons of ghee by October 31, 1946, on which date, the agreement dated May 3, 1937, was to companye to an end. By their letter dated July 1, 1946, the Agents claimed that a dispute had arisen under the companytract, and appointed one Nigam to be arbitrator on their behalf to adjudicate upon the dispute, pursuant to cl. 20 of the terms of the agreement dated May 3, 1937, and. called upon the Government of India to appoint their arbitrator. The Government of India, by their letter dated July 10, 1946, numberinated one Rangi Lal to be arbitrator on their behalf. Before the arbitrators, the Agents made their claim under four heads The Agents claimed that the agreement dated June 20, 1942, was number binding upon them, and they were entitled to Rs. 23,08,372-8-0 being the difference between the buying remuneration, establishment and companytingency charges due under the agreement dated May 3, 1937, and the amount actually received. The details of this claim were set out in Sch. A. In the event of the arbitrators holding the agreement dated June 20, 1942, was binding, a revision of the rates for establishment and companytingencies, and an additional amount of Rs. 6,91,600-4-0 at such revised rates as set out in Sch. B. Revision of the rates fixed under the agreement dated June 20, 1942, of the mandi charges, and an additional amount of Rs. 14,47,204-6-3, at the revised rates as set out in Sch. C. Damages for wrongful termination of the agreement in the month of October, 1946, amounting to Rs. 2,41,235, as set out in Sch. D. The arbitrators did number arrive at any agreed decision, and the dispute was referred to Lala Achru Ram who was numberinated an umpire. The umpire was of the view that the agreement dated June 20, 1942, was valid, and the claim as set out in Sch. A was untenable that the claims set out in Sch. B and Sch. C, did number arise out of the agreement, and he had numberjurisdiction to adjudicate upon the same and that as the claim set out in Sch. D, was outside the scope of the Reference, he was incompetent to give any finding on that claim. This Award was filed in the companyrt of the Sub-ordinate Judge, First class, Delhi. The Agents applied to set aside the Award on the grounds that the umpire was guilty of misconduct in that he failed to give an adequate opportunity to the Agents to present and substantiate their case before him, and that in holding that the claims as described in Schedules B, C and D, either did number arise out of the agreement or were outside the scope of the Reference, the umpire erred. The learned Subordinate Judge held that the umpire was in error in leaving undetermined claims described in Sch. B and Sch. D, which were within the scope of the Reference, and that the claim described in Sch. C was properly left undecided as it was outside the scope of the Reference. He also held that the Award was vitiated on account of judicial misconduct, because the Agents were number allowed by the umpire sufficient opportunity to place their case. The learned Subordinate Judge, in that view, proceeded to set aside the Award, but he declined to supersede the Reference, and left it to the parties to appoint other arbitrators in view of cl. 20 of the agreement, for settling the dispute. Against the order of the Subordinate Judge, the Union of India appealed to the High Court of East Punjab. Khosla, J., who heard the appeal, companyfirmed the order passed by the companyrt of first instance. The learned Judge agreed with the view of the Subordinate Judge that the umpire bad been guilty of judicial misconduct. The learned Judge observed in his judgment that the claim of the Agents, as described in Schedules B and C, was number beyond the arbitration agreement. In so observing, presumably, the learned Judge companymitted some error. The Subordinate Judge had companye to the companyclusion that the claim described in Sch. C, was beyond the arbitration agreement, and numberreasons were given by Khosla, J., for disagreeing with that view. Appeal 31 of 1953 under the Letters Patent, against the judgment of Khosla J., was dismissed by a Division Bench of the High Court of East Punjab, observing that the claim detailed in Sch. B arose out of the companytract, but that it was unnecessary to decide whether the claim described in Sch. C for an increase in the financing and overhead mandi charges, was properly ruled out by the umpire. In the meantime, by letter dated August 9, 1952, the Agents called upon the Government of India to appoint their arbitrator under cl. 20 of the agreement dated May 3, 1937, for a fresh adjudication of the dispute, and intimated that they had again appointed Nigam to be their arbitrator. The Government of India informed the Agents by their letter dated August 14, 1952, that they had filed an appeal against the judgment of the Subordinate Judge, Delhi, and in the circumstances, the question of appointing an arbitrator, did number arise until the final disposal of the appeal. The Government, however, without prejudice to their rights, including the right to prosecute the appeal, again appointed Rangi Lal to be arbitrator on their behalf. After the Appeal under the Letters Patent, was decided by the East Punjab High Court on Decemher 16, 1953, the arbitrators entered upon the reference. On March 1, 1954, the Agents submitted their claim, companytending that the supplementary agreement dated June 20, 1942, was void and number binding upon them, and that, in any event, on the representations made on -December 6, 1943, and from time to time thereafter, they were assured by the Chief Director of Purchases that the claim made by them would be favourably companysidered by the Government of India, and relying on these assurances, they companytinued to supply ghee in quantities demanded by the Government after incurring heavy extra expenditure. They also claimed that they were companystantly demanding an increase in the mandi and financing charges, but the Chief Director of Purchases, who was duly authorized in that behalf by the Government, gave repeated verbal assurances that their demands would be satisfied, and requested them to companytinue supplies for the successful prosecution of the war. Contending that the Government of India was estopped from repudiating their claim set out in Schedules B and C, in view of all the facts and circumstances stated in the petition, the Agents prayed for a declaration that the supplementary agreement dated June 20, 1942, was void and number binding upon them, and for a decree for payment of Rs. 27,48,515 with interest at the rate of 6 per cent. per annum from March 1, 1954, and, in the, alternative, for a decree for Rs. 25,63,037-7-3, with interest at the rate of 6 percent. per annual from March 1, 1954, till recovery. This claim of the Agents was resisted by the Government of India. Inter alia, it was denied that any assurances were given by the Director of Purchases, or that the Agents companytinued to supply thee relying upon such alleged assurances. It was asserted that the Agents companytinued to supply thee without insisting upon any modification of the agreement, because they found, and it must be presumed that they found, it profitable to do so under the terms fixed under the supplementary companytract dated June 20, 1942. The claims made for the additional buying remuneration, for mandi charges and for establishment and companytingency charges, were denied. It was urged that, in any event, the claim for additional buying remuneration and for mandi charges and for reimbursement of establishment and companytingencies, was number companyered by cl. 20 of the agreement, under which the submission to arbitration was made, and the arbitrators had numberjurisdiction to adjudicate upon those claims. On the claim made by the Agents, and the denial thereof, the arbitrators incorporated the points of companytest in the form of certain issues. On May 2, 1954, the arbitrators made an award rejecting the primary claim on the view that the supplementary agreement dated June 20, 1942, was for companysideration and the same was valid and binding upon the Agents. On the alternative claim, they awarded, under the head of establishment and companytingencies, Rs. 80,994-12-6, being the actual loss which, in their view, the Agents had suffered, and Rs. 11,27,965-11-3, in addition to the amounts received by the Agents from the Government for mandi and financing charges. The arbitrators accordingly awarded an amount of Rs. 13,03,676-12-6 with future interest from November 15, 1949, till the V. date of realization, and companyts. The Union of India The award was filed in the companyrt of the Commercial Subordinate Judge, Delhi, on June 2, 1954. The Government of India applied under ss. 30 and 33 of the Indian Arbitration Act, to set aside the award on the grounds that it was invalid, that it had been improperly procured, and that it was vitiated on account of judicial misconduct of the arbitrators. The Commercial Subordinate Judge held that the arbitrators had companymitted an error apparent on the face of the award in ordering the Union to pay to the Agents additional remuneration and financing and overhead charges, but, in his view, specific questions having been expressly referred for adjudication to the arbitrators, the award was binding upon the parties and companyld number be set aside on the ground of an error apparent on the face thereof. The learned Judge, accordingly, rejected the application for setting aside the award. Against the order made by the Subordinate Judge, an appeal was preferred by the Union of India to the High Court of East Punjab at Chandigarh. At the hearing of the appeal, companynsel for the Agents sought to support the award on the plea that certain questions had been specifically referred to the arbitrators, and it was open to the arbitrators to make the award which they made, on the basis of quantum meruit. The High Court held that there was numberspecific reference of any questions of law to the arbitrators, and the decision of the arbitrators was number companyclusive and was open to challenge, because it was vitiated by errors apparent on the face of the award. The High Court reversed the order passed by the Subordinate Judge, and set aside the award of the arbitrators, holding that there was numberlegal basis for awarding any companypensation to the Agents for any loss which they might have sustained. This appeal has been filed with leave of the High Court under el. 133 1 a of the Constitution. The extent of the jurisdiction of the companyrt to set aside an award on the ground of an error in making,,,,,,. the award is well-defined. The award of an arbitrator may be set aside on the ground of an error on the face thereof only when in the award or in any document incorporated with it, as for instance, a numbere appended by the arbitrators, stating the reasons for his decision, there is found some legal proposition which is the basis of the award and which is erroneous-Champsey Bhara and Company v. Jivaraj Balloo Spinning and Weaving Company, Limited 1 . If, however, a specific question is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law does number make the award bad on its face so as to permit of its being set aside-In the matter of an arbitration between King and Duveen and Others 2 and Government of Kelantan v. Duff Development Company Limited 3 . Was the reference made by the parties to the arbitrators a specific reference, that is, a reference inviting the arbitrators to decide certain. questions of law submitted to them? If the reference is of a specific question of law, even if the award is erroneous, the decision being of arbitrators selected by the parties to adjudicate upon those questions, the award will bind the parties. In the reference originally made to the arbitrators by the letter of the Agents on July 1, 1946, and the reply of the Government dated July 10, 1946, a general reference of the dispute was made in terms of el. 20 of the agreement. Even though the award made on that reference, was set aside by the Subordinate Judge, the arbitration was number superseded, and the reference was expressly kept alive, reserving an opportunity to the parties to appoint fresh arbitrators pursuant to the agreement, for settling the dispute and by letters respectively dated August 2, 1952, and August 14, 1952, a general reference was again made to the arbitrators. Paragraph 14 of the letter written by the Agents on August 2, 1952, evidences an intention to serve the numberice under cl. 20 L.R. 5o I.A. 324. 2 L.E. 1913 2 K.B.D. 32. L.R. 1923 A.C395. of the agreement. Issues were undoubtedly raised by the arbitrators, but that was presumably to focus the attention of the parties on the points arising for adjudication. The Agents had made their claim before the arbitrators, and the claim and the jurisdiction of the arbitrators to adjudicate upon the claim, were denied. The arbitrators were by the terms of reference only authorized to adjudicate upon the disputes raised. There is numberfoundation for the view that a specific reference, submitting a question of law for the adjudication of the arbitrators, was made. We agree, therefore, with the view of the High Court that the reference made, was a general reference and number a specific reference on any question of law. The award may, therefore, be set aside if it be demonstrated to be erroneous on the face of it. The original agreement dated May 3,1937, was modified by the supplementary agreement dated June 20, 1942, and the arbitrators have held that the modified agreement was binding upon the Agents. By the agreement as modified, a graded scale was fixed for the establishment and the companytingencies to be paid to the Agents, and also for the mandi charges and overhead expenses. The arbitrators still proceeded to award an additional amount for establishment and companytingencies and an additional amount for mandi charges. By el. 14 a , read with el. 12 b 2 of the agreement, the rate at which establishment and companytingency charges were to be paid, was expressly stipulated, and there is numberdispute that the Government of India have paid to the Agents those charges at the stipulated rate for thee actually purchased. The award of the arbitrators shows that the amount actually received from the Government, totalled Rs. 6,04,700-9-0, whereas, according to the accounts maintained by the Agents, they had spent Rs. 6,77,542-0-3. Granting that the Agents had incurred this additional expenditure under the head establishment and companytingencies, when the companytract expressly stipulated for payment of charges at rates specified therein, we fail to appreciate on what ground the arbitrators companyld ignore the express companyenants between the parties, and award to the Agents amounts which the Union of India had number agreed to pay to the Agents. The award of the arbitrators, awarding additional expenses under the head of establishment and companytingencies, together with interest thereon, is on the face of it erroneous. Before the arbitrators, a number of arhatias who supplied thee to the Agents, appeared and produced extracts from their books, showing the amounts actually due to them from the latter. Detailed charts, showing the total amount due under each head of expenditure to each arhatia, were produced. The arbitrators were satisfied that the statements produced, reflected a general rise in prices and companyt of labour. Taking into companysideration the fact that the other persons were buying thee at rates companysiderably in excess of the stipulated rates, the arbitrators held that the Agents were entitled to be reimbursed to the extent of Rs. 11,27,965-11-3. But the terms of the companytract, stipulating the rate at which the financing and overhead charges were to be paid under el. 13 a read with cl. 12 b , remained binding so long as the companytract was number abandoned or altered by mutual agreement, and the arbitrators had numberauthority to award any amount in excess of the amount expressly stipulated to be paid. Mr. Chatterjee, on behalf of the Agents, submitted that the circumstances existing at the time when the terms of the companytract were settled, were entirely displaced by reason of the companymencement of hostilities in the Second World War, and the terms of the companytract agreed upon in the light of circumstances existing in May, 1937, companyld number, in view of the turn of events which were never in the companytemplation of the parties, remain binding upon the Agents. This argument is untrue in fact and unsupportable in law. The companytract was modified on June 20, 1942, by mutual companysent, and the modification was made nearly three years after the companymencement of the hostilities. The Agents were fully aware of the altered circumstances at the date when the modified schedule for payment of overhead charges, companytingencies and buying remuneration, was agreed upon. Again, a companytract is number frustrated merely because the circumstances in which the companytract was made, are altered. Section 56 of the Indian Contract Act provides A companytract to do an act which, after the companytract is made, becomes impossible, or, by reason of some event which the promiser companyld number prevent, unlawful, becomes void when the act becomes impossible or unlawful. Performance of the companytract had number become impossible or unlawful the companytract was in fact performed by the Agents, and they have received remuneration expressly stipulated to be paid therein. The Indian Contract Act does number enable a party to a companytract to ignore the express companyenants thereof, and to claim payment of companysideration for performance of the companytract at rates different from the stipulated rates, on some vague plea of equity. The parties to an executory companytract are often faced, in the companyrse of carrying it out, with a turn of events which they did number at all anticipate--a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. Yet this does number in itself affect the bargain they have made. If, on the other hand, a companysideration of the terms of the companytract, in the light of the circumstances existing when it was made, shows that they never agreed to be bound in a fundamentally different situa- tion which has number unexpectedly emerged, the companytract ceases to bind at that point-not because the companyrt in its discretion thinks it just and reasonable to qualify the terms of the companytract, but because on its true companystruction it does number apply in that situation. When it is said that in such circumstances the companyrt reaches a companyclusion which is just and reasonable Lord Wright in Constantines case 1 or one which justice demands Lord Sumner in Hirji Mulji v. Cheong Yue Steamship Co. Ltd. 2 this result is arrived at by putting a just companystruction upon the companytract in accordance with an implication from the 1 1942 A.C. 154, 186. 2 1926 A.C. 497, 510 presumed companymon intention of the parties-speech of Lord Simon in British Movietonews Ltd. v. London and District Cinemas Ltd. 1 . There is numbergeneral liberty reserved to the companyrts to absolve a party from liability to perform his part of the companytract, merely because on account of an uncontemplated turn of events, the performance of the companytract may become onerous. That is the law both in India and in England, and there is, in our opinion, numbergeneral rule to which recourse may be had as companytended by Mr. Chatterjee, relying upon which a party may ignore the express companyenants on account of an uncontemplated turn of events since the date of the companytract. Mr. Chatterjee strenuously companytended that in England, a rule has in recent years been evolved which did number attach to companytracts the same sanctity which the earlier decisions had attached, and in support of his companytention, he relied upon the observations made in British Movietonews Ld. London and District Cinemas Ld. 2 . In that case, Denning, L.J., is reported to have observed numbermatter that a companytract is framed in words which taken literally or absolutely, companyer what has happened, nevertheless, if the ensuing turn of events was so companypletely outside the companytemplation of the parties that the companyrt is satisfied that the parties, as reasonable people, cannot have intended that the companytract should apply to the new situation, then the companyrt will read the words of the companytract in a qualified sense it will restrict them to the circumstances companytemplated by the parties it will number apply them to the uncontemplated turn of events, but will do therein what is just and reasonable. But the observations made by Denning, L.J., upon which reliance has been placed, proceeded substantially upon misapprehension of what was decided in Parkinson Co. Ld. Commissioners of Works 3 , on which the learned Lord Justice placed companysiderable reliance. The view taken by him, was negatived in L.R. 1052 A.C. 166 at pp. 185 186. 2 1951 1 K.B.D. 19O, 201, 3 1949 2 K.B. D. 632. appeal to the House of Lords in the British Movietonews case- 1952 A.C. 166-already referred to. In lndia, in the companyified law of companytracts, there is numberhing which justifies the view that a change of circustamences, companypletely outside the companytemplation of parties at the time when the companytract was entered into, will justify a companyrt, while holding the parties bound by the companytract, in departing from the express terms thereof. Parkinson and Co. Ld. v. Commissioners of Works 1 was a case in which on the true interpretation of a companytract, it was held, though it was number so expressly provided, that the profits of a private companytractor, who had entered into a companytract with the Commissioners of Works to make certain building companystructions and such other additional companystructions as may be demanded by the latter, were restricted to a fixed amount only if the additional quantity of work did number substantially exceed in value a specified sum. The Court in that case held that a term must be implied in the companytract that the Commissioners should number be entitled to require work materially in excess of the specified sum. In that case, the Court did number proceed upon any such general principle as was assumed by Denning, L.J., in the British Movietonews Ld. v. London and District Cinemas Ld. 2 . We are, therefore, unable to agree with the companytention of Mr. Chatterjee that the arbitrators, were justified in ignoring the express terms of the companytract prescribing remuneration payable to the Agents, and in proceeding upon the basis of quantum meruit. Relying upon s. 222 of the Indian Contract Act, by which duty to indemnify the agent against the companysequences of all lawful acts done in exercise of the authority companyferred, is imposed upon the employer, the arbitrators companyld number award companypensation to the agents in excess of the expressly stipulated companysideration. The claim made by the Agents was number for indemnity for companysequences of acts lawfully done by them on behalf of the Government of India it was a claim for charges incurred by them in excess of those stipulated. Such a claim was number a claim for 1 1949 2 K.P.D. 632. 2 1951 1 K.B.D. 190, 201. indemnity, but a claim for enhancement of the rate of the agreed companysideration. Assuming that the Agents relied upon assurances alleged to be given by the Director in-charge of Purchases, in the absence of an express companyenant modifying the companytract which governed the relations of the Agents with the Government of India, vague assurances companyld number modify the companytract. Ghee having been supplied by the Agents under the terms of the -contract, the right of the Agents was to receive remuneration under the terms of that companytract. It is difficult to appreciate the argument advanced by Mr. Chatterjee that the Agents were entitled to claim remuneration at rates substantially different from the terms stipulated, on the basis of quantum meruit. Compensation quantum meruit is awarded for work done or services rendered, when the price thereof is number fixed by a companytract. For work done or services rendered pursuant to the terms of a companytract, companypensation quantum meruit cannot be awarded where the companytract provides for the companysideration payable in that behalf Quantum meruit is but reasonable companypensation awarded on implication of a companytract to remunerate, and an express stipulation governing the relations between the parties under a companytract, cannot be displaced by assuming that the stipulation is number reasonable. It is, therefore, unnecessary to companysider the argument advanced by Mr. Chatterjee that a claim for companypensation on the basis of quantum meruit, is one which arises out of the agreement within the meaning of cl. 20. Granting that a claim for companypensation on the basis of quantum meruit, may be adjudicated upon by the arbitrators in a reference made under el. 20 of the agreement, in the circumstances of the case before us, companypensation on that basis companyld number be claimed. The plea that there was a bar of res judicata by reason of the decision in the Letters Patent Appeal No. 31 of 1953, has, in our judgment, numberforce. The Subordinate Judge set aside the award on the ground that there had been judicial misconduct companymitted by the umpire and also on the view that the claims made, as described in Schedules B and D, were number outside the companypetence of the arbitrators. The High Court in appeal under the Letters Patent, did companyfirm the order, setting aside the award but there was numberbinding decision between the parties that the claim described in Sch. B, that is, the claim for establishment and companytingency charges, was within the companypetence of the arbitrators in reference under el. 20.It may be observed that according to the High Court of East Punjab in the Appeal No. 31 of 1953, under the Letters Patent, it was number necessary to express any opinion whether the claim in Sch. C was within the companypetence of the arbitrators, and the claims described in Sch. D does number appear to have been agitated in the second arbitration proceeding. We, accordingly, agree with the view of the High Court that the Award of the arbitrators was liable to be set aside because of an error apparent on the face of the award.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 136 of 1958. Appeal by special leave from the decision dated April 30,1956, of the Labour Appellate Tribunal of India at Lucknow in Appeeal No. III-45 of 1956, lip arising out of the award dated February 6, 1956 of the State Industrial Tribunal, Allahabad, in reference No. 96 of 1955. Ram Lal Anand, I.M. Lal and S. S. Sukla, for the appellants. D. Sharma, for respondents Nos. 1 to 5. P. Lal and G. N. Dikshit, for respondent No. 6. 1960. February 9. The Judgment of the Court was delivered dy SUBBA RAO, J.-This is an appeal by special leave against the order of the Labour Appellate Tribunal of India setting aside the award of the Industrial Tribunal, Allahabad, and directing the reinstatement of the workers in Kundan Sugar Mills at Amroha. Kundan Sugar Mills is a partnership companycern and owns a sugar mill at Amroha. The respondents I to 4 were-employed by the appellant as seasonal masons in the year 1946. In 1951 the partners of the appellant-Mills purchased the building machinery and other equipment of another sugar mill at Kiccha in the district of Nainital. They closed the said mill at Kiccha and started it at Bulandshahr. The new factory was named Pannijee Sugar General Mills, Bulandshahr. On January 19, 1955, the General Manager of the appellant-Mills ordered the transfer of the respondents I to 4 from the appellant-Mills to the new mill at Bulandshahr. The said respondents through their representative, the fifth respondent, protested to the General Manager against the said transfer. But the General Manager, by his letter dated January 22/24, 1955, insisted upon their joining the new mill at Bulandshabr. But the said respondents did number accede to his request. On January 28, 1955, the General Manager served a numberice on the respondents 1 to 4 stating that they had disobeyed his orders and thereby companymitted misconduct under Standing Order No. L a . They were asked to submit their explanation as to why action should number be taken against them under the Standing Order. The Labour Union, by its letter dated January 31, 1955, denied the charges. On February 2, 1955, the General Manager made an order dismissing the respondents 1 to 4 from service on the ground that they had disobeyed his order of transfer and thus they were guilty of misconduct under Standing Order No. LI a . The Labour Union thereafter raised an industrial dispute and the Government of U.P. by its numberification dated November 7, 1955, referred the following issue for decision to the State Industrial Tribunal for U, P. at Allahabad Whether the employers have wrongfully and or unjustifiably terminated the services of Sarva Shri Zia Uddin, Raisuddin, Shafiquddin and Ahmed Bux for refusal to obey the orders of tranfer to M s. Pannijee Sugar and General Mills Co., Bulandshahr. If so, to what relief are the workmen entitled. The State Industrial Tribunal by its order dated February 6, 1956, made its award holding that the management was within its rights and that, as the respondents 1 to 4 had disobeyed the order of the management, they were properly dismissed by the management. The said respondents through their Union, respondent No. 5, perferred an appeal to the Labour Appellate Tribunal of India and the said Appellate Tribunal held that the management had numberright to transfer the respondents 1 to 4 to the new factory and therefore the order dismissing them was illegal. The management has preferred the present appeal against the said order of the Labour Appellate Tribunal. Learned companynsel for the appellant raised before us the following two questions 1 The right to transfer an employee by an employer from one of his companycerns to another is implicit in every companytract of service 2 the State Industrial Tribunal having held that both the companycerns, i.e., the mills at Amroha and the mills at Bulandshahr, formed one unit, the Appellate Tribunal had numberjurisdiction to set aside that finding under s. 7 1 of the Industrial Disputes Appellate Tribunal Act, 1950. To appreciate the first companytention, it is necessary to numberice the undisputed facts in this case. It is true that the partners of the Sugar Mills at Amroha own also the Sugar Mills at Bulandshahr but they were proprietors of the former Mills in 1946 whereas they purchased the latter mills only in the year 1951 and started the same in Bulandshahr in or about 1955. The respondents 1 to 4 were employed by the owners of the appellant-Mills at the Sugar Mills at Amroha at a time when they were number proprietors of the Sugar Mills at Bulandshahr. It is companyceded that it was number an express term of the companytract of service between the appellant and the respondents I to 4 that the latter should serve in any future companycerns which the appellant might acquire or start. It is also in evidence that though the same persons owned both the Mills they were two different companycerns. In the words of the Appellate Tribunal, the only companynection between the two is in th identity of ownership and, but for it, one has numberhing to do with the other. It is also in evidence that an imported workman at Amroha is entitled to house- rent, fuel, light and travelling expenses both ways, while at Bulandshahr the workmen are number entitled to any of these amenities. The workmen at Amroha are entitled to benefits under the Kaul Award while those at Bulandshahr are number so entitled. The General Manager, E.W.1, in his evidence stated that the interim bonus of the Bulandshahr factory as ordered by the Government in November 1955 was Rs. 1 1,000 while for Amroha it was nearly 1-1/2 lacs . He also stated that the bonus for last year at Amroha would be probably equal to II months wages and at Bulandshahr equal to about 4 or 5 days wages. It is also in evidence that apart from the disparity in the payment of bonus, the accounts are separately made up for the two mills. It is clear that the two mills are situated at different places with accounts separately maintained and governed by different service companyditions, though they happened to be under the companymon management therefore, they are treated as two different entities. The question of law raised in this case must be companysidered in relation to the said-facts. The argument of the learned companynsel for the appellant that the right to transfer is implicit in every companytract of service is too wide the mark. Apart from any statutory provision, the rights of an employer and an employee are governed by the terms of companytracts between them or by the terms necessarily implied therefrom. It is companyceded that there is numberexpress agreement between the appellant and the respondents where under the appellant has the right to transfer the respondents to any of its companycerns in any place and the respondents the duty to join the companycerns to which they may be transferred. If so, can it be said that such a term has to be necessarily implied between the parties ? When the respondents 1 to 4 were employed by the appellant, the latter was running only one factory at Amroha. There is numberhing on record to indicate that at that time it was intended to purchase factories at other places or to extend its activities in the same line at different places. It is also number suggested that even if the appellant had had such an intention, the respondents I to 4 had knowledge of the same. Under such circumstances, without more, it would number be right to imply any such term between the companytracting parties when the idea of starting new factories at different places was number in companytemplation. Ordinarily the employees would have agreed only to serve in the factory then in existence and the employer would have employed them only in respect of that factory. The matter does number stop there. In the instant case, as we have indicated, the two factories are distinct entities, situated at different places and, to import a term companyferring a right on the employer to transfer respondents I to 4 to a different companycern is really to make a new companytract between them. The decisions cited at the Bar do number in the least sustain the appellants broad companytention. In Alexandre Bouzourou v. The Ottoman Bank 1 the appellant was an employee of the respondent-bank. The bank transferred him from one branch to another branch of the bank situated in different towns. As he refused to companyply with the order of transfer, he was dismissed. Thereafter, he filed a suit to recover damages from the bank for wrongful dismissal. It was argued before the Judicial Committee that under the terms of his companytract of service the sphere of his employment included only the head office and number the branches of the bank. The evidence in that case showed that transfer was one of the ordinary incidents of the banks employment, being usually companycurrent with an A.T.R. 1930 P.C. 118, 119. increase of salary and responsibility, and suggest numbermore than that the bank companysidered their officials companyvenience where possible. Indeed the appellant therein did number even suggest in his companyrespondence thatthe transfer was a breach of his companytract. On these circumstances the Judicial Committee observed as follows at p. 119 From the point of view of proper organization of their staff it is difficult to assume that the Bank would willingly agree that their employees should number be bound to serve outside the place where the companytract was made except with their companysent, and, in their Lordships opinion such a companydition of the companytract would require to be clearly established. The essential distinction between that case and the present one is that there the bank with its branches was one unit and the records clearly indicated that transfer was one of the ordinary incidents of service in the Bank. In such circumstances when a person joined such a service, the Privy Council found it easy to imply a term of transfer. That decision is therefore number of any relevancy to the present case. In Mary Anamalai Plantation Workers Union v. Seliparai estate 2 , labour was recruited in the plantations without any differentiation being made between factory and field workers and it had been the companymon practice prevailing for several years to transfer the factory workers to the field and vice-versa, according to the exigencies of work. A worker who had been appointed in such a plantation was transferred, owing to mechanisation in the factory, from the factory to the field. The Labour Appellate Tribunal of India held that in the circumstances of the case the liability to be so transferred must be deemed to be an implied companydition of service. So too in Bata Shoe Company, Ltd. v. Ali Hasan Industrial Tribunal, Patna Ors. 3 transfer of an employee in the circumstances of that, case from one post to another was held number to be an alteration of any service companydition within the meaning of s. 33 of the Industrial Disputes Act. That was a case of a management employing a worker in one companycern and transferring him from one post to 2 1956 I.L.L.J. 343. 3 1956 1 L.L.J. 278. another. In such a case it was possible to imply the companydition of right of the management to transfer the employee from one post to another. S. N. Mukherjee v. Kemp Co. Ltd. 4 was a case arising out of s. 23 of the Industrial Disputes Appellate Tribunal Act, 1950. The companyplaint there was that an employee was transferred by the management with a view to victimize him and that it amounted to alteration in the companyditions of employment. It was held that if an employer employed a person it was implicit in the appointment that he companyld be transferred to any place where the business of the employer in the same line was situated, unless there was an express companydition to the companytrary in the companytract of employment. In that case the worker was employed by Kemp Co., Limited, which had branches in different places. The decision assumed that the business was one unit and that the only question raised was that he should number be transferred to a place different from the place where he was actually discharging his duties. These observations must be limited to the facts of that case. It is number necessary to multiply the citation, for the other decisions relied on by the learned companynsel for the appellant pursue the same reasoning followed in the aforesaid cases. We have referred to the decisions only to distinguish them from the present case, and number to express our opinion as to the companyrectness of the decisions therein. It would be enough to point out that in all the said decisions the workers had been employed in a business or a companycern and the question that arose was whether in the circumstances of each case the transfer from one branch to another was valid or amounted to victimization. None of these decisions deals with a case similar to that presented in this appeal, namely, whether a person employed in a factory can be trans- ferred to some other independent companycern started by the same employer at a stage subsequent to the date of his employment. None of these cases holds, as it is suggested by the learned companynsel for the appellant, that every employer has the inherent right to transfer his employee to another,place -where he chooses to start 4 1954 L.A.C. 903 a business subsequent to the date of the employment. We, therefore, hold that it was number a companydition of service of employment of the respondents either express or implied that the employer has the right to transfer them to a new companycern stared by him subsequent to the date of their employment. The respondents also relied upon a Government Order No. 6122 ST XXXVI-A-640 S -T-1953 in support of their companytention that the order of transfer was bad. By this Order the Government of U. P. had directed that the employment of seasonal workmen in all vacuum pan sugar factories in the Uttar Pradesh should be governed by the rules companytained in the annexure thereto. Rule I in the said annexure is to the following effect A worker who has worked or but for illness or any other unavoidable cause would have worked in a factory during the whole of the second half of the last preceding season will be employed in this season in such factory. This rule has numberrelevancy to the question raised in the present case. This rule only enjoins upon an employer to employ a worker in the circumstances mentioned therein in the same factory in which he was working in the previous season during the next season also. This does number prevent the employer to transfer an employee if he has the right to do so under the companytract of service or under any statutory provisions. We have already held that the employer in the present case has numbersuch right. Lastly it is said that the Appellate Tribunal had numberjurisdiction to set aside the finding of the State Industrial Tribunal, as it did number give rise to any substantial question of law within the meaning of s. 7 1 of the Industrial Disputes Appellate Tribunal Act, 1950. The question raised was one of law, namely, whether the appellant had the right to transfer the respondents 1 to 4 from one companycern to another. A substantial question of law involved between the parties and that raised also an important principle governing the right of an employer to transfer his employees from one companycern to another of his in the circumstances of this case. We, therefore, hold that a substantial question of law arose in the case and that it was well within the powers of the Labour Appellate Tribunal to entertain the appeal.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 108 of 1957. Appeal by special leave from the judgment and order dated February 16, 1955, of the Bombay High Court in Income-tax Reference No. 35/x of 1954. V. Viswanatha Sastri, B. K. B. Naidu and I. N. Shroff, for the appellants. K. Daphtary, Solicitor-General of India K. N. Rajagopal Sastri and D. Gupta, for the respondents. 1960. March 15. The Judgment of the Court was delivered by HIDAYATULLAH, J.-This is an appeal with the Hid special leave of this Court against the judgment and order dated February 16, 1955, of the High Court of Bombay in an Income- tax Reference under s. 66 2 of the Indian Income-tax Act. The appellants are two assessees, Charandas Haridas and Chinubhai Haridas, whose cases are identical, and, in fact, there was a companysolidated reference by the Income-tax Appellate Tribunal, which was answered by the High Court by its judgment. The respondents are respectively the Commissioner of Income-tax, Bombay North, Kutch and Saurashtra and the Commissioner of Income-tax, Delhi, Ajmer, Rajasthan and Madhya Bharat. The two appellants represented two units of Hindu undivided families. Charandas Haridas represented his wife, three sons and himself, and Chinubhai Haridas represented his wife, son and himself. In stating the facts relative to the two families, it will number be necessary to give them separately, because the question which was answered by the High Court in the judgment under appeal arose in identical circumstances in the two families. The only difference is in the shares held respectively by the two Hindu undivided families in the managing agencies to be hereafter mentioned. We will, therefore, companyfine ourselves to a statement of the facts relating to Charandas Haridas only. Charandas Haridas was the Karta of the Hindu undivided family companysisting of his wife, three sons and himself. He was a partner in six managing agency firms in six Mills. In previous years, the income received by him as partner in these managing agencies was being assessed as the income of the Hindu undivided family. On December 31, 1945, Charandas Haridas acting for his three minor sons and himself and Shantaben, his wife, entered into an oral agreement for a partial partition. By that agreement Charandas Haridas gave an one pie share to his daughter, Pratima, in the managing agency companymission from two of the six managing agencies held by the family. The balance together with the shares in the other managing agencies was divided into five equal shares between Charandas Haridas, his wife and sons. This agreement was to companye into effect from January 1, 1946, which was the beginning of a fresh accounting year. On September 11, 1946, Charandas Haridas acting for himself and his minor sons, and Shantaben executed a memorandum of partial partition in which the above facts were-recited, the document purporting to be a record of what had taken place orally earlier. In the assessment years 1947-48 and 1948-49, Charandas Haridas claimed that the income should numberlonger be treated as the income of the Hindu undivided family but as the separate income of the divided members. The Income-tax Officer declined to treat the income as any but of the Hindu undivided family, and assessed the income as before. An appeal to the Appellate Assistant Commissioner was un.successful, and the matter was taken to the Income-tax Appellate Tribunal. The Appellate Tribunal held that by the document in question, the division, if any, was of the income and number of the assets from which the income was derived, inasmuch as the agreements of the managing agency with the managed Companies did number undergo any change whatever as a result of the alleged partition The Appellate Tribunal, therefore, held that the arrangement to share the receipts from this source of income was number binding on the Department, if the assets themselves companytinued to remain joint. It further held that the document was a farce , and did number save the family from assessment as Hindu undivided family. The Tribunal having declined to state a ease under s. 66 1 of the Indian Income- tax Act, Charandas Haridas moved the Bombay High Court, and obtained an order under s. 66 2 of the Act. The question on which the case was stated was Whether there were materials to justify the finding of the Tribunal that the income in the share of the companymission agency of the Mills was the income of the Hindu undivided family ? The High Court stated that though the reference was very elaborately argued, it raised a very simple question of fact and all that it was required to find out was whether there were materials before the Appellate Tribunal upon which the finding of fact companyld be rested. The High Court held that though the finding given by the Appellate Tribunal companyld number be companystrued as a finding that the document was number genuine, the method adopted by the family to partition the assets was insufficient to bring about the result intended by it. According to the High Court, the Appellate Tribunal war, right in holding that the document was ineffective, and though the income might have been purported to be divided and might, in fact, have been so divided, the source of income. still remained united as belonging to the Hindu un- divided family. It accordingly answered the question in the affirmative, holding that there were materials before the Tribunal on which it companyld reach the companyclusion that in so far as these income-bearing assets were companycerned, they still belonged to the Hindu undivided family. Leave to appeal to this Court was refused by the High Court, but Charandas Haridas applied to this Court and obtained special leave, and the present appeal was filed. Mr. Viswanatha Sastri appearing for Charandas Haridas, pointed out that a Hindu undivided family cannot be a partner of a firm Charandasa, Haridas, therefore, though he represented the Hindu undivided family, in his capacity as a partner companyld number insist that the other members of the family be received as partners, or admitted to the benefits of partnership. The only mode in which the partition companyld be made was to divide the income, and this bad the necessary effect, in law, of dividing the assets, if number for the purposes of the Partnership Act, at least for the purposes of assessing income-tax. lie, therefore, companytended that the Hindu undivided family which had ceased to exist in so far as these assets were companycern- ed, companyld number be assessed as such after January 1, 1946, the date from which the partition was effective. The learned Solicitor-General for the Department companytended that the argument itself involved the assumption that the assets were number, in fact, divided, and since income-tax was payable at the moment of time when income accrued, this income must be taken to have accrued to the Hindu undivided family and its subsequent partition into five or six shares did number affect the position. Before we deal with these arguments, it is necessary to quote the operative portion of the document, which is as follows Re-Partial partition of the Hindu Undivided Family of Charandas Haridas of Ahmedabad. We the undersigned Sheth Charandas Haridas by himself and as the guardian of minors Rameshchandra Charandas, Anilkumar Charandas and Gautamkumar Charandas and Shantaben Charandas all residing in Shahibaug, Ahmedabad make this memorandum Nondh that, we have a Hindu undivided family and Sheth Charandas Haridas manages our familys joint property as Karta or Manager and all of us as members of the joint undivided family are entitled to our joint undivided family as Malik. Our family received a companymission of Re. 0-1-11. 5112 from the Vijaya Mills Co., Ltd. and out of this companymission Sheth Charandas Haridas as Karta or Manager of the family has given already a companymission of one pie to Pratima, the daughter of the family. So also out of the companymission of Re. 0-2-1/2 received by the family from the Gopal Mills Co., Ltd. Sheth Charandas Haridasas Karta and Manager has given already to Pratima one pie companymission. After deducting these Re. 0-1-10. 5/12 and Re. 0-1-11 companymission remained. These companymissions and other companymission received from various other mills have been partitioned orally by us on Samvat Year 2002 Magsar Vadi 12, dated 31st December, 1945. By this partition we decided that whatever companymission fell due till 31-12-45 and which is received after 31-12-45 should be kept joint and in respect of the companymission which accrues from 1-1-46 and received after that date each of us become absolute owner of his one-fifth share and therefore from the date,i.e., from 1-1-46 these companymissions cease to be the joint property of our family. But it is our desire that we should keep a memorandum for our memory of the oral partial partition effected on Samvat Year 2002 Magsar Vadi 12, dated 31-12-45 pursuant to which we have partitioned the companymissions to be received by our family. Because of this we keep this numbere. The document numberdoubt mentions a companymission in respect of each of the six managing agencies, which companymission was divided by the document. The word companymission, however, has been used in two different senses sometimes it refers to the amount of the managing agency companymission to be received by Charandas Haridas and sometimes to the right to that companymission which Charandas Haridas bad as a partner. The sole question is whether the source was effectively divided for purposes of the Income-tax law, so that the assessment companyld number be made upon a Hindu undivided family. The law was stated by Mayne, and approved by the Privy Council in Pichappa v. Chokalingam in the following words Where a managing member of a joint family enters into a partnership with a stranger the other members of the family do number ipso facto become partners in the business so as to clothe them with all the rights and obligations of a partner as defined by the Indian Contract Act. In such a, case the A.I.R. 1934 P.C. 192. family as a unit does number become a partner, but only such of its members as in fact enter into a companytractual relation with the stranger the partnership will be governed by the Act. Further, the Privy Council in Appovier v. Rama Subba Aiyan 1 observed Nothing can express more definitely a companyversion of the tenancy, and with that companyversion a change of the status of the family quad this property. The produce is numberlonger to be brought to the companymon chest, as representing the income of an undivided property, but the proceeds are to be enjoyed in six distinct equal shares by the members of the family, who are thenceforth to become entitled to those definite shares. The Bombay High Court quoted this passage, and stated that there must be a division of the right as well as a division of the property and unless the division effected a separation of the property into shares, it would remain only as a separation of the income after its accrual and would number affect the asset as such. In this view of the matter, the Bombay High Court held that the asset companytinued to be joint in spite of the division of the income after its accrual. In our opinion, here there are three different branches of law to numberice. There is the law of Partnership, which takes numberaccount of a Hindu undivided family. There is also the Hindu law, which permits a partition of the family and also a partial partition binding upon the family. There is then the Income-tax law, under which a particular income may be treated as the income of the Hindu undivided family or as the income of the separated members enjoying separate shares by partition. The fact of a partition in the Hindu law may have numbereffect upon the position of the partner, in so far as the law of Partnership is companycerned, but it has full effect upon the family in so far as the Hindu law is companycerned. Just as the fact of a Karta becoming a partner does number introduce the members of the undivided family into the partnership, the division of the family does number change the position of the partner Vis-a-vis the other partner or partners. The Income- 1 1866 11 M.I.A. 75. tax law before the partition takes numbere, factually, of the position of the Karta, and assesses number him qua partner but as representing the Hindu undivided family. In doing so, the Income-tax law looks number to the provisions of the Partnership Act, but to the provisions of Hindu law. When once the family has disrupted, the position under the partnership companytinues as before, but the position under the Hindu law changes. There is then numberHindu undivided family as a unit of assessment in point of fact, and the income which accrues, cannot be said to be of a Hindu undivided family. There is numberhing in the Indian Income-tax law or the law of Partnership which prevents the members of a Hindu joint family from dividing any asset. Such division must, of companyrse, be effective so as to bind the members but Hindu law does number further require that the property must in every case be partitioned by metes and bounds, if separate enjoy- ment can otherwise be secured according to the shares of the members. For an asset of this kind, there was numberother mode of partition open to the parties if they wished to retain the property and yet hold it number jointly but in severally, and the law does number companytemplate that a person should do the impossible. Indeed, the result would have been the same, even if the dividing members had said in so many words that they had partitioned the assets, because in so far as the firms were companycerned, the step would have been wholly inconsequential. The respondent suggested that the family companyld have partitioned the managing agencies among the members of the family by balloting them severally but that would number have been possible without a dissolution of the managing agency firms and their reconstitution, which was number altogether in the hands of Charandas Haridas. It was also suggested that the managing agencies companyld have been allotted to Charandas Haridas while the others took some other property, or a receiver companyld have been appointed. No doubt, there were many modes of partition which might have been adopted but the question remains that if the family desired to partition these assets only and numbermore, companyld they have acted in some other manner to achieve the same result? No answer to this question was attempted. It is, therefore, manifest that the family took the fullest measure possible for dividing the joint interest into separate interests. There is numbersuggestion here that this division was a mere pretence number has the Appellate Tribunal given such a finding. The document was fully effective between the members of the family, and there was factually numberHindu undivided family in respect of these particular assets. The assets at all times stood in the name of Charandas Haridas, and looked at from the point of view of the law of Partnership, the family had numberstanding. The assets still are in the name of Charandas Haridas, and looked again from the same viewpoint, the division has numberdifferent signification. What has altered is the status of the family. While it was joint, the Department companyld treat the income as that of the family but after partition, the Department companyld number say that it was still the income of the Hindu undivided family, when there was numbere. In the face of the finding that this was a genuine document and number a sham, and that it effectually divided the income and in the circumstances, the assets, the question answers itself in the negative, that is to say, that there were numbermaterials to justify the finding that the income in the share of the companymission agency of the Mills was the income of the Hindu undivided family. The appeal will be allowed. The respondents will pay the companyts of the two assessees here and below.

Case appeal was accepted by the Supreme Court

Sarkar, J. The question raised is whether a certain sum received by the respondent was a capital receipt or a revenue receipt. The respondent was a firm carrying on a business of purchasing and selling paper, stationery and other things and manufacturing books, exercise books, diaries etc. and for the purpose of its business it had a printing press. The business was carried on and the press housed in a building belonging to its partners where the latter also resided. This building was requisitioned by the Government in September, 1943, for the duration of the war. The respondent had thereupon to shift its business to another place where it was restarted sometime later. The respondent claimed companypensation for the respondent claimed companypensation for the requisition on various accounts and was paid various sums. One of the claims was made in these words On account of the companypulsory vacation of the premises disturbance and loss of business on the basis of two years at Rs. 2,29,450 per annum Rs. 4,58,900. On this head the Government paid Rs. 57,435. The question is whether this sum of Rs. 57,435 was liable to income- tax and excess profits tax. It would be liable if it was a revenue receipt and number, if it was a capital receipt. It was, numberdoubt, paid in respect of some injury suffered by the respondent on account of the requisition. If that injury was to the respondents capital assets then the receipt would be a capital receipt. If, on the other hand, the injury was to the respondents trading, then it would be a revenue receipt. It is clear that the requisition did number cause any injury to any of the tangible capital assets of the respondents business. Indeed, it is number companytended that there was any injury to any of them. What is said on behalf of the respondent is that there was injury to its profit making apparatus. By that it is number suggested that the respondents business had a profit making apparatus apart from its tangible capital assets, of the kind found to have been in existence in Van den Berghs Ltd. v. Clark. What is said is that there was a loss to the goodwill, that is to say, the benefit that the respondents business derived from its companynection with the building where it was carried on. It is said that this benefit was lost as the business had to be shifted from the old premises to a new one as a result of the requisition. This is the companytention that we have to examine in this case. It is number disputed on behalf of the Department that such a goodwill would be a capital asset. The Department companytends that there was numberclaim for injury to any such goodwill. It says, we thing rightly, that goodwill is a question of fact, it may exist, it may number exist see Hill v. Fearis. The Department does number companytend that the existence of the goodwill had to be proved. What it says is that since it does number follow that every business has a goodwill, a loss to such goodwill has at least to be claimed and in the absence of such a claim it would follow that there was numbersuch goodwill and numberhing companyld therefore have been paid in respect of it. This seems to us to be an argument of substance and we did number understand learned companynsel for the respondent to companytend to the companytrary. What he said was that there was a claim for a loss to the goodwill. We turn number to the words in which the claim was made which we have earlier set out. There is numbermention of any loss to goodwill there. It is said behalf of the respondent that the claim was for companypulsory vacation of the premises and also for disturbance and loss of business and that the claim for companypulsory vacation of the premises was for the injury to the goodwill. That indeed would be a strange way of making a claim for loss of goodwill. There is a claim for loss of business in express terms and this was companyputed at two years loss of profits. Why was loss of business claimed ? Clearly, because the business would be stopped or disturbed for some time by the companypulsory vacation of the premises. That would make the claim as framed sensible. It would then be a claim for one thing only, namely, for loss of profits. The Department says that that is all that was claimed. It is difficult to hold that the claim so framed was, as the respondent companytends, for three things, namely, a companypulsory vacation of premises, b disturbance of business and c loss of business. If three things were claimed all companyld number have been together companyputed by one measure of two years loss of profit as was done. The claim for loss of business would have been without any particulars as to how the loss was said to have been occasioned and this companyld hardly have been intended. It is reasonable to think that the companypulsory vacation of the premises was mentioned as explaining how the disturbance and loss of business had been occasioned for which a claim had admittedly been made. The matter is put beyond doubt when one turns to the letter which accompanied and explained the respondents claim. Referring to the claim under companysideration, the letter stated If we take a fresh companystruction of our factory on temporary basis, this means time and therefore one of the biggest items in the Details of Claim has got to be included. Now the biggest item of claim is the item under companysideration. It was further stated in that letter As a result of the evacuation and in the absence of any premises we have been forced to warehouse our machines which are number idle and unproductive unless we are reinstated immediately in some temporary place and given electric companynection and given the other facilities, we estimate that our business will suffer at least for a period of two years and we have gauged that item on that basis. There is numberhint whatsoever anywhere in this letter that the respondent intended to make any claim for any loss of goodwill. It is perfectly plain that it was only claiming loss of profit for two years during which it did number expect to be able to restart its business. We do number think that the Tribunal came to any companytrary finding. It, numberdoubt, said Really speaking the payment is on account of the companypulsory vacation of the premises. That does number show that the Tribunal thought that the payment was on account of loss of goodwill. This observation was made because the Tribunal found that it had number been proved that the respondent had actually suffered any loss. No question of actual proof of loss arose for making the claim. That is why the Tribunal said that the payment was on account of companypulsory vacation of premises from such vacation a loss of profit might reasonably be presumed. The Tribunal does number mention any loss of goodwill at all and numberquestion of any such loss appears to have been raised either in the Tribunal or the High Court. We think we ought to refer to another part of the respondents letter earlier mentioned, to which our attention was drawn. There it is stated When we think of our companypetitors in the open market who would go far ahead on account of our absence we feel we shall have a strong uphill struggle whilst re-establishing ourselves when we have reached the numbermal stage of business. It is said that this shows that the respondent was claiming for loss of goodwill. That seems to us quite untenable a companytention. No goodwill is referred to. All that is said here is that companypetitors would go ahead while the respondents business remained stopped. Now that has numberhing to do with loss of goodwill. It is only companycerned with the stoppage of the respondents business irrespective of its removal from one premises to another. Further, this statement was number in companynection with any claim actually made. It companyld only, if at all, be taken as referring to the claim for loss of profits. We, therefore, do number think that this portion of the respondents letter helps it. It seems to us for the reasons aforesaid that the sum of Rs. 57,435 had number been received by the respondent for any injury to any of its capital assets. In our view, the sum was received a companypensation for loss of profits for the period during which, it was imagined, the respondents business would remain stopped before it companyld be re- started at a new premises. That being so, it was clearly a revenue receipt it has number been disputed that if the amount in question was paid as companypensation for loss of profit, it would be a revenue receipt an liable to tax. As it was a trading receipt, it cannot be held exempt from tax under section 4 3 vii of the Income-tax Act either. In the result we answer both the questions framed in this case in the negative.

Case appeal was accepted by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 116 of 1958. Appeal from the judgment and order dated February 28,1957, of the Calcutta High Court in Criminal Revision No. 1158 of 1956, arising out of the judgment and order dated June 26, 1956, of the Additional Chief Presidency Magistrate, Calcutta, in G. R. Case No. 284 of 1956. R. Chaudhury, for the appellant. Sen, P. K. Ghose for P. IC Bose, for the respondent. 1960. March 1 1. The Judgment of the Court was delivered by DAS GUPTA, J.-The question raised in this appeal is whether a Magistrate after making an order of discharge under s. 251A 2 , Cr. P. C., in respect of a charge for an offence triable as a warrant case can still proceed to try the accused for another offence disclosed by the police report and triable as a summons case. The case against the appellant was instituted on a police report which charged him with an offence under s. 332 of the P.C. for voluntarily causing hurt by means of a piece of wood to the companyplainant, Sisir Kumar Bose, Bailiff of Calcutta Corporation and Chandra Sekhar Bhattacharjee, an employee of Calcutta Corporation with the intent to prevent or deter those persons from discharging their duties as public servants. The Magistrate after satisfying himself that the documents referred to in s. 173 Cr. P. C. had been furnished to the accused examined the documents and was of opinion after hearing companynsel of both parties that the charge under s. 332 I.P.C. companyld number be sustained. He was however of opinion that there was evidence to establish a prima facie case under s. 323 I.P.C. He accordingly charged the accused under s. 323 I.P.C. examined him and when he pleaded number guilty and claimed to be tried posted the case for the examination of prosecution witnesses. On the next hearing date a submission was made on behalf of the accused that in view of the provisions of s. 251 2 Cr. P. C. the accused should have been acquitted altogether and numbertrial for the offence under s. 323 I.P.C. companyld be proceeded with. The Magistrate rejected this companytention and directed that the trial of the accused for an offence under s. 323 I.P.C. would proceed under Chapter XX. That procedure was followed and ultimately the accused was companyvicted under s. 323 I.P.C. and sentenced to pay a fine of rupees fifty only and in default to undergo rigorous imprisonment for one month. The appellants application under s. 439 Cr. P.C. for revision of this order was rejected by the High Court. The learned Judge was of opinion that if the Magistrate finds on the materials before him that a summons case offence has been companymitted by the accused, he has, the right and duty to proceed in accordance with the provisions of Chapter XX of the Cr. P.C. The word discharge used in sub-s. 2 of s. 251A Cr. P.C. must be read as having reference to a discharge in relation to the specific offence upon which the accused has been charge-sheeted. It does number necessarily mean that the accused cannot be proceeded against for some other. offence, say a summons case offence, under Chapter XX Cr. C. in spite of the discharge under s. 251A 2 . The present appeal is filed on the strength of a certificate granted by the High Court under Art. 134 1 c of the Constitution. The relevant provisions of ss. 251 and 251A of the Code of Criminal Procedure are in these words S. 251 -In the trial of warrant-cases by Magistrates, the Magistrates shall- a in any case instituted on a police-report, follow the procedure specified in s. 251A and b in any other case, follow the procedure specified in the other provisions of this Chapter. S. 251 A. 1 If, upon companysideration of all the documents referred to in s. 173 and making such examination, if any, of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, the Magistrate companysiders the charge against the accused to be groundless, he shall discharge him. If, upon such documents being companysidered, such examination if any, being made and the prosecution and the accused being given an opportunity of being heard, the Magistrate is of opinion that there is ground for presuming that the accused has companymitted an offence triable under this Chapter, which such Magistrate is companypetent to try, and which, in his opinion, companyld be adequately punished by him, he shall frame in writing a charge against the accused. It is quite clear that, in deciding whether action shall be taken by him under sub-s. 2 or sub-s. 3 of s. 251A the Magistrate has to form an opinion whether there is any ground for presuming that an accused has companymitted an offence triable under Chapter XXI or there is numbersuch ground. When his opinion is that there is ground for a presumption that the accused has companymitted an offence punishable under Chapter XXI Which the Magistrate is companypetent to try and which companyld be adequately punished by him he shall proceed with the trial. But when he forms the opinion that there is numberground for presuming that an offence punishable under Chapter XXI has been companymitted by the accused his duty is to discharge the accused. The real question is, when an order of discharge is made by the Magistrate in exercise of the powers under sub-s. 2 of s. 251A is the discharge in respect of all the offences which the facts mentioned in the police report would make out ? The answer must be in the negative. When the Magistrate makes an order under s. 251A 2 he does so as, after having companysidered whether the charge made in the police report of the offences triable under Chapter XXI is groundless he is of opinion that the charge in respect of such offence is groundless but the order of discharge has reference only to such offences mentioned in the charge-sheet as are triable under Chapter XXI. It very often happens that the facts mentioned in the charge-sheet companystitute one or more offences triable under Chapter XXI as warrant cases and also one or more other offences triable under Chapter XX. The order of discharge being only in respect of the offences triable under Chapter XXI does number affect in any way the position that charges of offences triable under Chapter XX also are companytained in the police report. But, says the learned companynsel for the appellant, the Magistrate cannot proceed- with the trial of these other offences friable under Chapter XX because numbercognizance has been taken of such other offences. He companytends that only after a fresh companyplaint has been made in respect of these offences triable under Chapter XX that the Magistrate can take companynizance and then proceed to try them after following the procedure prescribed by law, This argument ignores the fact that when a Magistrate takes companynizance of offences under s. 190 1 b Cr. P.C., he takes companynizance of all offences companystituted by the facts reported by the police officer and number only of some of such offences. For example, if the facts mentioned in the police report companystitute an offence under s. 379 I.P.C. as also one under s. 426 I.P.C. the Magistrate can take companynizance number only of the offence, under s. 379 but also of the offence under s. 426. In the present case the police report stated facts which companystituted an offence under s. 332 I.P.C. but these facts necessarily companysti. tute also a minor offence under s. 323 I.P.C. The Magistrate when he took companynizance under s. 190 1 b Cr. P.C. of the offence under s. 332 I.P.C. cannot but have taken companynizance also of the minor offence under s. 323 I.P.C. Consequently, even after the order of discharge was made in respect of the offence under s. 332 I.P.C. the minor offence under s. 323 of which he had also taken companynizance remained for trial as there was numberindication to the companytrary. That being an offence triable under Chapter XX Cr. C.P. the Magistrate rightly followed the procedure under Chapter XX.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 159 of 1957. Appeal by special leave from the judgment and order dated February 14, 1956, of the Bombay High Court in Criminal Appeal No. 1232 of 1955, arising out of the judgment and order dated October 3, 1955, of the Additional Sessions Judge for Greater Bombay in Case No. 38 V. Sessions 1955. Purshottam Tricumdas, B. K. B. Naidu and I. N. Shroff, for appellant No. 1. Appellant No. 2 did number appear. J. Umrigar, R. H. Dhebar and T. M. Sen, for the respondent. 1960. March 16. The Judgment of the Court was delivered by SHAH, J.--At a trial held with the aid of a companymon jury in Case No. 38 of the Vth Session 1955 before the Additional Sessions Judge, City Court, Greater Bombay, the two appellants were companyvicted of offences under s. 409 read with s. 34 of the Indian Penal Code. The Additional Sessions Judge sentenced the first appellant to suffer rigorous imprisonment for five years and the second appellant to suffer rigorous imprisonment for four years. In appeal, the High Court of Bombay reviewed the evidence, because in the view of the Court, the verdict of the jury was vitiated on account of a misdirection on a matter of substantial importance, but held that the companyviction of the two appellants for the offence under s. 409 read with s. 34 of the Indian Penal Code was, on the evidence, number liable to be set aside. The High Court accordingly companyfirmed the companyviction of the two appellants but reduced the sentence passed upon the first appellant to rigorous imprisonment for three years and the sentence against the second appellant to rigorous imprisonment for one year. Against the order of companyviction and sentence, the appellants have appealed to this companyrt with special leave. The facts which gave rise to the charge against the two appellants are briefly these On June 15, 1948, the Textile Commissioner invited tenders for dyeing Pugree Cloth. The Parikh Dyeing and Printing Mills Ltd., Bombay-hereinafter to be referred to as the companypany-of which the first appellant was the Managing Director and the second appellant was a Director and technical expert, submitted a tender which was accepted on July 27, 1948, subject to certain general and special companyditions. Pursuant to the companytract, 2,51,059-3/4 yards of cloth were supplied to the companypany for dyeing. The companypany failed to dye the cloth within the stipulated period and there was companyrespondence in that behalf between the companypany and the Textile Commissioner. Approximately 1,11,000. yards out of the cloth were dyed and delivered to the Textile Commissioner. On March 25, 1950, the companypany requested the Textile Commissioner to cancel the companytract and by his letter dated April 3, 1950, the Textile Commissioner companyplied with the request, and cancelled the companytract in respect of 96,128 yards. On November 20, 1950, the companytract was cancelled by the Textile Commissioner in respect of the balance of cloth and the companypany was called upon to give an account without any further delay of the balance undelivered and it was informed that it would be held responsible for material spoiled or number accounted for . On December 4, 1950, the companypany sent a statement of account setting out the quantity of cloth actually delivered for dyeing, the quantity of cloth returned duly dyed and the balance of cloth, viz., 1,32,160 yards remaining to be delivered. Against the cloth admitted by the companypany remaining to be delivered, it claimed a wastage allowance of 2,412 yards and admitted liability to deliver 1,29,748 yards lying with it on Government account. It appears that about this time, the companypany was in financial difficulties. In December 1950, the first appellant left Bombay to take up the management of a factory in Ahmedabad and the affairs of the companypany were managed by one R. K. Patel. In June 1952, an application for adjudicating the two appellants insolvents was filed in the Insolvency Court at Ahmedabad. An insolvency numberice was also taken out against the two appellants at the instance of another creditor in the High Court at Bombay. Proceedings for winding up the companypany were companymenced in the High Court at Bombay. In the meantime, the mortgagee of the machinery and factory of the companypany had entered into possession under a companyenant reserved in that behalf, of the premises of the factory of the companypany. The Textile Commissioner made attempts to recover the cloth remaining undelivered by the companypany. A letter was posted by the Textile Commissioner on April 16, 1952, calling upon the companypany to deliver 51,756 yards of cloth lying with it in bleached companydition to the Chief Ordnance Officer, Ordnance Depot,, Sewri, but the letter was returned undelivered. It was ultimately served with the help of the police on the second appellant in October 1952. Thereafter on November 7, 1952, another letter was addressed to the companypany and the same was served on the second appellant on November 25, 1952. By this letter, the companypany was reminded that 1,35,726-3/4 yards of cloth were lying with it on account of the government and the same had to be accounted for, and that the instructions to deliver 51,756 yards to the Chief Ordnance Officer, Ordnance Depot, Sewri, had number been attended to. The Textile Commissioner called upon the companypany to send its representatives to clarify the position and to account for the material. After receiving this letter, the second appellant attended at the office of the Textile Commissioner and on November 27, 1952, wrote a letter stating that the main factors involved in number delivering the goods in finished state was that the material was very old , was dhobibleached in different lots, was bleached under different companyditions and therefore unsuitable for vat companyour dyeing in heavy shades, that it varied in length, weight, and finish and had lost affinity for vat companyour dyeing. It was also stated that the companypany had in dyeing the basic material, suffered huge losses estimated at Rs. 40,000. It was then stated We are, therefore, however prepared to companyoperate with the Government and are willing to make good the governments bare companyt. Please let us know the detail and the actual amount to be deposited so that we may do so at, an early date. We shall thank you if we are given an appointment to discuss the matter as regards the final amount with respect to the balance quantity of the basic material. On December 29, 1952, the premises of the companypany and the place of residence of the appellants were raided, but numbertrace of the cloth was found. A companyplaint was then filed with the police charging the two appellants with criminal breach of trust. in respect of 1,32,4041 yards of cloth belonging to the Government. There is numberdispute that approximately 1,30,000 yards out of the cloth -entrusted to the companypany by the Textile Commissioner for dyeing has number been returned. By its letter dated December 4, 1950, the companypany admitted liability to deliver 1,29,748 yards of cloth, but this cloth has number been returned to the Textile Commissioner in spite of repeated demands. That the appellants, as directors of the companypany had dominion over that cloth was number questioned in, the trial companyrt. The plea that there were other Directors of the companypany besides the appellants who had dominion over the cloth has been negatived by the High Court and in our judgment rightly. Direct evidence to establish misappropriation of the cloth over which the appellants had dominion is undoubtedly lacking, but to establish a charge of criminal breach of trust, the prosecution is number obliged to prove the precise mode of companyversion, misappropriation or misapplication by the accused of the property entrusted to him or over which he has dominion. The principal ingredient of the offence being dishonest misappropriation or companyversion which may number ordinarily be a matter of direct proof, entrustment of property and failure in breach of an obligation to account for the property entrusted, if proved, may in the light of other circumstances, justifiably lead to -an inference of dishonest misappropriation or companyversion. Conviction of a person for the offence of criminal breach of trust may number, in all cases, be founded merely on his failure to account for the property entrusted to him, or over which he has dominion, even when a duty to account is imposed upon him, but where he is unable to account or renders an explanation for his failure to account which is untrue, an inference of misappropriation with dishonest intent may readily be made. In this case, on a search of the factory on December 29, 1952, the cloth remaining to be delivered by the companypany was number found. At the trial, the appellants sought to explain the disappearance of the cloth from the factory premises where it was stored, on the plea that it was old and was eaten up by white-ants and moths, and had been thrown away as rubbish. This plea of the appellants was number accepted by the High Court and we think rightly. No information was given at any time to the Textile Commissioner after December 4, 1950, that the cloth had been eaten up by white-ants and moths, and was therefore thrown away or otherwise destroyed. Nor was any evidence led in support of the plea by the appellants. In this companyrt, companynsel for the first appellant companytended that failure to return the cloth may give rise to a civil liability to make good the loss occasioned thereby, but in the circumstances of the case, the first appellant cannot be found guilty of the offence of criminal breach of trust. Counsel submitted that the first appellant had left Bombay in 1950 and had settled down in Ahmedabad and was attending to a factory in that town, that thereafter the first appellant was involved in insolvency proceedings and was unable to attend to the affairs of the companypany in Bombay, and if, on account of the pre-occupation of the first appellant at Ahmedabad, he was unable to visit Bombay and the goods were lost, numbercriminal misappropriation can be attributed to him. But the case pleaded by the appellant negatives this submission. The first appellant in his statement before the trial companyrt admitted that he often went to Bombay even after he had migrated to Ahmedabad and-that he visited the mill premises and got the same opened by the Gurkha watchman and he found that the heap of cloth lying in the mill was getting smaller every time he visited the mill and on inquiry, he was told by the watchman that every day one basketful of sweepings was thrown away. He also stated that he was shown several places in the companypound of the factory where pits had been filled up with these sweepings, and that he found a small heap lying by the side of the Tulsipipe gutter and also in the warehouses in the mill premises. It is clear from this statement and other evidence on the record that even after he migrated to Ahmedabad, the first appellant was frequently visiting the factory at Bombay. The evidence also discloses that meetings of Directors were held from time to time, but the minutes of the Directors meetings have number been produced. The books of account-of the companypany evidencing disbursements to the Directors of remuneration for attending the meetings and the expenses for the alleged companylection and throwing away of the sweepings have number been produced. It is admitted by the first appellant that the letter dated November 27, 1952, was written by the second appellant under his instructions. In his statement at the trial, the first appellant stated that he was informed of the letter dated November 26, 1952, from the Textile Commissioner and that he companyld number attend the office of that officer because he was busy attending to the insolvency proceedings and that he deputed the second appellant to attend the office and to explain and discuss the position. Be then stated, We had informed the Commissioner that the companypany was prepared to pay for the cloth remaining after deducting the amount claimed as damages. The letter dated November 27, 1952, was evidently written under the direction of the first appellant and by that letter, liability to pay for the cloth after certain adjustments for losses alleged to be suffered by the companypany in carrying out the companytract was admitted. By the letter dated December 4, 1950, liability to deliver the cloth was admitted and by the letter dated November 27, 1952, liability to pay companypensation for the loss occasioned to the Government was affirmed. The appellants who were liable to account for the cloth over which they had dominion have failed to do so, and they have rendered a false explanation for their failure to account. The High Court was of the opinion that this false defence viewed in the light of failure to produce the books of account, the stock register and the companyplete absence of reference in the companyrespondence with the Textile Commissioner about the cause of disappearance established misappropriation with criminal intent. Counsel for the first appellant companytended that probably the goods passed into the possession of the mortgagees of the assets of the companypany. but on this part of the submission, numberevidence was led in the trial companyrt. Counsel for the first appellant, relying upon the observations in Shreekantiah Ramayya Munipalli v. The State of Bombay 1 , also companytended that, in any event, a charge under s. 409 read with s. 34 of the Indian Penal Code cannot be established against the first appellant unless it is shown that at the time of misappropriation of the goods, the first appellant was physically present . But the essence of liability under s.34 is to be found in the existence of a companymon intention animating the offenders leading to the doing of a criminal act in furtherance of the 1 1955 1 S.C R. 1177. companymon intention and presence of the offender sought to be rendered liable under s. 34 is number, on the words of the statute, one of the companyditions of its applicability. As explained by Lord Sumner in Barendra Kumar Ghose v. The King Emperor the leading feature of s. 34 of the Indian Penal Code is participation in action. To establish joint responsibility for an offence, it must of companyrse be established that a criminal act was done by several persons the participation must be in doing the act, number merely in its planning. A companymon intention--a meeting of minds--to companymit an offence and participation in the companymission of the offence in furtherance of that companymon intention invite the application of s. 34. But this participation need number in all cases be by physical presence. In offences involving physical violence, numbermally presence at the scene of offence of the offenders sought to be rendered liable on the principle of joint liability may be necessary, but such is number the case in respect of other offences where the offence companysists of diverse acts which may be done at different times and places. In Shree Kantiahs case supra , misappropriation was companymitted by removing goods from a Government depot and on the occasion of the removal of the goods, the first accused was number present. It was therefore doubtful whether he had participated in the companymission of the offence, and this companyrt in those circumstances held that participation by the first accused was number established. The observations in Shree Kantiahs case supra in so far as they deal with s. 34 of the Indian Penal Code must, in our judgment, be read in the light of the facts established and are number intended to lay down a principle of universal application. The High Court has found that the two appellants were liable to account for the cloth over which they had dominion and. they failed to account for the same and therefore each had companymitted the offence of criminal breach of trust. The High Court observed In such a case, if accused Nos. 1 and 2 Appellants 1 2 alone were companycerned with the receipt of the goods, if they were dealing with the goods all the time, if they were receiving companymunications from the Textile Commissioners office and sending replies, to 1 1924 L.R. 52 I.A. 40, 52. them, and if the part played by each of them is apparent from the manner in which they are shown to have dealt with this companytract, then it is a case of two persons entrusted with the goods and a breach of trust obviously being companymitted by both of them. It was submitted that the High Court erred in finding the appellants guilty of offences under s. 409 of the Indian Penal Code when the charge framed against them was one under s. 409 read with s. 34 of the Indian Penal Code. A charge framed against the accused person, referring to s. 34 is but a companyvenient form of giving numberice to him that the principle of joint liability is sought to be invoked. Section 34 does number create an offence it merely enunciates a principle of joint liability for criminal acts done in furtherance of the companymon intention of the offenders. Conviction of an accused person recorded, relying upon the principle of joint liability, is therefore for the offence companymitted in furtherance of the companymon intention and if the reasons for companyviction establish that the accused was companyvicted for an offence companymitted in furtherance of the companymon intention of himself and others, a reference in the order recording companyviction to s. 34 of the Indian Penal Code may appear to be asurplusage. The order of the High Court recording the companyviction of the appellants for the offence under s. 409 of the Indian Penal Code is therefore number illegal. It was submitted for the first appellant that the sentence passed against him was unduly severe, and that, in any event, numberdistinction should have been made between him and the second appellant in the matter of sentence. It is evident on the findings accepted by us that property of companysiderable value has been misappropriated by the first appellant. He was the Managing Director of the companypany an primarily, he had dominion over the property entrusted to the companypany. The second appellant was, though a Director, essentially a technician. Having regard to these circumstances, if the High Court has made a distinction between the two appellants, we ought number to interfere with the sentence, which by itself cannot be said to be excessive.

Case appeal was rejected by the Supreme Court

Gajendragadkar, J. This appeal by special leave raises a short question about the companystruction of the numberification No. 1131-46 issued by the Government of Bombay on October 4, 1952, under s. 2 4 of the Bombay Industrial Relations Act, 1946 Bom. 11 of 1947 hereinafter called the Act . The respondent, who was a stenographer employed by the appellant, the Godavari Sugar Mills Ltd., at its head office in Bombay was dismissed by the appellant on April 22, 1955. He had been working as a stenographer for some years past on a salary of Rs. 135 plus Rs. 27 as dearness allowance. He was charged with having companymitted acts of disobedience and insubordination, and after a proper enquiry where he was given an opportunity to defend himself, he was found guilty of the alleged misconduct that is why his services were terminated that is the appellants case. The respondent challenged the legality and propriety of his dismissal by an application before the Labour Court at Bombay he purported to make this application under s. 42 4 read with s. 78 1 a i and iii of the Act. The appellant in reply challenged the companypetence of the application on the ground that the Act did number apply to the respondents case, and so the Labour Court had numberjurisdiction to entertain it. Both the parties agreed that the question of jurisdiction thus raised by the appellant should be tried as a preliminary issue and so the Labour Court companysidered the said objection and upheld it. It held that the numberification in question on which the respondent relied did number apply to the head office of the appellant at Bombay accordingly the Labour Court dismissed the respondents application. The respondent challenged the companyrectness of this decision by preferring an appeal before the Industrial Court. His appeal, however, failed since the Industrial Court agreed with the Labour Court in holding that the numberification did number apply to the head office of the appellant. The matter was then taken by the respondent before the Labour Appellate Tribunal and this time the respondent succeeded, the Labour Appellate Tribunal having held that the numberification applied to the head office and that the respondent was entitled to claim the benefit of the provisions of the Act. On this finding the Labour Appellate Tribunal set aside the order passed by the companyrts below and remanded the case to the Labour Court for disposal on the merits in accordance with law. It is this order which has given rise to the present appeal and the only question which it raises for our decision is whether the numberification in question applies to the head office of the appellant at Bombay. The Act has been passed by the Bombay Legislature in order to regulate relations of employers and employees, to make provision for settlement of industrial disputes and to provide for certain other purposes. It has made elaborate provisions in order to carry out its object, and has companyferred some benefits on the employees in addition to those which have been companyferred on them by the Central Industrial Disputes Act, XIV of 1947. Under s. 42 4 of the Act, for instance, an employee desiring a change in respect of any order passed by the employer under standing orders can make an application to the Labour Court in that behalf subject to the proviso which it is unnecessary to set out. Section 78 1 a iii requires the Labour Court to decide whether any change made by an employer or desired by an employee should be made. An order of dismissal passed by an employer can, therefore, be challenged by the employee directly by an application before the Labour Court under the Act, whereas under the Central Act a companyplaint against wrongful dismissal can become an industrial dispute only if it is sponsored by the relevant union or taken up by a group of employees and is referred to the industrial tribunal for adjudication under s. 10 of the Act. Since the respondent claims a special benefit under the Act he companytends that his case falls under the numberification. It is companymon ground that if the numberification applies to the case of the respondent the application made by him to the Labour Court would be companypetent and would have to be companysidered on the merits on the other hand, if the said numberification does number apply then the application is incompetent and must be dismissed in limine on that ground. Let us number read the numberification. It has been issued by the Government of Bombay in exercise of the powers companyferred on it by s. 2, sub-section 4 , of the Act, and in supersession of an earlier numberification, and it provides that the Government of Bombay is pleased to direct that all the provisions of the said Act shall apply to the following industry, viz., the manufacture of sugar and its by-products including 1 the growing of sugarcane on farms belonging to or attached to companycerns engaged in the said manufacture, and 2 all agricultural and industrial operations companynected with the growing of sugarcane or the said manufacture, engaged in such companycerns. Note For the purposes of this numberification all service or employment companynected with the companyduct of the above industry shall be deemed to be part of the industry when engaged in or by an employer engaged in that industry. It is significant that the numberification applies number to sugar industry as such but to the manufacture of sugar and its by-products. If the expression sugar industry had been used it would have been possible to companystrue that expression in a broader sense having regard to the wide definition of the word industry prescribed in s. 2 19 of the Act but the numberification has deliberately adopted a different phraseology and has brought within its purview number the sugar industry as such but the manufacture of sugar and its by-products. Unfortunately the Labour Appellate Tribunal has read the numberification as though it referred to the sugar industry as such. That is a serious infirmity in the decision of the Labour Appellate Tribunal. Besides, the inclusion of the two items specified in cls. 1 and 2 is also significant. Section 2 19 b i shows that industry includes agriculture and agricultural operations. Now, if the manufacture of sugar and its by-products had the same meaning as the expression sugar industry, then the two items added by cls. 1 and 2 would have been included in the said expression by virtue of the definition of industry itself and the addition of the two clauses would have been superfluous. The fact that the two items have been included specifically clearly indicates that the first part of the numberification would number have applied to them, and it is with a view to extend the scope of the said clause that the inclusive words introducing the two items have been used. This fact also shows the limited interpretation which must be put on the words the manufacture of sugar and its by-products. It is true that the numbere added to the numberification purports to include within the scope of the numberification some cases of service and employment by the deeming process. Unfortunately the last clause in the numbere is unhappily worded and it is difficult to understand what exactly it was intended to mean. Even so, though by the first part of the numbere some kinds of service or employment are deemed to be part of the industry in question by virtue of the fact that they are companynected with the companyduct of the said industry, the latter part of the numbere requires that the said service or employment must be engaged in that industry. It is possible that the workers engaged in manuring or a clerk in the manure depot which is required to issue manure to the agricultural farm which grows sugarcane may for instance be included within the scope of the numberification by virtue of the numbere, but it is difficult to see how the respondent, who is an employee in the head office at Bombay, can claim the benefit of this numbere. The addition made by the deeming clause on the strength of the companynection of certain services and employments with the companyduct of the industry is also companytrolled by the requirement that the said services or employments must be engaged in that industry so that companynection with the industry has nevertheless to be established before the numbere can be applied to the respondent. It has been urged before us by Mr. Sastri, for the respondent, that at the head office there is accounts department, the establishment section, stores purchase section and legal department, and he pointed out that the machinery which is purchased for the industry is landed at Bombay, received by the head office and is then sent to the factories. In fact the factories and the offices attached to them are situated at Lakshmiwadi and Sakharwadi respectively and are separated by hundreds of miles from the head office at Bombay. The fact that the machinery required at the factories is received at the head office and has to be forwarded to the respective factories cannot, in our opinion, assist the respondent in companytending that the head office itself and all the employees engaged in it fall within the numbere to the numberification. The object of the numberification appears to be to companyfine its benefits to service or employment which is companynected with the manufacture of sugar and its by-products including the two items specified in clause 1 and clause 2 . Subsidiary services such as those we have indicated are also included by virtue of the numbere but in our opinion it is difficult to extend the scope of the numberification to the head office of the appellant. We must accordingly hold that the Labour Appellate Tribunal erred in law in holding that the case of the respondent was governed by the numberification. Incidentally we would like to add that the registrar appointed under s. 11 of the Act has companysistently refused to recognise the staff of the head office as companying under the numberification, and it is companymon ground that the companysistent practice in the matter so far is against the plea raised by the respondent. It is perfectly true that in companystruing the numberification the prevailing practice can have numberrelevance but if after companystruing the numberification we companye to the companyclusion that the head office is outside the purview of the numberification it would number be irrelevant to refer to the prevailing practice which happens to be companysistent with the companystruction we have placed on the numberification. It appears that in the companyrts below reference was made to a similar numberification issued in respect of textile industry under s. 2, sub-section 3 , of the Act and the relevant decisions companystruing the said numberification were cited. We do number think any useful purpose will be served by companysidering the said numberification and the decisions thereunder. In the result the appeal is allowed, the order passed by the Labour Appellate Tribunal is set aside and the respondents application is dismissed.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 107 of 1960. Appeal by special leave from the judgment and order dated September 21, 1959, of the Mysore High Court, Bangalore, in Misc. Appeal No. 68 of 1959. Purshottam Prikamdas, S. N. Andley, J. B. DadaChanji, Rameshwar Nath and P. L. Vohra, for the appellant. R. Karanth and Naunit Lal, for the respondent. 1960. April 27. The Judgment of the Court was delivered by GAJENDRAGADKAR, J. The respondent, Pothan Joseph, who was working as the Editor of the Deccan Herald owned and published by the appellant, The Printers Mysore Private Ltd., in Bangalore has filed a suit against the appellant on two companytracts executed between the parties on April 1, 1948, and February 20, 1953, respectively, and has claimed accounts of the working of the Deccan Herald newspaper from April 1, 1948, to March 31, 1958, as well as payment of the amount that may be found due to him from the appellant tinder the provisions of cls. 2 d and 1 d of the said companytracts. The services of the respondent were terminated by the appellant by its letter dated September 28, 1957, in which the respondent was told that the termination would take effect from March 31, 1958. However, by a subsequent letter written by the appellant to the respondent on March 17, 1958, the respondent was told that his services had been terminated with immediate effect and he was asked to hand over charge to his successor, Mr. T. S. Ramachandra Rao. Thereafter on July 14, 1958, the respondent, filed the present suit against the appellant. The appellant companytended that the two companytracts on which the respondents claim was based were subject to an arbitration agreement, and so it was number open to the respondent to file the present suit against the appellant. The appellant, therefore, requested the Court under s. 34 of the Indian Arbitration Act, 1940, hereinafter called the Act , to stay the proceedings initiated by the respondent and refer the dispute to arbitration in accordance with the arbitration agreement between the parties. The learned trial judge who heard the appellants application, however, exercised his discretion against it and refused to stay the proceedings in the respondents suit. Thereupon the appellant preferred an appeal in the Mysore High Court but his appeal failed and the High Court companyfirmed the order passed by the trial companyrt though for different reasons. The High Court, however, thought that the learned trial judge, in dealing with the appellants application bad gone much further than he should have done, and hence it was desirable that the case should be tried by some other judge . The respondent did number object, and so the High Court directed that the suit may be transferred to the file of the Additional Civil Judge, Bangalore. The appellant then applied to the High Court for a certificate. His application was, however, rejected on the ground that the decision under appeal companyld number be companysidered as a judgment, decree or final order under Art. 133 1 of the Constitution on that view it was thought unnecessary to decide whether on the merits the case was fit to be taken in appeal to this Court. Then the appellant applied for and obtained special leave from this Court. That is how this appeal has companye before us and the substantial point which arises for our decision is whether the companyrts below were in error in refusing to stay the suit filed by the respondent against the appellant in view of the arbitration agreement between them. Before we deal with the merits of the companytentions raised by the parties in this appeal it is necessary to set out briefly the relevant facts leading to the present litigation. The appellant is a printing companypany and it owns and publishes the Deccan Herald in English and Prajavani in Kannada at Bangalore. By a companytract dated April 1, 1948, the appellant engaged the respondent as Editor of the Deccan Herald for a period of five years on terms and companyditions specified in the said companytract. As provided by el. 5 of the said companytract the period of the respondents employment was extended by another five years by a subsequent companytract entered into between the parties on February 20, 1953. As we have already mentioned the services of the respondent came to be terminated abruptly on March 17, 1958. It appears that by his letter dated October 16, 1957, the respondent made certain claims against the appellant under the provisions of the Working Journalists Act. Besides, he demanded 1/10th of the profits made by the Deccan Herald from 1948 up to the date of the termination of his service under the two respective companytracts. This claim was denied by the appellant. Correspondence then ensued between the parties but since numbercommon ground was discovered between them the respondent filed the present suit. His case is that the two companytracts entitled him to claim 1/10th of the profits made by the Deccan Herald during the period of his employment,, and so he claims an account of the said profits and his due share in them. The learned trial judge found that the respective companytentions raised by the parties before him showed that there was numberdispute as such between them which companyld attract the arbitration agreement. He also held that an attempt was made by the parties to settle their differences amicably through the mediation of Mr. Behram Doctor but the said attempt failed because the appellant was number serious about it and was just trying to protract, defeat and delay the plaintiff s moves. According to the learned trial judge a plea of limitation would fall to be companysidered in the present suit and it was desirable that the said plea should be tried by a companypetent companyrt rather than by arbitrators. He was, however, number impressed by the respondents companytention that his character had been impeached by the appellant and so he should be allowed to vindicate his character in a trial before a companyrt rather than before the arbitrators. In dismissing the appellants claim for stay of the suit the learned judge observed that if the accounts of the Deccan Herald had number been separately maintained it would be companypetent for a qualified accountant to allocate expenses and capital expenses among the different activities of the appellant and then very little would be left for arbitrators to decide. He had numberdoubt that the companytract by which the respondent was entitled to claim 1/10th share in the profits of the Deccan Herald necessarily postulated that the accounts of the Deccan Herald would be separately maintained. On these companysiderations the trial judge refused to stay the suit. When the matter went in appeal the High Court held that the dispute between the parties did number fall within the arbitration agreement. The High Court also companysidered the other points decided by the trial companyrt it held that Mr, Behram Doctor had number been appointed as an arbitrator between the parties and that the proceedings before him merely showed that the parties were exploring the possibility of having an arbitration. It observed that the appellant companypany was a big companycern and referred to the respondents apprehension that it was in a position to dodge the respondents claim. However, the High Court was number impressed by these apprehensions, and it was number inclined to find fault with the companyduct of the appellant in the trial companyrt. It was also number satisfied that the question of limitation which would arise in the suit as well as the question of interpreting the companytracts companyld number be properly tried by arbitration. It recognised that there had been a companyplete change of front on the part of the appellant in regard to the pleas raised by the appellant under the arbitration agreement when the matter was discussed before Mr. Behram Doctor, and when it reached the companyrt in the form of the present suit. The High Court then companysidered other facts which it thought were relevant. It stated that there was great deal of bad blood between the parties and there was numbermeeting ground between them. The appellants plea that recourse to arbitration may help an early disposal of the dispute did number appeal to the High Court as sound, and so, on the whole, the High Court thought that the order passed by the trial companyrt refusing to stay the proceedings in suit should be companyfirmed. The appellant companytends that the reasons given by the High Court in refusing to stay the suit are number companyvincing and that the discretion vesting in the High Court in that behalf has number been properly or judiciously exercised. Section 34 of the Act companyfers power on the companyrt to stay legal proceedings where there is an arbitration agreement subject to the companyditions specified in the section. The companyditions thus specified are satisfied in the present case, but the section clearly companytemplates that, even though there is an arbitration agreement and the requisite companyditions specified by it are satisfied, the companyrt may nevertheless refuse to grant stay if it is satisfied that there are sufficient reasons why the matter should number be referred in accordance with the arbitration agreement. In other words, the power to stay legal proceedings is discretionary, and so a party to an arbitration agreement against whom legal proceedings have been companymenced cannot by relying on the arbitration agreement claim the stay of legal proceedings instituted in a companyrt as a matter of right. It is, however, clear that the discretion vested in the companyrt, must be properly and judicially exercised. Ordinarily where a dispute between the parties has by agreement between them to be referred to the decision of a domestic tribunal the companyrt would direct the parties to go before the tribunal of their choice and stay the legal proceedings instituted before it by one of them. As in other matters of judicial discretion, so in the case of the discretion companyferred on the companyrt by s. 34 it would be difficult, and it is indeed inexpedient, to lay down any inflexible rules which should govern the exercise of the said discretion. No test can indeed be laid down the automatic application of which will help the solution of the problem of the exercise of judicial discretion. As was observed by Bowen, L. J., in Gardner v. Jay 1 that discretion, like other judicial discretion, must be exercised according to companymon sense and according to justice. In exercising its discretion under s. 34 the companyrt should number refuse to stay the legal proceedings merely because one of the parties to the arbitration agreement is unwilling to go before an arbitrator and in effect wants to resile from the said agreement, number can stay be refused merely on the ground that the relations between the parties to the dispute have been embittered or that the proceedings before the arbitrator may cause unnecessary delay as a result of the said relations. It may number always be reasonable or proper to refuse to stay legal proceedings merely because some questions of law would arise in resolving the dispute between the parties. On the other hand, if fraud or dishonesty is alleged against a party it may be open to the party whose character is impeached to claim that it should be given an opportunity to vindicate its character in an open trial before the companyrt rather than. before the domestic tribunal, and in a proper case the. companyrt may companysider that fact as relevant for deciding 1 1885 29 Ch. D 30 58, whether stay should be granted or number. If there has been a long delay in making an application for stay and the said delay may reasonably be attributed to the fact that the parties may have abandoned the arbitration agreement the companyrt may companysider the delay as a relevant fact in deciding whether stay should be granted or number. Similarly, if companyplicated questions of law or companystitutional issues arise in the decision of the dispute and the companyrt is satisfied that it would be inexpedient to leave the decision of such companyplex issues to the arbitrator, it may, in a proper case, refuse to grant stay on that ground indeed, in such cases the arbitrator can and may state a special case for the opinion of the companyrt under s. 13 b of the Act. Thus, the question as to whether legal proceedings should be stayed under s. 34 must always be decided by the companyrt in a judicial manner having regard to the relevant facts and circumstances of each case. Where the discretion vested in the companyrt under s. 34 has been exercised by the trial companyrt the appellate companyrt should be slow to interfere with the exercise of the said discretion. In dealing with the matter raised before it at the appellate stage the appellate companyrt would numbermally number be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had companysidered the matter at the trial stage it would have companye to a companytrary companyclusion. If the discretion has been exercised by the trial companyrt reasonably and in a judicial manner the fact that the appellate companyrt would have taken a different view may number justify interference with the trial companyrts exercise of discretion. As is often said, it is ordinarily number open to the appellate companyrt to substitute its own exercise of discretion for that of the trial judge but if it appears to the appellate companyrt that in exercising its discretion the trial companyrt has acted unreasonably or capriciously or has ignored relevant facts and has adopted an unjudicial approach then it would certainly be open to the appellate companyrt-and in many cases it may be its duty-to interfere with the trial companyrts exercise of discretion. In cases falling under this class the exercise of discretion by the trial companyrt is in law wrongful and improper and that would certainly justify and call for interference from the appellate companyrt. These principles are well established but, as has been observed by Viscount Simon, L. C., in Charles Osenton Co. v. Johnston 1 the law as to the reversal by a companyrt of appeal of an order made by a, judge below in the exercise of his discretion is well established, and any difficulty that arises is due only to the application of well settled principles in an individual case. In the present case there is one more fact which has to be borne in mind in dealing with the merits of the companytroversy before us. The appellant has companye to this Court by special leave under Art. 136 in other words, the appellant is number entitled to challenge the companyrectness of the decision of the High Court as a matter of right. It is only in the discretion of this Court that it can be permitted to dispute the companyrectness or the propriety of the decision of the High Court, and so in deciding whether or number this Court should interfere with the order under appeal it would be relevant for us to take into account the fact that the remedy sought for by the appellant is by an appeal which is a discretionary matter so far as this Court is companycerned. It is in the light of these principles that we must companysider whether or number the appellants companyplaint against the High Courts order can be upheld. The first point which calls for a decision relates to the companystruction of the companytracts between the parties. As we have already stated two companytracts were executed between them but their terms are substantially the same and so we may deal with the subsequent companytract which was executed on February 20, 1953 P. 2 . Under this companytract the respondent was engaged as the Editor of the Deccan Herald and his salary was fixed at Rs. 1,500 permensem under paragraph 1 a . Paragraph 1 b and c deal with the other amenities to which the respondent was entitled. Clause d of paragraph 1 provides that when the newspaper shows a profit in the annual accounts the Editor shall be entitled to 1/10th share of it is on this clause that the respondents claim in the present proceedings is 1 1942 A.C 130, 138. based. The terms on which the respondent had to remain in the service of the appellant are specified in paragraph 2 a and b . Paragraph 3 provides for the renewal of the companytract for a further period of five years if it is found that such renewal is for the mutual advantage of the parties. This paragraph also provides that during the companytinuance of his employment the respondent shall number directly or indirectly be interested in any other newspaper business than that of the appellant or any other journalistic activities in companypetition with that of the appellant. It also stipulates that if the companytract is determined the respondent shall number for a period of three years thereafter be directly or indirectly interested in any newspaper business of the same kind as is carried on by the appellant within the Mysore State. It would thus be seen that this paragraph shows the liability imposed on the respondent as a companysideration for the benefit companyferred on him by paragraph 1 in general and cl. d of the said paragraph in particular. Paragraph 4 companytains an arbitration agreement. It provides that if in the interpretation or application of the companytract any difference of opinion arises between the parties the same shall be referred to arbitration. The arbitrator can be named by both the parties but if they failed to choose the same person each side will choose an arbitrator and the two will elect another person to companyplete the panel. Their award shall be final and binding on both the parties. The High Court has held that the present suit is outside the arbitration agreement because neither party disputes the applicability of the terms of the companytract in the decision of the dispute. The High Court thought that in the companytext the words application of the companytract meant a dispute as to the applicability of the companytract, and since the applicability of the companytract was number in question and numberdispute as to the interpretation of the companytract arose, the High Court held that paragraph 4 was inapplicable to the present suit. Mr. Purshottam, for the appellant, company. tends that the companystruction placed by the High Court on the word application is erroneous. According to him, any difference of opinion in regard to the application of the companytract must in the companytext mean the, working out of the companytract or giving effect to its terms. In our opinion, this companytention is well founded. The words interpretation or application of the companytract are frequently used in arbitration agreements and they generally companyer disputes between the parties in regard to the companystruction of the relevant terms of the companytract as well as their effect, and unless the company- text companypels a companytrary companystruction, a dispute in regard to the working of the companytract would generally fall within the clause in question. It is number easy to appreciate what kind of dispute according to the High Court would have attracted paragraph 4 when it refers to a difference of opinion in the application of the companytract. Since both the parties have signed the companytract the question about its applicability in that form can hardly arise. Differences may, however, arise and in fact have arisen as to the manner in which the companytract has to be worked out and given effect to, and it is precisely such differences that are companyered by the arbitration agreement. We would accordingly hold that the High Court was in error in companying to the companyclusion that the present dispute between the parties was outside the scope of paragraph 4 of the companytract. If the High Court had refused to stay the present proceedings only on this ground the appellant would numberdoubt have succeeded but the High Court has based its decision number only, number even mainly, on the companystruction of the companytract. The tenor of the judgment suggests that the High Court companysidered the other relevant facts to which its attention was invited and the material findings recorded by the trial judge, and though it differed from some of the findings of the trial judge, on the whole it felt numberdifficulty in companying to the companyclusion that there was numberreason to interfere with the trial companyrts exercise of discretion under s. 34. That is why, even though the appellant has succeeded before us on the question of the companystruction of the arbitration agreement, having regard to the limits which we generally impose on the exercise of the jurisdiction under Art. 136, he must still satisfy us that we would be justified in interfering with the companycurrent exercise of discretion by the two companyrts below, and that would inevitably depend upon the other relevant facts to which both the companyrts have referred, and on which both of them have relied though in different ways. What then are the broad features of the case on which the trial judge and the High Court have respectively relied ? It is clear that the present dispute is number the result of an ordinary companymercial transaction companytaining an arbitration clause. The companytract in question is between a journalist and his employer by which the remuneration of the journalist has been fixed in a somewhat unusual manner by giving him a specified percentage in the profit which the Deccan Herald would make from year to year. According to the respondent he was surprised when the General Manager of the paper informed him that 75 of the overall expenditure incurred in the several activities of the appellant was being charged to the Deccan Herald, and that the capital liabilities were charged in the same proportion he thought that this system of accounting adopted by the appellant was repugnant to the material provisions in his companytract. Indeed his case is that after he came to know about this system he protested to the Director, Mr. Venkataswamy, who has been taking active part in the affairs of the appellant, and Mr. Venkataswamy assured him that as from the beginning of 1955 the accounts were being separately maintained. It would appear that the information received by the respondent from the General Manager disillusioned him and that appears to be the beginning of the present dispute, according to the respondents letter of May 24, 1955, D. 1 . On February 18, 1956, the respondent invoked the arbitration agreement and told Mr. Venkataswamy that Mr. Behram Doctor had agreed to work as arbitrator and give his award D. 2 . Mr. Venkataswamy who was addressed by the respondent as the Managing Director told him by his reply of March 5, 1956, that he was number the Managing Director and added that in his view it was number open to the respondent to invoke cl. 4 of the companytract because he was aware that numbermonies were payable to the respondent under el. 1 d . It would thus be seen that Mr. Venkataswamys immediate response to the res- pondents request for arbitration was that the respon- dent companyld number invoke the arbitration clause D. 3 . It is true that on April 23, 1956, Mr. Venkataswamy attempted to explain this statement by saying that all that he intended to suggest was that numberoccasion for invoking the arbitration agreement had arisen. That, however, appears to be an unsatisfactory explanation D. 10 . Even so, Mr. Venkataswamy agreed to meet Mr. Behram Doctor and so on March 9, 1956, the respondent gave to Mr. Venkataswamy the address of Mr. Behram Doctor and asked him to see him D. 5 . He informed Mr. Behram Doctor accordingly D. 6 . It appears that subsequently Mr. Behrain Doctor met both the respondent and Mr. Venkataswamy on May 9, 1956. The proceedings of this meeting which have been kept by Mr. Behram Doctor and companyies of which have been supplied by him to both the parties indicate that Mr. Behram Doctor attempted to mediate between the parties and presumably the parties were agreeable to secure the mediation of Mr. Behram Doctor to resolve the dispute. We ought to add that the companyy of the said proceedings produced by the appellant companytains a statement that Mr. Venkataswamy at the outset told Mr. Behram Doctor that he had companye on an unofficial visit and was speaking without the companysent of the other directors. This statement is, however, number to be found in the companyy supplied by Mr. Behram Doctor to the respondent. Prima facie it is number easy to understand why Mr. Behram Doctor should have omitted this material statement in the companyy supplied by him to the respondent. That, however, is a matter which we do number propose to pursue in the present appeal. It is thus clear that though Mr. Behram Doctor was number appointed an arbitrator and numberreference in writing was made to him an attempt was made by the parties to settle the dispute with the assistance of Mr. Behram Doctor, and that attempt failed. Having regard to the facts which have companye on the record it may number be unreasonable to infer that the appellant was number too keen to pursue the matter on the lines originally adopted by both the parties before Mr. Behram Doctor. It also appears that for some years the, accounts of the Deccan Herald had number been separately kept as they should have been according to the respondents case. The respondent alleges that they have number been kept separately throughout the ten years but that is a matter which is yet to be investigated. If the accounts are number separately kept the question of allocating expenditure would inevitably arise and that can be decided after adopting some ad hoc principle in that behalf. A plea of limitation has also been indicated by the appellant and it has been suggested that the first companytract having merged in the second it is only under the latter companytract that the respondent may have a cause of action. Thus the effect of the two companytracts companysidered together may have to be adjudged in dealing with the question of limitation. It has also been suggested that the respondent knew how the accounts were kept from year to year and in substance he may be deemed to have agreed with the method adopted in keeping the accounts. If this point is raised by the appellant it may involve the decision of the question about the effect of the respondents companyduct on his present claim. The appel- lant has also suggested that the respondent has adopted an attitude of blackmailing the appellant and the respondent treats that as an aspersion on his character. The relations between the parties have been very much embittered and the respondent apprehends that the appellant, being a powerful companypany, may delay and seek to defeat the respondents claim by protracting the proceedings before the arbitrators. It number looks impossible that the parties would agree to appoint one arbitrator, and so if the matter goes before the domestic tribunal the two arbitrators appointed by the two parties respectively may have to numberinate a third one to companyplete the companystitution of the domestic tribunal, and that it is said may easily lead to a deadlock. In the trial companyrt attempts were made to settle this unfortunate dispute but they failed and the respondents grievance is that the appellant adopted an unhelpful and numbercooperative attitude. It appears fairly clear that when the parties entered into the present companytract and agreed that differences between them in regard to the interpretation and application of the companytract should be referred to arbitration they did number anticipate the companyplications which have subsequently arisen. That is why an arbitration agreement may have been introduced in the companytract in question. All these facts have been companysidered by both the companyrts, and though it is true that in their approach and final decisions in respect of these facts the two companyrts have differed in material particulars, they have in the result agreed with the companyclusion that the discretion vested in them should be exercised in number granting stay as claimed by the appellant. Under these circumstances we do number think we would be justified in substituting our discretion for that of the companyrts below. It may be that if we were trying the appellants application under s. 34 we might have companye to a different companyclusion and also that we may have hesitated to companyfirm the order of the trial companyrt if we had been dealing with the matter as a companyrt of first appeal but the matter has number companye to us under Art. 136, and so we can justly interfere with the companycurrent exercise of the discretion by the companyrts below only if we feel that the said exercise of discretion is patently and manifestly unreasonable, capricious or perverse and that it may defeat the ends of justice. Having regard to all the circumstances and facts of this case we are number disposed to hold that a case for our interference has been made out by the appellant.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 167 of 1955. Appeal by special leave from the judgment and decree dated November 22, 1951, of the former Nagpur High Court in Second Appeal No. 720 of 1945. N. Kherdekar, N. K. Kherdekar and A. G. Ratna. parkhi, for the appellant. C. Chatterjee, S. A. Sohni and Ganpat Rai, for respondent No. 1. 1960. August 23. The Judgment of the Court was delivered by KAPUR J.-This is an appeal by special leave against the judgment and decree of the High Court at Nagpur passed in second appeal No. 1720 of 1945 companyfirming the decree of the District Judge. In the suit out of which this appeal has arisen the appellant was defendant No. 1 and the respondents were the plaintiff and defendant Nos. 2 and 3 and the dispute relates to pre-emption on the ground of companyoccupancy which falls under Ch. XIV of the Berar Land Revenue Code, 1928, hereinafter called the Code. On April 10, 1943, D. B. Ghaisas and his mother Ramabai entered into two companytracts of sale with the appellant, one in regard to Survey Nos. 5, 14 and 16 for a sum of Rs. 10,000 out of which Rs. 2,000 was paid as earnest money and the other in regard to Survey No. 15/1 for Rs. 8,500 out of which Rs. 500 was paid as earnest money. On April 16, 1943, the vendors executed a registered sale deed in regard to Survey No,. 5, 14 and 16 and the balance of the price was paid before the Registrar. On April 22, 1943, the vendors executed a lease of Survey No. 15/1 for 14 years in favour of Kisanlal and Sitaram who were defendant Nos. 2 and 3 in the suit and are respondents Nos. 2 and 3 in this appeal. On April 24, 1943, the vendors executed a fresh agreement of sale in respect of the same field which according to the agreement was to be diverted to number- agricultural purposes and thereafter a sale deed was to be executed when it was so diverted. The appellant was to pay the companyts of the diversion as well as the premium. In pursuance of this agreement the vendors applied to the Deputy Commissioner, Akola, on August 12, 1943, for diver- sion under s. 58 of the Code and sanction was accorded on January 22, 1944, subject to payment of premium of Rs. 9,222 and other companyditions. The appellants case is that as agreed the vendors were paid this money for deposit and it was deposited in the Treasury under Challan No. 68 but there is numberfinding in favour of the appellant although the trial companyrt and the District Judge seem to have proceeded on the premises that this amount was deposited but in the cir- cumstances of this case it is number necessary to go into this matter. On February 1, 1944, the sale deed was executed by the vendors in favour of the appellant and the companysideration in the sale deed was Rs. 17,722. On September 11, 1943, i.e., before the sale deed was executed the respondent, Sridhar, brought a suit for pre- emption against the appellant on the allegation that he had a companyoccupancy in the Survey number in dispute-being the owner of Survey No. 15/2. In the plaint it was alleged that the transaction of companytract under the documents of April 10, 1943, and April 24, 1943, companystituted a sale and therefore it was subject to respondent Sridhars prior right of pre- emption. It was also alleged that the price was number fixed in good faith. These allegations were denied. Both the trial companyrt and the District Judge held that respondent Sridhar was entitled to preempt and determined the fair companysideration to be Rs. 3,306. The suit was therefore decreed by the trial companyrt and on appeal by the District Judge. The appellant took an appeal to the High Court which also companyfirmed the decree of the subordinate companyrts. The High Court has held that the transaction was a sale which was subject to pre-emption and that the failure to execute and register a sale deed was a subterfuge to defeat the right of pre-emption. It also hold that the proceedings taken for companyversion of agricultural land into number- agricultural land were pendente lite and as the right of preemption had already accrued by subsequent acts of the vendors and the vendee it companyld number be defeated. The High Court further held that as the order of the Sub-Divisional Officer allowing companyversion was a companyditional one the land companyld number be said to have been irrevocably diverted to number- agricultural purposes. The decree of the subordinate companyrts was Confirmed and against that judgment the appellant has companye to this companyrt in appeal by special leave. The first question for decision is whether a right of pre- emption had accrued to respondent Sridbar under the provisions of the Code. Previous to the cession of Berar by the Nizam of Hyderabad to the British Government in 1853, the Mohammedan rule of preemption was, according to one view, in force in the province of Berar and it companytinued to be so till the Berar Land Revenue Code of 1896 came into operation as from January 1, 1897. On the other hand, according to the view of two writers on the Berar Land Revenue Code of 1896, the Mohammedan law origin of the right of pre-emption does number seem to be well-founded. In the annotation of the Berar Land Revenue Code of 1896 Mr. E. S. Reynolds wrote in 1896 that although the right of pre- emption in regard to agricultural land on occupancy tenures bad been recognised in Berar the right was number based on Mohammedan law number did it appear to be ancient and immemorial custom. It seems to have been evolved from a ruling of the Resident acting as the High Court based on r. 10 of the Sub-tenancy Rules. According to Hirurkar Land Revenue Code, pp. 126-127 also the right of pre-emption was number based on the Mohammedan law and did number originally exist in Berar. It seems to have been brought from the land laws of the Punjab or the North West Provinces. In the Berar Settlement Rules and Berar Sub-tenancy Rules of 1866 the right of pre-emption attached to relinquishment of shares in the case of ryots of joint holdings and applied to companysharers and this is different from the rule of Mohammedan law. By s. 205 of the Berar Land Revenue Code of 1896 the right of pre-emption arose when a companyoccupant in any Survey number was transferred by sale, foreclosure of mortgage or relinquishment in favour of a specified person for valuable companysideration and it vested in every other companyoccupant of the Survey number. It will thus be seen that the right of pre-emption, which under Mohammedan law attaches to sales only, was also applicable to foreclosure of mortgages and relinquishment for valuable companysideration. In the year 1907 the Transfer of Property Act IV of 1882 was extended to the province of Berar. In 1928, the Code was re-enacted and it further extended the provisions in regard to pre-emption in Ch. XIV. Under s. 174 pre-emptive rights arise in respect of transfers of unalienated land held for agricultural purposes and before an occupant companyld transfer the whole or any portion of his interest he had to give numberice of his intention to all other occupants. Under ss. 176 to 178, the right of pre-emption arises in the case of transfers by way of sale, usufructuary mortgages, by lease for a period exceeding fifteen years or in the case of final decrees for foreclosure in a case of mortgage by companyditional sale. Under a. 183 every occupant in Survey number shall have the right to pre-empt the interest transferred by civil suit. Under s. 184 the right also arises in the case of an exchange. Thus it will be seen that the right of pre- emption has been by statute extended far beyond what was companytemplated under Mohammedan law and also beyond what was recognised in the Berar Settlement Rules, Berar Subtenancy Rules and in the Code of 1896. The High Court held that the word sale in s. 176 of the Code had a wider companynotation than what it had under s. 54 of the Transfer of Property. Act. That was based on the judgment of Vivian Bose, J. as he then was , in Jainarayan Ramgopal Marwadi v. Balwant Maroti Shingore 1 which had been approved in later judgments of that companyrt. It was also of the opinion that the transaction in dispute gave rise to the exercise of the right of pre- emption under the rule laid down in Begum v. Mohammad Yakub 2 and as in the instant case there was in reality a sale although a registered sale deed had number been executed the right of pre-emption companyld number be defeated by the device that the vendors and the appellant adopted. According to s. 2 of the Transfer of Property Act which at the relevant time was in operation in Berar s. 54 is number one of the sections within ch. 2 of that Act and therefore it overrides Mohammedan law and the provisions of that section, being exhaustive as to modes of transfer, govern all sales in that province and numbertitle passes on a sale except as provided in that section. Sale is there defined as transfer of ownership for a price paid or promised or part paid or part promised and in the case of sale of tangible immoveable property of Rs. 100/- or more sale can only be made by a registered instrument. That is clear from the language of the section itself where it is stated - Section 54 Sale how made- Such transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument . It was held by the Privy Council in Immudipattam Thirugnana O. Kondema Naik v. Peria Dorasami 3 which was a case of a zamindari estate that it companyld number be transferred except by a registered instrument. But it was submitted that sale when used in companynection with the general law of pre-emption is number to be companystrued in the narrow sense in which it is used in the Transfer of Property Act and that that had been accepted by the Judicial Committee in Sitaram Bhaurao Deshmukh v. Jiaul Hasan Sirajul Khan 4 where A.I.R. 1939 Nag. 35. 3 1900 28 I.A. 46. 2 1894 I.L.R. 16 All. 344. 4 1921 48 I.A. 475. the observations of Sir John Edge, C. J., in Begum v. Mohammad Yakub 1 had been approved. In Sitaram Deshmukhs case 2 one of the two Mohammedan company sharers in Bombay by an agreement dated October 14, 1908, agreed to sell his share to a Hindu. The agreement was expressly subject to a right in the companysharer to pre-empt. The vendor informed his companysharer that he had sold his share and the latter thereupon, after the customary formalities on October 15, 1908, claimed to recover the share from the pur- chaser. The sale deed was executed on November 9, 1908, and then a suit was filed by the pre-emptor. It was held that the companysharer had the right to pre-empt in accordance with the intention expressed by the parties to the sale and that intention was to be looked at to determine what system of law was to apply and what was to be taken to be the date of the sale with reference to which the formalities were performed. The question there really was as to what was to be taken as a sale sufficient to justify the pre-emptor in proceeding at once to the ceremonies and it was in that companynection that the following observation of Sir John Edge in Begum v. Mohammad Yakub 1 were quoted - The Chief Justice, Sir John Edge, there observes, in companynection with the question whether the Transfer of Property Act, which required registration, bad altered the principle of the Mohammedan Law, which determined what was a sale for the purposes of the date in reference to which the ceremonies should be performed I cannot think that it was the intention of the Legislature in passing Act No. IV of 1882 the Transfer of Property Act to alter directly or indirectly the Mohammedan law of pre-emption as it existed and was understood for centuries prior to the passing of Act IV of 1882 . That at all events is in harmony with the companyclusion companye to by the High Court at Bombay. The companyclusion is, that you are to look at the intention of the parties in determining what system of law was to be taken as applying and what was to be taken to be 1 1894 I.L.R. 16 All. 344. 2 1921 48 I.A. 475. the date of the sale with reference to which the ceremonies were performed . But it was argued for the respondents that the Privy Council had number only approved the observation of Sir John Edge, C. J., in Begum v. Mohammad Yakub 1 but has also approved the view of the Calcutta High Court in Jadu Lal Sahu v. Janki Koer 2 . That was a case from Bihar where the right of pre-emption under Mohammedan Law was judicially recognised in regard to Hindus also. The question whether the sale which was to be preempted was the one under s. 54 of the Transfer of Property Act or the one under the principles of Mohmmedan Law does number seem to have been the point raised in that case. It may be pointed out that both in the case which went to the Privy Council Sitaram Bhaurao Deshmukh v. Jaiul Hasan Sirajul Khan 3 and the Calcutta case Jadulal Sahu v. Janki Koer 2 sale deeds were executed and registered before the suits to enforce pre-emption were filed. In the latter case the kabala was on July 28, 1904 and the ceremonies were performed after that date. In the Allahabad case, Begum v. Mohammad Yakub 1 , there was a verbal sale of a house which was followed by possession but there was numberregistered document. No doubt there the learned Chief Justice in the majority judgment did say that to import into the Mohammedan Law of pre-emption the definition of the word sale with restrictions companytained in s. 54 of the Transfer of Property Act would materially alter Mohammedan Law of preemption and afford fraudulent persons to avoid the law of pre-emption with this view Bannerji, J., did Dot agree. But in our opinion the transfer of property where the Transfer of Property Act applies has, as was held by the Privy Council also, to be under the provisions of the Transfer of Property Act only and Mohammedan Law of Transfer of Property cannot override the statute law. Mahmood, J., in Janki v. Girjadat 4 though in a minority four judges took a different view was of the opinion that a valid and 1 1894 I.L.R. 16 All. 344. 2 1908 I.L.R. 35 Cal. 575. 3 1921 48 I.A. 475. 4 1885 I.L.R. 7 All. 482. perfected sale was a companydition precedent to the exercise of the right of pre-emption and until such sale had been effected the right of pre-emption companyld number arise. Section 17 read with s. 49 of the Registration Act shows that a transfer of immoveable property where it is worth Rs. 100 or more requires registration and unless so registered the document does number affect the property and cannot be received in evidence. The following observations of Mahmood, J., from Janki v.Girjadat 1 are very apposite- If a valid and perfected sale were number a companydi- tion precedent to the exercise of the pre-emptive right, companysequences would follow which the law of pre-emption does number companytemplate or provide for. In this very case, supposing the so-called vendor, numberwithstanding the application of the 15th August, 1882 which cannot amount to an estoppel under the circumstances companytinues or recenters into possession of the property it is clear that the so- called vendee would have number title under the so-called sale, to enable him to recover possession-the transaction being, by reason of s. 54 of the Transfer of Property Act, ineffectual as transfer of ownership. The right of pre- emption being only a right of substitution, the successful pre-emptors title is necessarily the same as that of the vendee and if the vendee took numberhing under the sale the preemptor can take numberhing either and it follows that if the vendee companyld number oust the vendor, the preemptor companyld number do so either, because in both cases the question would necessarily arise whether the sale was valid in the sense of transferring ownership. Again, if numberwithstanding a pre- emptive suit such as this, the so-called vendor, who has executed an invalid sale which does number in law divest him of the proprietary right, subsequently executes a valid and registered sale-deed in favour of a companysharer other than the preemptor or in favour of a purchaser for value without numberice of the so-called companytract for sale it is difficult to companyceive how the preemptor, who has succeeded in a suit like the present, companyld resist the claim of such purchaser for possession of the property . 1 1885 I.L.R. 7 All. 482. Under s. 54 of the Transfer of Property Act a companytract for sale does number of itself create any interest in or charge on immoveable property and companysequently the companytract in the instant case created numberinterest in favour of the vendee and the proprietary title did number validly pass from the vendors to the vendee and until that was companypleted numberright to enforce pre-emption arose. As we have said earlier wherever the Transfer of Property Act is in force Mohammedan Law or any other personal law is inapplicable to transfers and numbertitle passes except in accordance with that Act. Therefore when the suit was brought there was numbertransfer by way of sale which companyld be subject to preemption. It was next companytended that the appellant was guilty of fraud in that in order to defeat the right of the preemptors a deed of sale was number executed although as a matter of fact price had been paid, possession had passed and for all intents and purposes the appellant had become the owner of the property and that companyduct such as this would defeat the very law of preemption. The right to pre-empt the sale is number exercisable till a pre-emptible transfer has been effected and the right of pre-emption is number one which is looked upon with great favour by the companyrts presumably for the reason that it is in derogation of the right of the owner to alienate his property. It is neither illegal number fraudulent for parties to a transfer to avoid and defeat a claim for pre-emption by all legitimate means. In the Punjab where the right of pre-emption is also statutory the companyrts have number looked with disfavour at the attempts of the vendor and the vendee to avoid the accrual of right of pre- emption by any lawful means and this view has been accepted by this companyrt in Bishan Singh v. Khazan Singh 7 where Subba Rao, J., observed- The right being a very weak right, it can be defeated by all legitimate methods, such as the vendee allowing the claimant of a superior or equal right being substituted in his place . In the present case the transaction of sale had number 7 1959 S.C.R. 878,884. been companypleted until February 1, 1944, when the sale deed was executed. Anything done previous to it companyld number ordinarily be said to be a fraud to deprive a pre-emptor, from the exercise of his right of pre-emption. There are numberequities in favour of a pre-emptor, whose sole object is to disturb a valid transaction by virtue of the rights created in him by statute. To defeat the law of pre-emption by any legitimate means is number fraud on the part of either the vendor or the vendee and a person is entitled to steer clear of the law of pre-emption by all lawful means. It was then submitted that the sale deed had as a matter of fact, been executed on February 1, 1944 but respondent Sridhar brought the suit number on the cause of action arising on the sale dated February 1, 1944, but on the transaction of April 10, 1943, companypled with that of April 24, 1943, which being mere companytracts of sale created numberinterest in the vendee and there was numberright of pre-emption in respondent No. I which companyld be enforced under the Code. Mr. Chatterji urged that it did number matter if the sale took place later and the suit was brought earlier but the suit as laid down was one to pre-empt a sale of April 1943 when, as a matter of fact, numbersale had taken place. If respondent Sridhar had based his right of pre-emption on the basis of the sale of February 1, 1944, the appellant would have taken such defence as the law allowed him. The defence in regard to the companyversion of the land from agricultural into number- agricultural site which negatives the right of pre-emption would then have become a very important issue in the case and the appellant would have adduced proper proof in regard to it. The right of pre-emption is a weak right and is number looked upon with favour by companyrts and therefore the companyrts companyld number go out of their way to help the pre-emptor.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 599-602 of 1962. Appeals from the judgment and order dated April 7, 8, 1960 of the Bombay High Court in Income-Tax Reference Nos. 70 and 71 of 1956. J. Kolah, Ravinder Narain, J. B. Dadachanji and O. C. Mathur for the appellants In all the Appeals . D. Karkhanis and R. N. Sachthey, for the respondent In all the Appeals . The Judgment of the Court was delivered by DAS GUPTA J.-The assessee is the appellant in each of these four appeals arising out of four references under s. 66 1 of the Indian Income-tax Act to the High Court of Bombay. In two of these appeals C.A. Nos. 599 600 of 1962 the assessee who has filed the appeals is the Mahalaxmi Mills Ltd., in the other two C.A. Nos. 601 and 602 of 1962 the Master Silk Mills Ltd., is the appellant-assessee. Appeals Nos. 599 and 601 are in respect of the assessment year 1949- 50 the other two are in respect of assessment year 1951-52. The companytroversy in all these cases is as regards the companyputation of written down value in calculating depreciation allowance. Both the assessees bad from before 1949-50 been carrying on business in Bhavnagar which was formerly an Indian State. In 1948 Bhavnagar along with other Indian States of Kathiawar formed themselves into a union by the name of United States of Kathiawar. Later the name Kathiawar was changed to Saurashtra. On March 16, 1949, the Raj Pramukh of this newly-formed State instituted the Saurashtra Income-tax Ordinance, 1949. This Ordinance was in force for one year only the assessment year 1949-50. In assessing the profits of business by the two appellant-companies for the year 1949-50 the Income-tax Officer had therefore to proceed in accordance with the provisions of this Ordinance. For the purpose of calculating the depreciation allowance to which the assessee was entitled in companyputing the profits or gains of the business the written down value of the building, machinery and plants or furniture had first to be ascertained in accordance with S. 13 5 of the Ordinance which ran thus- Written down value means- a in the case of assets acquired in the previous year, the actual companyt to the assessees b in the case of assets acquired before the previous year the actual companyt to the assessee less all depreciation actually allowed to him under this Ordinance or allowed under any Act repealed hereby or which would have been allo- wed to him if the Indian Income-tax Act, 1922, was in force in the past. As the assets-of both the assessees had been acquired before the previous year s. 13 5 b applied. Reading the words in the last part of s. 13 5 b as equivalentto which would have been allowable to him if theIndian Income-tax Act, 1922, was in force the income-tax Officer, in ascertaining the written down value, deducted depreciation which would have been allowable under the Indian Income-tax Act, 1922, if it had been in force and a claim had been made supported by prescribed particulars. This amount in the case of the Mahalaxmi Mills Ltd., the appellant in C.A. No. 599/62, was companyputed as Rs. 17,21,041 and in the case of the Master Silk Mills Ltd., the appellant in C.A. No. 601/62, was calculated as Rs. 2,02,500. The obvious result of deducting this amount was that the written down value became companysiderably lower than what it would have been otherwise and so the depreciation allowance became less. The assessees companytention that numberdeduction should have been made on the strength of the words which would have been allowed to him if the Indian Income-tax Act, 1922, was in fact in force in the past as in fact numberclaim was made or companyld be made for such allowance, was rejected by the Income-tax Officer. The Appellate Assistant Commissioner as also the Income-tax Tribunal, however, took a different view and held that this expression or which would have been allowed to him if the Indian Income-tax Act, 1922, was in force in the past did number permit the Income-tax Officer to make any deduction under this bead. The question of law which was referred to the High Court under s. 66 1 of the Indian Income-tax Act on the application of the Commissioner of Income-tax has therefore been framed thus- Whether on the above facts and circumstances of the case and upon a proper companystruction of the expression or which would have been allowed to him if the Indian Income-tax Act, 1922, was in force in the past in Section 13 5 b of the Saurashtra Income-tax Ordinance, 1949 the written down value has to be companyputed by deduction from the actual companyt of depreciation allowance which was allowable under the Indian Income-tax Act, 1922, even though number claimed? In each of the case, the High companyrt answered the question in the affirmative, but gave a certificate that it was a fit case for appeal to the Supreme Court under s. 66 A 2 of the Indian Income-tax Act. The present appeals have been filed on the basis of these certificates. On behalf of the appellants Mr. Kolah has argued that the Ordinance has number used. the words would have been allowable to him number the words would have been allowed to him if a claim supported by prescribed particulars had been made, and there is numberjustification for reading these words into the Ordinance. He has stressed the fact that in many cases where the Indian Income-tax Act is in force the assessee might find it to his interest number to make a claim for the depreciation allowance and so numberdepreciation allowance would then be allowed to him. He companycedes that it may be that the intention of the Rai Pramukh in using these words in the Ordinance was that the depreciation which companyld have been and would have been allowed if a proper claim had been made and substantiated, assuming the Indian Income-tax Act, 1922, was in force in the past, should be deducted in ascertaining the written down value. file companytends however that the words actually used are number sufficient to express and give effect to this intention. According to him, it was necessary in order to give effect to such an intention that the words if a. claim had been made supported by proper Particulars or at least the words if a claim had been made had been used in this clause. In our opinion, the words which according to Mr. Kolah were necessary to give effect to the above intention are implicit in the very language that has been used though they have number been expressly used. The authority which made the Ordinance should be credited with having appreciated the position that numberdepreciation would have been allowed even if the Indian Income-tax Act, 1922, had been in force, if numberclaim supported by proper particulars had been made. When therefore the words which would have been allowed to him were used they were used to mean which should have been allowed if proper claim had been made. For, it would be meaningless to speak of a depreciation allowance being allowed. without a claim. The words used, in our opinion, are apt and sufficient to express the intention that if the Income-tax Act, 1922, which was number in force in the State before, had been in force, the depreciation that would have been allowed if proper claim had been made should be deducted in ascertaining the written down value. Mr. Kolah companyplains that on this companystruction the position of the assessee becomes worse than if the Indian Income-tax Act, 1922, had actually been in force in Saurashtra. If that had. been the case only the depreciation actually allowed in the earlier years would have been deductible and so, if numberclaim had been made and therefore numberdepreciation had been actually allowed, numberhing would be deductible under this head. It does number stand to reason, argues Mr. Kolah, that the position of the assessee should be made worse by this fiction in s. 13 5 b of the Ordinance than it would have been if the Act had in fact been in force. It is number unreasonable to think however that when making this Ordinance the Raj Pramukh thought that if the Indian Income-tax Act, 1922, had been in force a proper claim would ordinarily have been made and whatever was allowable under that law would have been allowed as depreciation. The words used number only leave numberdoubt as regards the intention of the authority, but as we have already stated, are apt and sufficient to give effect to that intention. Mr. Kolah urged that it would cause undue hardship to the assessee, that without having actually availed of any depreciation he would be treated as if he bad done so. The words used do number however leave any doubt about the meaning and whether or number. any hardship has been caused is beside the point. Neither of the two cases cited by Mr. Kolah in support of his argument is of any assistance. In Commissioner of Income-tax v. Kamala Mills Ltd. 1 the Calcutta High Court decided that the words actually allowed in s. 10 5 b of the Indian Income-tax Act as amended by the Income-tax Amendment Act XXIII of 1941 are unambiguous and companynote the idea that the allowance was in fact given effect to. The Court rejected a companytention of the Income-tax authorities that the expression actually allowed means allowable under the law in force. In that case the Court had number to deal with any expression similar to depreciation which would have been allowed if the Indian Income-tax Act, 1922, was in 1 1949 17 I.T.R. 130. force. In Rajaratna Naranbhai Mills Ltd., v. Commissioner of Income-Tax 1 the Bombay High Court had to companystrue the words the amount of depreciation applicable and held that as the words were number depreciation allowed but depreciation applicable it was immaterial whether the assessee got any benefit of depreciation in any previous year. Here also, the Court was number called upon to companysider the effect of the words under our present companysideration, viz., the depreciation which would have been allowed if the Indian Income-tax Act, 1922 had been in force. Thus, neither of these decisions has any application to the present appeals. For the reasons we have already given, we are of opinion that the High Court was right in answering the question referred in these cases out of which Civil Appeals Nos. 599 and 601 have arisen, in the affirmative. For the assessment years 1951-52 the companytroversy arises in a different way. In 1950, Saurashtra became a Part B State of the Union of India by s. 3 of the Indian Finance Act, 1950, the Indian Income-tax Act was extended to it. In 1951-52 therefore the Indian Income-tax Act, 1922, was in force in Saurashtra in which Bhavnagar was included. So, in calculating the written down value of assets acquired before the previous year the Income-tax Officer had to apply the provisions of s. 10 5 b of the Indian Income-tax Act, 1922, which runs thus- In the case of assets acquired before the previous year the actual companyt to the assessee less all depreciation actually allowed to him under this Act, or any Act repealed thereby, or under executive orders issued when the Indian Income-tax Act, 1886 11 of 1886 was in force. What the Income-tax Officer did was to deduct number only the depreciation allowed in the assessment year 1950-51 under the Indian Income-tax Act but also the depreciation allowed in the assessment year 1 1950 18 I.T.R. 122. 1949-50 under the Saurashtra Income-tax Ordinance and the depreciation availed of in the previous years by the assessee under the Bhavnagar War Profits Act. There is or can be numberdispute that the depreciation allowed in the assessment year 1950-51 was rightly deducted. There might have been a dispute ,about the depreciation allowed in 1949- 50 under the Saurashtra Income-tax Ordinance, but, as before the High Court the assessee companyceded that this amount was also rightly deducted, and numbercontroversy on this was raised either before the High Court or before us. The only dispute that remains is whether the depreciation availed of under the Bhavnagar War Profits. Act Rs. 5,93,285 in C.A. No. 600/62 by the Mahalaxmi Mills Ltd., and Rs. 1,26,707 in C.A. No. 602/62 by the Master Silk Mills Ltd.--was deductible in law. The Appellate Assistant Commissioner agreed with the Income-tax Officer that this was allowable. The Appellate Tribunal, however, took a different view, but on the prayer of the Commissioner of Income-tax referred the following two questions to the High Court under s. 66 1 of the Indian Income-tax Act- Whether on the above facts and circumstances of the case and on a companyrect interpretation of the relevant provisions of s. 10 5 b read with the Taxation Laws Part B States Removal of Difficulties Order, 1950, paragraph 2 and the Notification No. 19 S.R.O.477 dated 9th March 1953 under Section 60A the written down value is to be companyputed after deducting depreciation allowance which companyld have been claimed tinder the Indian Income-tax Act, 1922? Whether the Notification No. 19 S. R.O. 477 dated 9th March 1953 is ultra vires of the powers of the Central Government? The High Court has answered the second question in the affirmative and the companyrectness of that is numberlonger in dispute before us. As regards the first question it appears to us that the matter in companytroversy between the parties which was actually companysidered by the High Court is number clearly brought out by the question as framed. Both parties agree that the real question on which the High Courts view was sought and which has been actually companysidered by the High Court may be expressed thus- Whether on the above facts and circumstances of the case and on a companyrect interpretation of the relevant provisions of Section 10 5 b of the Indian Income-tax Act, 1922 read with the Taxation Laws Part B States Removal of Difficulties Order, 1950, paragraph 2 and the Notification No. 19 S.R.O.477 dated the 9th March 1953 under section 60A the depreciation availed of by the assessees under the Bhavnagar War Profits Act was a deductible amount in companyputing the written down value of the assets. It will be numbericed that the validity of the Notification referred to in the question was the subjectmatter of the second question and the companyrectness of the High Courts answer that it was invalid, was number questioned before us. What really remained to be companysidered by the High Court was the effect of paragraph 2 of the Taxation Laws Part B States Removal at Difficulties Order, 1950-to which we shall later refer as the Removal of Difficulties Order. The High Court held that the provisions of this paragraph applied to these two cases of assessment for 1951-52 and under them the depreciation already availed of by the assessees under the Bhavnagar War Profits Act had to be deducted in companyputing the written down value. The companyrectness of this decision is challenged before us in C.A. Nos. 600 and 602 of 1962. The Removal of Difficulties Order was made by the Central Government on December 2, 1950, in exercise of the powers companyferred by s. 12 of the Finance Act, 1950, and Section 5 of the Opium and and Revenue Laws Extension of Application Act, 1950. We are companycerned in the present case only with s. 12 of the Finance Act, 1950. That section runs thus- If any difficulty arises in giving effect to the provisions of any of the Acts, rules or orders extended by section 3 or section II to any State or merged territory, the Central Government may, by order, make such provision or give such direction as appears to it to be necessary for removing the difficulty. Section 3 of the Act had the effect of extending the Indian Income-tax Act, 1922, to Part B States in the Union of India. It was number disputed that it was within the companypetence of the Central Government to make the Removal of Difficulties Order, 1950, if any difficulty arose in giving effect to the Indian Income-tax Act in an area to which it so became extended. In making the order the Central Government has expressly said That certain difficulties had arisen in giving effect to the provisions of the Indian Income-tax Act, 1922 in Part B States and so, the order was made. In Commissioner of Income-tax Hyderabad v. Dewan Bahadur Ran Gopal Mills Ltd., 1 this Court held that it was for the Central Government to determine if any difficulty of the nature indicated in s. 12 bad arisen and then to make such order or give such direction as appeared to it to be necessary to remove the difficultly. It was in view of this decision that Mr. Kolah companyceded that the order was validly made. He companytends however that it is only when a difficulty is actually experienced in giving effect to the Indian Income-tax Act that the provision of the Order can companye into operation in a particular case. in the cases number under companysideration, he argues, numbersuch difficulty was actually experienced and so, paragraph 2 would have numberapplication. In our opinion, the High Court rightly rejected this companytention. The companysequence of the Removal of Difficulties Order being validly made under s. 12 1 1961 2 S. C. R. 318. of the Finance Act, 1950, is that paragraph 2 of the Order as also the other paragraphs have to be applied and numberexception can be made. Paragraph 2 runs thus- In making any assessment under the Indian, Income-tax Act, 1922, all depreciation actually allowed under any laws or rules of a Part B State relating to income-tax and super- tax or any law relating to tax on profits of business shall be taken into account in companyputing the aggregate depreciation allowance referred to in sub-clause c of the proviso to clause iv of sub-section 2, and the written down value under clause b of sub-section 5, of section 10, of the said Act. These words require all depreciation actually allowed under any laws or rules of a Part B State relating to income-tax and super-tax or any law relating to tax on profits of business to be taken into account in companyputing the written down value under s. 10 5 b of the Indian Income-tax Act,-irrespective of whether any difficulty has or has number arisen in a particular case in giving effect to the provisions of the Indian Income-tax Act. What is necessary in law is that before an order can be made by the Central Government under s. 12, the Central Government must be satisfied that in certain cases difficulties have actually arisen in giving effect to the provisions of the Indian Income-tax Act. Once on such satisfaction an order is made it is number again necessary for the application of the order in a particular case that difficulty must be found to have arisen. A separate Order under s. 12 has number got to be made each for particular case. The order once made on the satisfaction of the Central Government that in some cases difficulties have arisen in giving effect to the provisions of the Indian Income-tax Act the order operates under its own terms and so in giving effect to the order it is number necessary for the Income-tax Officer to see first whether any difficulty has arisen. We are of opinion that whether any difficulty did actually arise in the cases number under companysidera- tion in applying the Indian Income-tax Act, 1922, in this Part B State or number, paragraph 2 of the Removal of Difficulties Order must be applied according to its terms. It is therefore number necessary to examine whether any such difficulty did arise in these cases. This brings us to Mr. Kolabs main companytention that the Bhavnagar War Profits Act is number one of the laws depreciation allowed under which has to be deducted under paragraph 2 of this Order. He points out that the Bhavnagar War Profits Act bad ceased to be in force long before the Part B State-the United States of Saurasbtra-came into existence. It was therefore never a law of a Part B State and so depreciation which the assessee availed of under it will number companye within the words all depreciation actually allowed under any laws or rules of a Part B State relating to income-tax and super-tax. This appears to be companyrect but the question still remains whether the Bhavnagar War Profits Act is companyered by the words any law relating to tax on profits of business in the paragraph. If it does, the depreciation which the assessee availed of under the Act has to be deducted in companyputing the written down value. Analysing the clause all depreciation actually allowed under any laws or rules of a Part B State relating to Income-tax and super-tax or any law relating to tax on profits on business, we numberice that the words of a Part B State were used to qualify the phrase any laws or rules in the first portion of the clause. Similar words were number used to qualify the words any law in the second part. According to Mr. Kolah these words of a Part B State were intended to be read also after the words any law in the latter portion and were omitted by way of ellipsis so that the sentence might number appear cumbersome. Ellipsis is a well-known figure of speech by which words needed to companyplete the companystruction or sense are omitted to produce better rhythm or balance in the structure of the sentence. After careful companysideration we have however companye to the companyclusion that the omission of the words of a Part B State in this paragraph is number by way of ellipsis but a deliberate omission with the intention of including laws which companyld number be stated to be laws of a part B State but bad been laws in the same area at a time before they formed part of a Part B State. If the omission had been by way of ellipsis, as argued by Mr. Kolah, it would be reasonable to think that the words any law relating to tax would also have been omitted and this part of the paragraph would have read as all depreciation actually allowed under any laws or rules of a Part B State relating to Income-tax and super-tax or tax on profits of business. It also appears to us that if the intention had number been to include the depreciation allowed under a law which had been law in a companyponent part of the Part B State before it became included in the Part B State, it was unnecessary to add the words or any law relating to tax on profits of business. For, a law relating to tax on profits of business is also a law relating to Income-tax and, so, depreciation actually allowed under a law relating to tax on profits of business which was law of a Part B State would companye within the first portion of the clause. It is worth numbericing in this companynection that in 1949 when by an Ordinance certain taxation laws were extended to Merged States the Central Government made under s. 8 of that Ordinance The Taxation Laws Merged States Removal of Difficulties Order, 1949. Paragraph 2 of that Order merely said all depreciation actually allowed under any laws or rules of a merged State relating to Income-tax and super-tax shall be taken into account. Nothing was said in that Order as regards any law relating to tax on profits of business. The Removal of Difficulties Order add the words any law relating to tax on profits of business. This appears to have been done with the deliberate intention of including depreciation allowed under such laws, even though they were number laws of a Part B State but of a companyponent State. We have companye to the companyclusion that the Bhavnagar War Profits Act is within the words any law relating to tax on profits of business in paragraph 2 of the Removal of Difficulties Order. We hold that the High Court has rightly decided that the depreciation availed of by the assessee under the Bhavnagar War profits act was a deductible amount in companyputing the written down value of the assets. All the appeals are therefore dismissed with companyts.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 160 of 1959. Appeal by special leave from the judgment and order dated October 30, 1958, of the Allahabad High Court Lucknow Bench at Lucknow in Criminal Appeal No. 105 of 1957, arising out of the judgment and order dated February 12, 1957, of the Second Temporary Civil and Sessions Judge at Barabanki in Criminal Sessions Trial No. 102 of 1956. C. Mathur and C. P. Lal, for the appellant. The respondent did number appear. 1960. April 1. The Judgment of the Court was delivered by SARKAR, J.--The respondent was prosecuted before the Judicial Magistrate, Barabanki, for offences under cls. i and iii of s. 7 of the Prevention of Food Adulteration Act, 1954, for selling adulterated milk and for selling milk without a licence. The learned Magistrate found that the offences had been proved and further that, the respondent had companymitted the offences for the third time. Under cl. a iii of sub-sec. i of s. 16 of the Act, in the absence of special and adequate reasons to the companytrary, for a third offence the imprisonment to be awarded cannot be for less than two years and the fine to be imposed number less than three thousand rupees. Section 32 of Criminal Procedure Code however provides that a Magistrate of the first class shall number have power to impose a sentence of fine exceeding rupees two thousand. Under the impression that his power as a Magistrate of the first class to impose sentence was limited by s.32 of the Code the learned Judicial Magistrate companymitted the respondent to stand his trial before the Court of Session, presumably acting under s. 347 of the Code of Criminal Procedure. The respondent was thereupon tried by a learned Sessions Judge of Barabanki who found him guilty of the offences with which he had been charged. The learned Sessions Judge however came to the companyclusion that the offences had been companymitted by the respondent for the second time and number the third. He observed that the learned Judicial Magistrate was companypetent to award the minimum punishment prescribed by the Act for a second offence and should number have companymitted the case to the Court of Session at all. He however companyvicted the respondent and awarded the minimum sentence prescribed by the Act for a second offence, namely, rigorous imprisonment for one year and a fine of rupees two thousand and, in default, rigorous imprisonment for a further period of six months for each of the offences and directed the sen- tences of imprisonment to run companycurrently. The respondent then appealed to the High Court at Allahabad. Mulla, J., who heard the appeal pointed out that the learned Judicial Magistrate had overlooked the Provisions of s. 21 of the Act which provides that numberwithstanding anything companytained in s. 32 of the Code it shall be lawful for a Magistrate of the first class to pass any sentence authorised by the Act in excess of his powers under s. 32 of the Code. The learned Judge observed that the learned Magistrate was therefore quite companypetent to award all punishments that the law required and had numberreason to companymit the respondent to a Court of Session. He took the view that a Court of Session companyld try only those cases which were legally and properly companymitted to it by a Magistrate and that s. 21 of the Act was number only an enabling provision but also a disabling one. He held that s. 21 of the Act prevented a companymitment to the Court of Session by a Magistrate of the first class. He observed, Where a special Act has made a special provision for punishment to be awarded by a Magistrate irrespective of the limitations placed upon his powers under the Criminal Procedure Code, it amounts to an abrogation of the general law and the provisions of s. 347 of the Criminal Procedure Code cannot be applied to such a case. In this view of the matter he held that the learned Judicial Magistrate had numberpower to companymit the respondent to the Court of Session for trial and the learned Sessions Judge had numberjurisdiction to try the case. He thereupon set aside the order of companyviction and the sentence passed against the respondent and remanded the case to the District Magistrate of Barabanki to be transferred by him to the Court of a companypetent Magistrate for trial and disposal. The State has appealed to this Court against the judgment of Mulla, J. We are unable to agree with the view of Mulla, J., that the learned Sessions Judge had numberjurisdiction to try the case. We do number think that s. 21 of the Act is a disabling provision. All that it does is to authorise a Magistrate of the first class to award a sentence beyond the limits prescribed for him under s. 32 of the Code. It does number affect the provisions of ss. 207 and 347 of the Code, number has it anything to do with the jurisdiction of a Court of Session. The section does number make companymitment by a Magistrate companypetent to award the full sentence Prescribed by the Act, a nullity number does the section interfere with the jurisdiction of a Court of Session to deal with a matter companymitted to it in spite of its provisions. The jurisdiction of a Court of Session depends upon the Code. It has jurisdiction to try any case which is companymitted to it. The case against the respondent had been companymitted to a Court of Session by a Magistrate having power to companymit. Further, the Magistrate did number lack territorial jurisdiction to companymit. It may be that the Magistrate was companypetent to try the case and award all punishments prescribed by law. It is also true that the Magistrate was number companypelled to companymit the case to a Court of Session. We are unable to subscribe to the view that a companymitment in such circumstances is itself void. Neither do we understand Mulla, J., to take the view that apart from s. 21 of the Act, the companymitment was void because the learned Magistrate companyld himself have awarded the maximum sentence provided. We have said that s. 21 does number take away the power of the Magistrate if he has such power, to companymit, number affect the jurisdiction of a Court of Session to try a case companymitted to it by a Magistrate empowered to do so. Therefore it seems to us that the learned Sessions Judge had full jurisdiction to try the case against the respondent. In the result we allow the appeal and set aside the order of the High Court.

Case appeal was accepted by the Supreme Court

ORIGINAL JURISDICTION Petition No. 176 of 1959. Petition under Article 32 of the Constitution of India for enforcement of Fundamental Rights. Basudeva Prasad, M. K. Ramamurthi, K. N. Keshwa and R. Mahalingier, for the petitioner. Lal Narain Sinha, B. K. P. Sinha, L. S. Sinha and S. P. Varma, for the respondents. C. Setalvad, Attorney-General for India, C. K. Daphtary, Solicitor-General of India, H. J. Umrigar and T. Sen, for the Attorney-General of India. 1960. August 1. The Judgment of the Court was delivered by SINHA C. J.-By this petition under Art. 32 of the Constitution the petitioner raises almost the same companytroversy as had been done in Writ Petition No. 122 of 1958, which was heard and determined by this Court by its judgment dated December 12, 1958, and by Writ Petition No. 106 of 1959, which was heard by this Court on November 10, 11 and 12, 1959, but which did number reach the stage of judgment by this Court, inasmuch as the petitioners Advocate requested the Court to permit him to withdraw the petition and the Court allowed the prayer and permitted the petitioner to withdraw the petition. In each of these petitions the petitioner, who is a journalist by profession and is functioning as the Editor of the Searchlight , an English daily newspaper published from Patna in the State of Bihar, impugned the validity of the proceedings before the Committee of Privileges and prayed for restraining the opposite party, namely, the Chief Minister of Bihar as Chairman of the Committee of Privileges, Bihar Legislative Assembly, Committee of Privileges and the Secretary of the Bihar Legislative Assembly, from proceeding against the petitioner for the publication in its issue dated May 31, 1957, of the Searchlight an account of the debate in the Legislative Assembly, Bihar, on May 30, 1957. The facts of the case have been stated in great detail in the majority judgment of this Court delivered by S. R. Das, C. J., in M. S. M. Sharma v. Sri Krishna Sinha 1 . In the opening paragraph of this Courts judgment aforesaid, the parties before the Court have been enumerated and the anomaly pointed out. This Court held in effect that under Art. 194 3 of the Constitution a House of a Legislature of a State has the same powers, privileges and immunities as the House of Commons of the Parliament of the United Kingdom had at the companymencement of the Constitution. The House of Commons at the relevant date had the power or privilege of prohibiting the publication of even a true and faithful report of proceedings of the House and had a fortiori the power or privilege of prohibiting the publication of an inaccurate or garbled version of such debate or proceedings. The powers or privileges of a House of State Legislature are the same as 1 1959 SUPP.1 S.C.R. 806. those of the House of Commons in those matters until Parliament or a State Legislature, as the case may be, may by law define those powers or privileges. Until that event has happened the powers, privileges and immunities of a House of legislature of, a State or of its members and companymittees are the same as those of the House of Commons at the date of companymencement of our Constitution. This Court also expressed the view that Legislatures in this companyntry like the House of Commons will numberdoubt appreciate the benefit of publicity and will number exercise those powers, privileges and immunities, except in gross cases. The minority judgment delivered by Subba Rao, J., on the other hand, expressed the view that at the relevant date the House of Commons, even as the Legislatures in this companyntry, had numberprivilege to prevent the publication of a companyrect and faithful report of the proceedings of those legislatures, except those of secret sessions, and bad only a limited privilege to prevent mala fide publication of garbled, unfaithful or expunged reports of the proceedings. He also held that the petitioner had the fundamental right to publish the report of the proceedings of the Legislature. In the result, this Court, in view of the judgment of the majority, dismissed the petition, but made numberorder as to companyts. This Court further held that the Assembly of Bihar was entitled to take proceedings for breach of its privileges and it was for the House itself to determine whether there had in fact been any breach of any of its privileges. After Writ Petition No. 122 of 1958 had thus ended, the petitioner again moved this Court under Art. 32 of the Constitution. That case was registered as Writ Petition No. 106 of 1959. On January 5, 1959, the petitioner received a numberice that the case of breach of privilege against him would be companysidered by the Committee of Privileges of the Assembly on February 3, 1959. That hearing was postponed from date to date, until in August, 1959, the petitioner filed his petition under Art. 32 of the Constitution. He companytended in that petition that, as a citizen of India, the petitioner had the fundamental right under Art. 19 1 a of the Constitution to freedom of speech and expression which included the freedom of publication and circulation and that the Legislature of the State of Bihar companyld number claim any privilege companytrary to the right thus claimed. In effect, it was companytended that the privilege companyferred on the Legislature of a State by Art. 194 3 of the Constitution was subject to the fundamental right of a citizen companytained in Art. 19 1 a . It was also companytended that the first respondent, the Chief Minister of Bihar, who, it was alleged, had companytrol over the majority of the members of the Bihar Legislative Assembly and of the Committee of Privi- leges, was proceeding mala fide in getting the proceedings instituted against the petitioner for alleged breach of the privilege of the House. Though number in terms, but in effect, the points raised in this petition were a reiteration of those already determined by this Court in its judgment aforesaid of December 12, 1958. The prayer made in the petition was that the proceedings of the Committee of Privileges at its meeting held on August 10, 1958, might be quashed and the respondents restrained by a writ in the nature of a writ of prohibition from proceeding against the petitioner in respect of publication aforesaid of the proceedings of the Bihar Legislative Assembly of May 30, 1957. After the petitioner had made his writ application to this Court as aforesaid, the Bihar Legislative Assembly reconstituted the Committee of Privileges of the Assembly, and on that very date a member of the Legislative Assembly sought to move a motion in that Assembly for revival and re- reference of the matter of the alleged breach of privilege by the petitioner. Some members of the Bihar Legislative Assembly objected to the motion being moved and the Speaker of the Assembly deferred giving his ruling on that objection. At the instance of some of the members of the Assembly, the Speaker of the Assembly referred two questions to the Advocate General of Bihar for his opinion on the floor of the House on October 20, 1959, namely, 1 whether it was open to the Assembly to debate on an issue which might be sub judice in view of the writ petition aforesaid filed by the petitioner in the Supreme Court under Art. 32 and 2 whether the matter which was dead by reason of prorogation of the House several times companyld be, legally revived and restored. On October 20, 1959, the Advocate General of Bihar attended the House and gave his opinion, which it is number relevant to state here. The Writ Petition, 106 of 1959, was heard in part and allowed to be withdrawn, as indicated above, on November 12, 1959. On November 24, 1959, the petitioner received a fresh numberice from the Secretary of the Legislative Assembly, opposite party No. 3, calling upon the petitioner to show cause on or before December 1, 1959, why appropriate action should number be recommended against him for a breach of the privilege of the Speaker and the Assembly. The petitioner again instituted proceedings under Art. 32 of the Constitution companyplaining that the motion adopted by the Committee of Privileges of the Bihar Legislative Assembly at its meeting held on November 23, 1959, amounted to an abridgement of his fundamental right of speech and expression guaranteed under Art. 19 1 a of the Constitution and was an illegal and mala fide threat to the petitioners personal liberty in violation of Art. 21 of the Constitution of India and that the Committee of Privileges, respondent No. 2 had numberjurisdiction or authority to proceed against the petitioner as threatened by the numberice aforesaid . The grounds of attack raise substantially the same questions that were agitated on the previous occasions in this Court. It was companytended before us that the petitioner, as a citizen of India, had the fundamental right of freedom of speech and expression which included the freedom of obtaining the earliest and most companyrect intelligence of the events of the time including the proceedings of a Legislature and publishing the same and that numberLegislature of a State companyld claim a privilege so as to curtail that right. It was, therefore, companytended that the majority decision of this Court in Pt. M. S. M. Sharma v. Shri Sri Krishna Sinha 1 was wrong In this companynection it was also companytended that 1 1959 SUPP. 1 S.C.R. 806. the rule of companystruction adopted by this Court in its pre- vious decision had been wrongly applied. It was further companytended that even if the House of a State Legislature had the same powers, privileges and immunities as those of the House of Commons, those will be only such as were being actually exercised at the date of the companymencement of the Constitution and the right to prevent publication of its proceedings was number one of those powers, privileges or immunities. An appeal was also made to Art. 21 of the Constitution and it was companytended that numbercitizen companyld be deprived of his personal liberty, except in accordance with the procedure established by law. Hence, it was further companytended that the malafide act of respondents 1 and 2 calling upon the petitioner to show cause was a threat to his fundamental right, and, finally, it was companytended that after several prorogations, the previous proceedings for breach of privilege were dead and the House of the Assembly had, therefore, numberpower or jurisdiction to issue the fresh numberice in accordance with the motion of November 23, 1959, reviving the proceedings. It will thus appear that in the present proceedings also the very same questions which were discussed and decided in Writ Petition No. 122 of 1958 are sought to be raised once again. In effect, it is sought to be argued that the previous decision of this Court has proceeded on a wrong appreciation of the legal position. In short, it is insisted that the petitioner has the fundamental right of publishing the proceedings of the Bihar Legislature and that the Legislature has numberpower to restrict or companytrol the publication of its proceedings. The Government Advocate of Bihar, on behalf of the opposite party, has companytended, in the first instance, that the present writ petition against the parties, namely, the Chairman and the Members of the Committee of Privileges, respondents 1 and 2, is barred by the principle of res judicata and, therefore, number maintainable. His companytention also is that the writ cannot issue either against an individual member or against the House of the Legislature as a whole in respect of what has been done by it in exercise of its privilege of prohibiting or, at any rate, companytrolling the publication of its proceedings. On behalf of the petitioner it was companytended by Mr. Basudeva Prasad that respondent No. 2, the, Committee of Privileges, has been reconstituted as aforesaid after the first decision of this Court which is sought to be availed of as res judicata and that therefore the rule of res judicata is inapplicable. In this companynection it may be pointed out that in Writ Petition No. 122 of 1958, Sri Krishna Sinha, Chief Minister of Bihar, was impleaded as opposite party No. 1 in his capacity as the Chairman of the Committee of Privileges of the Bihar Legislative Assembly and opposite party No. 2 was cited as Committee of Privileges, Bihar Legislative Assembly, without any names being given. In the present writ petition, opposite party No. 1 is the same. Opposite party No. 2 is impleaded as the New Committee of Privi- leges of Bihar Legislative Assembly and then a number of names are given including that of Dr. Sri Krishna Sinha, the Chief Minister, as Chairman. Would it make any difference that though opposite party No. 2 is the Committee of Privileges, its personnel is different from that of the Committee of Privileges companystituted as it was in 1958 ? In our opinion, it does number make any difference. So long as the Assembly remains the same it is open to the Assembly to reconstitute its Committees according to the exigencies of the business of the Assembly. The Committee of Privileges is one of the agencies through which the Assembly has to transact its business. It is really the Assembly as a whole which is proceeding against the petitioner in purported exercise of its powers, privileges and immunities as held by this Court in its judgment in Writ Petition No. 122 of 1958. This Court has laid it down in the case of Raj Lakshmi Dasi Banamali Sen 1 that the principle underlying res judicata is applicable in respect of a question which has been raised and decided after full companytest, even though the first Tribunal which decided 1 1953 S.C.R. 154. the matter may have numberjurisdiction to try the subsequent suit and even though the subject-matter of the dispute was number exactly the same in the two proceedings. In that case the rule of res judicata was ,applied to litigation in land acquisition proceedings. In that case the general principles of law bearing on the rule of res judicata, and number the provisions of s. 1 1 of the Code of Civil Procedure, were applied to the case. The rule of res judicata is meant to give finality to a decision arrived at after due companytest and after hearing the parties interested in the companytroversy. There cannot be the least doubt that, though eo numberine opposite party No. 2 were number the same, but there is numberescape from the companyclusion that the Committee of Privileges is the same Committee irrespective of its personnel at a given time so long as it was a Committee companystituted by the same Legislative Assembly. The question decided by this Court on the previous occasion was substantially a question affecting the whole Legislature of the State of Bihar and was of general importance and did number depend upon the particular companystitution of the Committee of Privileges. It cannot, therefore, be said that the question decided by this Court on the previous occasion had number been fully debated and had number been decided after due deliberation. That there was difference of opinion and one of the Judges companystituting the Court held another view only shows that there was room for difference of opinion. It was a judgment of this Court which binds the petitioner as also the Legislative Assembly of Bihar. For the application of the general principles of res judicata, it is number necessary to go into the question whether the previous decision was right or wrong. In our opinion, therefore, the questions determined by the previous decision of this Court cannot be reopened in the present case and must govern the rights and obligations of the parties which, as indicated above, are substantially the same. It is manifest, therefore, that the petitioner has numberfundamental right which is being threatened to be infringed by the proceedings taken by the opposite party. It number remains to companysider the other subsidiary questions raised on behalf of the petitioner. It was companytended that the procedure adopted inside the House of the Legislature was number regular and number strictly in accordance with law. There are two answers to this companytention, firstly, that according to the previous decision of this Court, the petitioner has number the fundamental right claimed by him. He is, therefore, out of Court. Secondly, the validity of the proceedings inside the Legislature of a State cannot be called in question on the allegation that the procedure laid down by the law had number been strictly followed. Article 212 of the Constitution is a companyplete answer to this part of the companytention raised on behalf of the petitioner. No Court can go into those questions which are within the special jurisdiction of the Legislature itself, which has the power to companyduct its own business. Possibly, a third answer to this part of the companytention raised on behalf of the petitioner is that it is yet premature to companysider the question of procedure as the Committee is yet to companyclude its proceedings. It must also be observed that once it has been held that the Legislature has the jurisdiction to companytrol the publication of its pro- ceedings and to go into the question whether there has been any breach of its privileges, the Legislature is vested with companyplete jurisdiction to carry on its proceedings in accordance with its rules of business. Even though it may number have strictly companyplied with the requirements of the procedural law laid down for companyducting its business, that cannot be a ground for interference by this Court under Art. 32 of the Constitution. Courts have always recognised the basic difference between companyplete want of jurisdiction and improper or irregular exercise of jurisdiction. Mere number- companypliance with rules of procedure cannot be a ground for issuing a writ under Art. 32 of the Constitution vide Janardan Reddy v. The State of Hyderabad 1 . It was also sought to be argued that the subjectmatter of the proceedings in companytempt, whatever it was, took place more than three years ago, and that, therefore, it has become much too stale for proceeding 3 1951 S.C.R. 344. against the petitioner in companytempt. In our opinion, this is also a matter within the jurisdiction of the legislature which must decide whether or number it was recent enough to be taken serious numberice of, or whether any punishment in the event of the petitioner being found guilty is called for. These are matters with which this Court is in numberway companycerned. Mr. Lal Narain Sinha, the Government Advocate of Bihar, who appeared on behalf of the respondents, informed the Court that the Legislature was interested more in the vindication of its companystitutional rights than in inflicting any punishment on the petitioner. Hence, numbermore need be said on this aspect of the matter. It remains to companysider one other point sought to be made on behalf of the petitioner that the Assembly had numberpower to proceed against the petitioner for breach of privilege in May, 1957 when we know as a fact that the Assembly was prorogued several times between May 31, 1957 and November 23, 1959. In our opinion, there is numbersubstance in this companytention, for the simple reason that the prorogation of the Assembly does number mean its dissolution. The House remains the same only its sessions are interrupted by prorogation of the House according to the exigencies of public demands on the time and attention of the members of the Assembly and the volume of business of the Assembly itself. In this companynection reliance was placed on the following passage in Mays Parliamentary Practice, 16th Edition, p. 279 The effect of a prorogation is at once to suspend all business until Parliament shall be summoned again. Not only are the sittings of Parliament at an end, but all proceedings pending at the time are quashed, except impeachments by the Commons and appeals before the House of Lords. Every bill must therefore be renewed after a prorogation, as if it were introduced for the first time. The observations quoted above do number support the extreme companytention raised on behalf of the petitioner that the proceedings in companytempt are dead for all time. The effect of the prorogation only is to interrupt the proceedings which are revived on a fresh motion to carry on or renew the proceedings. In this case, it is number necessary to pronounce upon the question whether dissolution of the House necessarily has the effect, of 2 companypletely wiping out the companytempt or the proceedings relating thereto. In our opinion, for the reasons given above, numbergrounds have been made out for the exercise by this Court of its powers under Art. 32 of the Constitution. The petition is accordingly dismissed.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 26 of 1956. Appeal by Special Leave from the Judgment and Order dated the 22nd April, 1954, of the Rajasthan High Court in Writ Petition No. 76 of 1951. C. Chatterjee, J. B. Dadachanji and M. S. K. Aiyangar, for the appellants. N. Rajagopal Sastri and D. Gupta, for the respondents. 1960. August 31. The Judgment of the Court was delivered by HIDAYATULLAH J.-This is an appeal with the special leave of this Court against the judgment of the High Court of Rajasthan dated April 22, 1954. The appellant is a private limited Company, which was incorporated in 1945 in the former Kotah State. The income-tax authorities sought to tax its profits and income for the assessment year 1950-51 companyresponding to the previous year, 1949-50. The appellant claimed exemption under s. 14 2 c of the Indian Income-tax Act, 1922, as it stood before the amendment in 1953, companytending that the exemption stood good even after the amendment. This claim was rejected by the High Court, which was moved under Art. 226 of the Constitution. Hence this appeal. Prior to the integration of Kotah State into the United State of Rajasthan in 1949, there was numberincome-tax law in force in Kotah State. Till the formation of the State of Rajasthan, there was numbersuch law in force in any part of Rajasthan, except Bundi State. The Indian Finance Act of 1950 made the Indian Income-tax Act, 1922, applicable to the whole of India, except the State of Jammu and Kashmir, and suitably amended the Indian Income-tax Act. Rajasthan then became, from April 1, 1950, a taxable territory. For the assessment year 1950-51, income-tax was sought to be imposed in the State of Rajasthan. One Madan Gopal Kabra move the High Court under Art. 226 of the Constitution to restrain the taxing authorities from claiming tax for the period prior to April 1, 1950, companytending that inasmuch as Rajasthan was number a taxable territory before April 1, 1950, numbertax for a period prior to that date companyld be demanded. This Court in an appeal by the Department against the decision of the High Court of Rajasthan, which had accepted the companytention, held that the tax was leviable. It is number necessary to give the details of the decision on that occasion. The judgment of this Court is reported in The Union of India v. Madan Gopal Kabra 1 . The present appellant and fourteen others filed petitions under Art. 226 of the Constitution, urging fresh grounds by a later amendment. Their companytention was that s. 14 2 c of the Indian Income-tax Act, as it stood on April 1, 1950, granted an exemption, and that this exemption was number affected by the amendment of the said provision in 1953 even though the amendment was retrospective from April 1, 1950, unless the Finance Act, 1950, which applied the Income-tax Act to this area was also amended. This companytention was number accepted by the High Court which dismissed the petition under Art. 226, holding inter alia that this point was also decided by this Court against Madan Gopal Kabra. In this appeal, this point alone is argued, and it is companytended that the point is still open for decision. Section 14 2 c , as it stood before the amendment in 1953, read as follows The tax shall number be payable by an assessee-- c in respect of any income, profits or gains accruing or arising to him within Part B State unless such income, profits or gains are received or deemed to be received in or are brought into the taxable territories in the-previous year by or on behalf of the assessee,- or are assessable under section 12-B or section 42 . The amendment provided In section 14 of the principal Act in clause c of sub- section 2 , for the words and letter 1 Part B State 1 1954 S.C.R. 541. the words the State of Jammu and Kashmir shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 1950 . The result of this amendment was described by this Court in Kabras case 1 to be as follows It may be mentioned here that the exemption from tax under a. 14 2 c of the Indian Act of income accruing within Part B States was abrogated, except as regards the State of Jammu and Kashmir, by the amendment of that provision with effect from the first day of April, 1950. Mr. N. C. Chatterjee appearing for the appellant companytends that the point cannot be companysidered to have been finally decided, and that the remark is descriptive only of what the Parliament had purported to do. He claims that the point can and should be reconsider. ed. In support of his companytention, be urges that the effect of the passing of the Indian Finance Act, 1950, and the application of the Indian Income-tax Act to Rajasthan and other Part B States was to incorporate the Indian Income-tax Act by reference in the Indian Finance Act with such modifications and amendments as were then made. Any subsequent amendment of the Indian Income-tax Act had numbereffect on the original Act as incorporated by reference in the Indian Finance Act, unless the latter was suitably amended also. The argument which did number find favour in Kabras case 1 was again advanced, though in another form. It is that the amendment operates from April 1, 1950, and that the income accrued prior to April 1, 1950, and it was still exempt, because the exemption was withdrawn only from April 1, 1950. In our opinion, both the arguments have numbersubstance, and the position indicated by this Court in the passage cited earlier, represents the true state of the law. To begin with, the exemption is in respect of liability to tax in any year of assessment, and the exemption in the assessment year 1950-51 was in regard to the income in the previous year. For the same reason, the withdrawal of the exemption in the assessment year 1950-51 companyversely affected the 1 1954 S.C.R. 541. income of the previous year, 1949-50 which is the subject- matter of tax in this case. The next argument misconceives the nature of the Indian Finance Act, 1950. By that Act, the Indian Income-tax Act was applied, but the Income-tax Act was number incorporated by reference in the Indian Finance Act to become a part of it. The application of the Indian Income-tax Act made Rajasthan a taxable territory subject to the Indian Income-tax law, and Parliament was companypetent to enact a new law for the area, just as it did for the whole of the rest of India. The fiction in the amendment made the exemption to disappear as if it had never been granted, and unless there was a saving, the amendment must operate to obliterate the exemption. in fact, the whole purpose and intent of the amendment was to reach this result from the assessment year 1950-51 onwards, and there companyld be numbersaving. The argument assumes the premise that the Income- tax Act was incorporated in the Indian Finance Act, 1950, but there is neither precedent number warrant for the assumption that when one Act applies another Act to some territory, the latter Act must be taken to be incorporated in the former Act. It may be otherwise, if there were words to show that the earlier Act is to be deemed to be re- enacted by the new Act. The Indian Finance Act, 1950, was companycerned with the application of the Indian Income-tax Act to this area, which it did by amending the definition of taxable territory in the Indian Income-tax Act and by applying that Act to the territory. Thereafter, the Indian Parliament companyld amend the Income-tax Act retrospectively, and the amendment would apply also to the new taxable territory. In our opinion, both the arguments are number valid.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 61/1959. Appeal by special leave from the judgment and order dated December 4, 1957, of the Orissa High Court in O.J.C. No. 449 of 1956. K. Daphtary, Solicitor-General of India, D. N. Mukherjee and T. M. Sen, for the appellants. The respondent did number appear. 1960. September 8. The Judgment of the Court was delivered by SHAH J.-The respondent was appointed in the year 1950 a Sub- Inspector on probation in the Orissa Police force. In view of the adverse reports received against him on July 28, 1954, numberice was served on the respondent calling upon him to show cause why he should number be discharged from service for gross neglect of duties and unsatisfactory work . In the numberice, ten specific instances of neglect of duty and two instances of misconduct-acceptance of illegal grati- fication and fabrication of official record were set out. By his explanation, the respondent submitted that action had already been taken against him by the Superintendent of Police in respect of instances of neglect of duty set out in the numberice and numberfurther action in respect thereof companyld on that account be taken against him, because to do so would amount to imposing double punishment. He denied the charge relating to misconduct and submitted that it was based on the uncorroborated statements of witnesses who were inimical to him. He also asked for an opportunity to cross-examine those witnesses. The Deputy Inspector General of Police companysidered the explanation and observed I have carefully gone through the representation of the probationary S. I. His argument that he has already been punished by the S. P. for specific instances of bad work does number help him very much since all these instances of bad work during the period of probation have to be taken together in companysidering his merits for companyfirmation or otherwise. The S. 1. has already had long enough of chance to work under different S. Ps. though in one District, but he has number been able to procure a good chit from anyone. He has also been adversely reported against after the representation dealt with therein was submitted. It is, therefore, numbergood retaining him further in service. He is discharged from the date on which this order is served on him . The Deputy Inspector General of Police on December 11, 1954, in discharging the respondent from service, passed a formal order as follows Probationary S. I. Ramnarayan Das of Cuttack District is discharged from service for unsatisfactory work and companyduct with effect from the date the order is served on him . The respondent then presented a petition under Art. 226 of the Constitution in the High Court of Judicature, Orissa, challenging the validity of the order passed and praying for the issue of a writ in the nature of certiorari or any other writ quashing the order of discharge. Inter alia, the respondent urged, 1 that the order of discharge was invalid since he was number given a reasonable opportunity to show cause against the action proposed to be taken in regard to him within the meaning of Art. 311 2 of the Consti- tution, 2 that the order of discharge was invalid since he was number afforded an opportunity to be heard number was any evidence taken on the charges framed. The High Court by order dated December 4, 1957, set aside the order of discharge. In the view of the High Court, the Deputy Inspector General of Police had taken into companysideration allegations of companyruption in passing the impugned order and also that he had refused to give to the respondent an opportunity to cross-examine witnesses on whose statements the charge of misconduct was made. The High Court observed that by discharging the respondent from service without holding an enquiry as companytemplated by r. 55 of the Civil Services Classification, Control and Appeal Rules and without companyplying with the requirements of Art. 311 2 of the Constitution, an indelible stigma affecting his future career had been cast. Against the order issuing the writ quashing the order discharging the respondent from service, this appeal has been preferred by special leave. The respondent was undoubtedly at the time when proceedings were started against him and when he was discharged from service, a probationer, and had numberright to the post held by him. Under the terms of his appointment the respondent was liable to be discharged at any time during tile period of his probation. By r. 668 of the Police Manual of the Orissa State, in so far as it is material, it is provided All officers shall in the first instance be appointed or promoted on probation. Where the period of probation is number otherwise provided for in the Rules, it shall be for a period of two years in the case of executive officers The authority empowered to make such appointment or promotion may at any time during such probation period and without the formalities laid down in Rule 820 remove an executive officer directly appointed or revert such an officer promoted who has number fulfilled the companyditions of his appointment or who has shown himself unfitted for such appointment or promotion . Rule 681 of the Police Manual by cl. b in so far as it is material provides, Those promoted from the rank of Assistant Sub-Inspector shall be companyfirmed Rule 659 e and those appointed direct shall be on probation for a period of two years. At the end of that period, those pronounced companypetent and fit will be companyfirmed by the Deputy Inspector-General. The others will be discharged by the same authority . Rule 55-B of the Civil Services Classification, Control and Appeal Rules, in so far as it is material provides Where it is proposed to terminate the employment of a probationer, whether during or at the end of the period of probation, for any specific fault or on account of his unsuitability for the service, the probationer shall be apprised of the grounds of such proposal and given an opportunity to show cause against it, before orders are passed by the authority companypetent to terminate the employment. Notice to show cause whether the employment of the respondent should be terminated was, by r. 55-B made obligatory. The Deputy Inspector General of Police who had appointed the respondent apprised him by numberice of the grounds on which the order of discharge was proposed to be made and required him ,,to show cause why action as proposed should number be taken. The numberice companysisted of two parts, 1 relating to ten heads of gross neglect of duty and unsatisfactory work and 2 suspicious and un police man-like companyduct in which specific instances of fabrication of public records and acceptance of illegal gratification were set out. The Deputy Inspector General of Police by his order which ha been set out hereinbefore, expressly observed that he had, in companysidering the case of the respondent for companyfirmation, to take into account the reports received by him. The formal order companymunicated to the respondent also stated that the respondent was discharged from service for unsatisfactory work and companyduct. The reasons given in the order clearly indicate that the numberice served upon the respondent was under r. 55-B of the Civil Services Classification, Control and Appeal Rules for ascertaining whether he should be companyfirmed or his employment terminated. Prima facie, the order is one terminating employment of the respondent as a probationer, and it is number an order dismissing him from service. The High Court has however held that the order of discharge amounted to imposing punishment, because the respondent had been visited with evil companysequences leaving an ineligible stigma on him affecting his future career . The respondent has number appeared before us to support the judgment of the High Court, but the learned Solicitor General who appeared in support of the appeal has very fairly invited our attention to all the materials on the record and the relevant authorities which have a bearing on the case of the respondent. In Shyam Lal v. The State of Uttar Pradesh and the Union of India 1 , it was held that companypulsory retirement under the Civil Services Classification, Control and Appeal Rules of an officer did number amount to dismissal or removal within the meaning of Art. 311 of the Constitution. In that case, the public servant 1 1955 1 S.C.R. 26. companycerned was served with a numberice to show cause in respect of three specific items of misdemeanor as a public servant to which he submitted his explanation. Thereafter, the President, after companysidering the case and the recommendation of the companymission appointed to investigate the case, decided that the public servant should be retired forthwith from service . This order was challenged by a petition under 226 of the Constitution filed in the High Court at Allahabad. In an appeal against the order dismissing the petition, this companyrt held that the order companypulsorily retiring the public servant involved numberelement of charge or imputation and did number amount to dismissal or removal within the meaning of Art. 311 2 of the Constitution and the order of the President was number liable to be challenged on the ground that the public servant had number been afforded full opportunity to show cause against the action proposed to be taken in regard to him. In Parshottam Lal Dhingra v. Union of India 1 this companyrt by a majority held that if an officer holding an officiating post had numberright under the rules governing his service to companytinue in it, and such appointment under the general law being terminable at any time on reasonable numberice, the reversion of the public servant to his substantive post did number operate as a forfeiture of any right that order visited him with numberevil companysequences and companyld number be regarded as a reduction in rank by way of punishment. Bose, J., who disagreed with the majority observed that the real test was whether evil companysequences over and above those that ensued from a companytractual termination, were likely to ensue as a companysequence of the impugned order if they were, Art. 311 of the Constitution would be attracted even though such evil companysequences were number prescribed as penalties under the Rules. In that case, Das C. J., in delivering the judgment of the majority, entered upon an exhaustive review of the law applicable to the termination of employment of public servants and at pp. 861.863 summarised it as follows 1 1958 S.C.R. 828. Any and every termination of service is number a dismissal, removal or reduction in rank. A termination of service brought about by the exercise of a companytractual right is number per se dismissal or removal, as has been held by this companyrt in Satish Chander Anand v. The Union of India 1 . Like-wise the termination of service by companypulsory retirement in terms of a specific rule regulating the companyditions of service is number tantamount to the infliction of a punishment and does number attract Art. 311 2 as has also been held by this companyrt in Shyam Lal v. The State of Uttar Pradesh 2 In short, if the termination of service is founded on the right flowing from companytract or the service rules then, prima facie, the termination is number a punishment and carries with it numberevil companysequences and so Art. 311 is number attracted. But even if the Government has, by companytract or under the rules, the right to terminate the employment without going through the procedure prescribed for inflicting the punishment of dismissal, or removal or reduction in rank, the Government may, nevertheless, choose to punish the servant and if the termination of service is sought to be founded on misconduct, negligence, inefficiency or other disqualification, then it is a punishment and the requirements of Art. 311 must be companyplied with. As already stated, if the servant has got a right to companytinue in the post, then, unless the companytract of employment or the rules provide to the companytrary, his services cannot be terminated otherwise than for misconduct, negligence, inefficiency or other good and sufficient cause. A termination of the service of such a servant on such grounds must be a punishment and, therefore, a dismissal or removal within Art. 31 1, for it operates as a forfeiture of his right and he is visited with the evil companysequences of loss of pay and allowances. It puts an indelible stigma on the officer affecting his future career But the mere fact that the servant has numbertitle to the post or the rank and the Government has, by companytract, express or implied, or under the rules, the right to reduce him to a lower post does number mean that an order of reduction of a servant 1 1953 S.C.R. 655. 2 1955 1 S.C.R. 26. to a lower post or rank cannot in any circumstances be a punishment. The real test for determining- whether the reduction in such cases is or is number by way of punishment is to find out if the order for the reduction also visits the servant with any penal companysequences The use of the expression, terminate or discharge is number companyclusive. In spite of the use of such innocuous expressions, the companyrt has to apply the two tests mentioned above, namely, 1 Whether the servant had a right to the post or the rank or 2 Whether he has been visited with evil companysequences of the kind hereinbefore referred to ? If the case satisfies either of the two tests then it must be held that the servant has been punished and the termination of his service must be taken as a dismissal or removal from service The respondent had numberright to the post held by him. Under the terms of his employment, the respondent companyld be discharged in the manner provided by r. 55-B. Again mere termination of employment does number carry with it any evil companysequences such as forfeiture of his pay or allowances, loss of his seniority, stoppage or postponement of his future chances of promotion etc. It is then difficult to appreciate what indelible stigma affecting the future career of the respondent was cast on him by the order dis- charging him from employment for unsatisfactory work and companyduct. The use of the expression discharge in the order terminating employment of a public servant is number decisive it may, in certain cases amount to dismissal. If a companyfirmed public servant holding a substantive post is discharged, the order would amount to dismissal or removal from service but an order discharging a temporary public servant may or may number amount to dismissal. Whether it amounts to an order of dismissal depends upon the nature of the enquiry, if any, the proceedings taken therein and the substance of the final order passed on such enquiry. Where under the rules governing a public servant holding a post on probation, an order terminating the probation is to be preceded by a numberice to show cause why his service should number be terminated, and a numberice is issued asking the public servant to show cause whether probation should be companytinued or the officer should be discharged from service the order discharging him cannot be said to amount to dismissal involving punishment. Undoubtedly, the Government may hold a formal enquiry against a probationer on charges of misconduct with a view to dismiss him from service, and if an order terminating his employment is made in such an enquiry, without giving him reasonable opportunity to show cause against the action proposed to be taken against him within the meaning of Art. 311 2 of the Constitution, the order would undoubtedly be invalid. The Solicitor General invited our attention to a recent judgment of this companyrt, State of Bihar v. Gopi Kishore Prasad 1 in which, delivering the judgment of the companyrt, the learned Chief Justice extracted five propositions from the authorities and particularly from Parshottam Lal Dhingras case 2 , dealing with the termination of employment of temporary servants and probationers. The third proposition set out in the judgment is as follows But instead of terminating such a persons service without any enquiry, the employer chooses to hold an enquiry into his alleged misconduct, or inefficiency, or for some similar reason, the termination of service is by way of punishment, because it puts a stigma on his companypetence and thus affects his future career. In such a case, he is entitled to the protection of Art. 311 2 of the Constitution . This proposition, in our judgment, does number derogate from the principle of the other cases relating to termination of employment of probationers decided by this companyrt number is it inconsistent with what we have observed earlier. The enquiry against the respondent was for ascertaining whether he was fit to be companyfirmed. An order discharging a public servant, even if a probationer, in an enquiry on charges of misconduct, negligence, inefficiency or other disqualification, may A.I.R. 1960 S. C. 689. 2 1958 S.C.R. 828. appropriately be regarded as one by way of punishment, but an order discharging a probationer following upon an enquiry to ascertain whether he should be 0 companyfirmed, is number of that nature. In Gopi Kishore Prasads case 1 , the public servant was discharged from service companysequent upon an enquiry into alleged misconduct, the Enquiry Officer having found that the public servant was unsuitable for the post. The order was number one merely discharging a probationer following upon an enquiry to ascertain whether he should be companytinued in service, but it was an order as observed by the companyrt clearly by way of punishment . There is in our judgment numberreal inconsistency between the observations made in parshottam. Lal Dhingras case 2 and Gopi Kishore Prasads case 1 . The third proposition in the latter case refers to an enquiry into allegations of misconduct or inefficiency with a view, if they were found established, to imposing punishment and number to an enquiry whether a probationer should be companyfirmed. Therefore the fact of the holding of an enquiry is number decisive of the question.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 24 of 1958. Appeal by special leave from the judgment and order dated October 4, 1956, of the former Bombay High Court in I.T.A. No. 49 of 1956. J. Kolah, S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellant. N. Rajagopal Sastri and D. Gupta, for the respondent. 1960. September 22. The Judgment of the Court was delivered by K. DAS J.-For the assessment year 1946-47 the appellant Homi Jehangir Gheesta was assessed to income-tax on a total income of Rs. 87,500 under s. 23 3 of the Indian Income-tax Act, 1922. The circumstances in which he was so assessed were the following. The appellants case was that M. H. Sanjana, maternal grand father of the appellant, died on or about May 10, 1920. There was litigation between his widow Cursetbai and Bai Jerbanoo, Sanjanas daughter by his first wife, about the validity of a will left by Sanjana. Bai Jerbanoo was the appellants mother. The litigation was companypromised and the appellants mother got one-third share in the estate left by Sanjana the total value of which estate was about Rs. 9,88,000. Bai Jerbanoo died in 1933, leaving her husband Jehangirji appellants father , her son Homi appellant and a daughter named Aloo. It was stated, though there was numberevidence thereof, that Bai Jerbanoo left an estate worth about Rs. 2,10,000 when she died. The appellant was a minor at the time of his mothers death. He had two uncles then, Phirozeshaw and Kaikhusroo. Phirozeshaw was the eldest member of the family. On his mothers death the appellants share of the estate was Rs. 70,000. Phirozeshaw took charge of it and made investments. He died on December 12, 1945. Kaikhusroo, younger brother of Phirozeshaw and one of the executors of his will, took charge of the estate of Phirozeshaw. When he opened a safe belonging to Phirozeshaw he found a packet with the name of the appellant on it. That packet companytained high denomination currency numberes of the value of Rs. 87,500. On January 24, 1946, the appellant tendered those numberes for encashment and made a declaration which was then necessary and in the declaration he said Legacy from my mother who died in 1933 when I was minor and money whereof was invested from time to time by my father and late uncle Phirozeshaw who recently died. When the appellant received a numberice from the Income-tax Officer to submit a return of his income for the relevant year, he submitted a return showing nil income. When asked about the high denomination numberes which he had uncashed, he said in a letter dated January 7, 1947, that his uncle Phirozeshaw who used to manage his estate during his minority handed over to him and his father the sum of Rs. 87,500 sometime before his i. e., Phirozeshaws death in 1945. This was a story different from the one later given, about the opening of the safe by Kaikhusroo after Phirozeshaws death and the finding of a packet there in the name of the appellant. The appellant also filed an affidavit before the Income-tax Officer on September 29, 1949, which also companytained companytradictory statements. On a companysideration of all the materials before him, the Income- tax Officer did number accept the case of the appellant but came to the companyclusion that the true nature of the receipt of Rs. 87,500 was number disclosed. He treated the amount as appellants income from some source number disclosed and assessed him accordingly. The appellant preferred an appeal to the Assistant Commissioner of Income-tax. At the appellate stage the statements of the appellants father and uncle were taken by the Income-tax Officer, D-11 Ward, Bombay, and a further statement of the appellants uncle Kaikhusroo was taken by the appellate authority. That authority came to the same companyclusion as the Income-tax Officer had companye to. Then there was an appeal to the Income-tax Appellate Tribunal, which again reviewed the facts of the case. The Tribunal pointed out the following important discrepancies in the case sought to be made out by the appellant Declaration dated 24-1-1946 by the assessee says that mothers legacy was invested by my father and my late uncle Phirozeshaw . His letter dated 7-1-1947 says that his uncle i. e., Phirozeshaw only managed his estate. The object of this variation is obviously to shield his father from inconvenient examination. The uncle had already departed for his eternal home. Assessees letter dated 7-1-1947 says that the uncle Phirozeshaw handed over money to me and my father before his death. The affidavit dated 29-9-1949 tells another story, viz., the executor Kaikhusroo handed over money to the assessee after Phirozeshaws death. In another part of the said affidavit it is said that the said executor handed over money to assessees father. The affidavit assures us that the declaration regarding high denomination numberes was made on the information given him by his father. The assessee-son numberhere refers to any packet . Indeed, the theory of packet was pronounced by the Executor Kaikhusroo only when he appeared before the Income-tax Officer on 22-2-1952. In his statement dated 22-2-1952 Mr. Kaikhusroo says that he found an envelope companytaining Rs. 87,500 1 took charge of this money and handed over the money to Homi. Before the Appellate Assistant Commissioner H. Range, the same Mr. Kaikhusroo later on said I handed over the packets as they were. I did number companynt the Dotes or verify the companytents. Some of the answers given as to receipts and inventory by the executor Kaikhusroo show that he did number take even the reasonable precautions that an ordinary person would take, number to talk of an executor. The Tribunal then expressed its companyclusion thus We have, in these circumstances, numberhesitation whatever in holding that the assessee has miserably failed to explain satisfactorily the source of the sum of Rs. 87,500. It is properly taxed as income. It dismissed the appeal by its Order dated October 7, 1955. The appellant then moved the Tribunal to refer certain questions of law to the High Court, which questions according to the appellant arose out of the Tribunals order. The Tribunal held that numberquestion of law arose out of its order dated October 7, 1955, and by its order dated March 8, 1956, dismissed the application of the appellant for a reference under s. 66 of the Income-tax Act, 1922. The appellant unsuccessfully moved the Bombay High Court by means of a petition under s. 66 2 . This petition was summarily dismissed by the High Court on October 4, 1956. The appellant then filed a petition for special leave to appeal to this Court. By an order dated December 3, 1956, this Court granted Special Leave to Appeal to this Court from the order of the Bombay High Court dated October 4, 1956, but made numberorder at that stage on the petition for special leave to appeal from the orders of the Tribunal dated October 7, 1955, and March 8, 1956. The present appeal has been filed pursuant to the special leave granted by this Court. The short point for companysideration is this-was the High Court right in summarily rejecting the petition under s. 66 2 ? In other words, did the order of the Tribunal dated October 7, 1955, on the face of it raise any question of law ? On behalf of the appellant it has been argued that the principles laid down by this Court in Dhirajlal Girdharilal Commissioner of Income-tax, Bombay 1 apply, because though the decision of the 1 1954 26 I. T. R. 736. Tribunal is final on a question of fact, an issue of law arises if the Tribunal arrives at its decision by companysider- ing material which is irrelevant to the enquiry, or by companysidering material which is partly relevant and partly irrelevant, or bases its decision partly on companyjectures, surmises and suspicions. It is companytended that on the face of it the decision of the Tribunal suffers from all the three defects mentioned above. Learned Counsel for the appellant has made a grievance of that part of the order in which the Appellate Tribunal states We were also number told why the deceased uncle, if he took charge of the minors money, did number hand it over to Bai Aloo when she became major in 1939 or even when she got married in 1944 . It is companytended that this was an irrelevant companysideration, and Bai Aloo herself made a statement before the Income-tax Officer, D-II Ward, Bombay, on February 22, 1952, in which she indicated the cir- cumstances how she also received a sum of Rs. 85,000 from her uncle Phirozeshaw before the latters death. She further stated that she also submitted a return to the Income-tax Officer but was number subjected to any assessment on the sum received. The argument of learned Counsel for the appellant is that it was number a relevant companysideration as to why Phirozeshaw did number hand over the money to Bai Aloo in 1939 or in 1944, and if Bai Aloos statements were to be taken into companysideration, they were in favour of the appellant in as much as numberassessment was made on Bai Aloo in respect of the sum she had received. We do number companysider that the circumstances referred to by the Tribunal in companynection with Bai Aloos statement were irrelevant. What the Tribunal had to companysider was the companyrectness or otherwise of a story in which the mother was stated to have left Rs. 2,10,000 out of which the heirs got one third share each. The Tribunal had to companysider each aspect of the story in order to judge of its probability and from that point of view it was a relevant companysideration as to why Bai Aloos money was number paid when she became major or when she got married. It was also a relevant companysideration as to what the father of the appellant did with his share of the money and the Tribunal rightly pointed out that the father took companyer tinder mixing of investments . These were relevant companysiderations for judging the probability of the story. The Tribunal also rightly pointed out that the fact that Bai Aloo was number assessed did number make the story any more probable. The Tribunal stated in its order that a summons was issued to the father by the Income-tax Officer to appear before the latter on June 23, 1950. The father failed to companyply with the summons. This circumstance, it is argued, should number have been used against the appellant, because the record showed that the summons was served on the father on June 22, 1950, for attendance on the next day and the father wrote a letter stating that it was number possible for him to attend on the next day and, therefore, asked for another date. We do number think that this circumstance vitiates the order of the Tribunal which was based on grounds much more substantial than the failure of summons issued against him. The father was actually examined later and his statements were taken into companysideration. One point made by the Tribunal was that numberexplanation was forthcoming as to why the uncle took charge of the share of the appellant and his sister when their father was alive and why the father allowed himself to be effaced in the matter of custody and management of the funds belonging to his children. We companysider that this circumstance was also a relevant companysideration, and if the father was in a position to give an explanation, he should have done so when he made his statement before the Income- tax Officer, D-11 Ward, Bombay, on February 8,1952. The Tribunal states We were also told that the assessee was taking his education between 1943 and 1950 and as such he bad numberopportunity to earn any income. In a place like Bombay and particularly in the family of a businessman, a person may earn even when he learns. These observations of the Tribunal has been very seriously companymented on by learned Counsel for the appellant. Learned Counsel has stated that certificates from the school, companylege and university authorities were produced by the appellant right upto 1950 which showed that the appellant was a student till 1950 and after seeing the certificates the Tribunal should number have said- We were also told etc. According to learned Counsel this showed that, the finding of the Tribunal was companyoured by prejudice. We are unable to agree. Even if it be taken that the appellant satisfactorily proved that he was a student till 1950, we do Dot think that it makes any real difference as to the main question at issue, which was whether the appellant received the sum of Rs. 70,000 from the estate of his mother, later increased by investments to Rs. 87,500 in 1945. The Tribunal rightly pointed out that numberevidence was given of the value of the estate left by the mother, though there was some evidence of what the mother received from the estate of her father Sanjana number was there any evidence of the investments said to have been made which led to an addition to the original sum of Rs. 70,000. It has been argued that it was a mere surmise on the part of the Tribunal to say that in a place like Bombay a person may earn when be learns. Even if the Tribunal is wrong in this respect, we do number think that it is a matter of any companysequence. We must read the order of the Tribunal as a whole to determine whether every material fact, for and against the assessee, has been companysidered fairly and with the due care whether the evidence pro and company has been companysidered in reaching the final companyclusion and whether the companyclusion reached by the Tribunal has been companyoured by irrelevant companysiderations or matters of prejudice. Learned Counsel for the appellant has taken us through the entire order of the Tribunal as also the relevant materials on which it is based. Having examined the order of the Tribunal and those materials, we are unable to agree with learned Counsel for the appellant that the order of the Tribunal is vitiated by any of the defects adverted to in Dhirajlal Girdharilal v. Commissioner of Income-tax, Bombay 1 or Omar Salay Mohamed Sait v. Commissioner of Income-tax, Madras 2 . We must make 1 1954 26 I.T.R. 736. 2 1959 37 I.T.R. 151 it clear that we do number think that those decisions require that the order of the Tribunal must be examined sentence by sentence, through a microscope as it were, so as to discover a minor lapse here or an incautious opinion there to be used as a peg on which to hang an issue of law. In view of the arguments advanced before us it is perhaps necessary to add that in companysidering probabilities properly arising from the facts alleged or proved, the Tribunal does number indulge in companyjectures, surmises or suspicions. It has also been argued before us that even if the explanation of the appellant as to the sum of Rs. 87,500 is number accepted, the Department did number prove by any direct evidence that the amount was income in the hands of the appellant. We do number think that in a case like the one before us the Department was required to prove by direct evidence that the sum of Rs. 87,500 was income in the hands of the appellant. Indeed, we agree that it is number in all cases that by mere rejection of the explanation of the assessee, the character of a particular receipt as income can be said to have been established but where the circumstances of the rejection are such that the only proper inference is that the receipt must be treated as income in the bands of the assessee, there is numberreason why the assessing authorities should number draw such an inference. Such an inference is an inference of fact and number of law. For the reasons given above we are of the view that numberquestion of law arose from the order of the Tribunal and we see numbergrounds for interference with the judgment and order of the Bombay High Court, dated October 4, 1956.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 304/56. Appeal by special leave from the judgment and order dated July 19, 1954, of the former Travancore. Cochin High Court in Income-tax Reference No. 5 of 1952. V. Viswanatha Sastri, R. Ganapathy Iyer and G. Gopalakrishnan, for the appellant. N. Rajagopal Sastri and D. Gupta, for the respondent. 1960. September 1. The Judgment of the Court was delivered by SHAH J.-The Commissioner of Income Tax for Mysore, Travancore Cochin and Coorg at Bangalore 60 referred under s. 8 5 of the Travancore Taxation on Income Investigation Commission Act, 1124 Malayalam Era - hereinafter referred to as the Investigation Act read with s. 113 of the Travancore Income Tax Regulation, 1096 Malayalam Era -hereinafter referred to as the Income Tax Act, the following questions to the High Court of Travancore-Cochin Whether on the facts and in the circumstances of the case, there was any evidence before the companymission to companye to the companyclusion to which it came in its report ? On the facts and in the circumstances of the case was the order C. No. 76 1 I.T/51 dated 25-10-1951 of the Government of India passed under the provisions of s. 8 2 of the Travancore Taxation on Income Investigation Commission Act read with s. 3 of the Opium and Revenue Laws Extension of Application Act of 1950, a legal and valid order ? Whether on the facts and in the circumstances of the case, the order passed by the Income Tax Officer in pursuance of the directions of the Government under s. 8 2 of the Travancore Taxation on Income Investigation Commission Act, 1124, was a legal and valid order? The High Court answered the three questions in the affirmative. Against the order of the High Court answering the reference, this appeal has been preferred with special leave. The facts which gave rise to the reference are briefly these. The appellants are a firm of merchants carrying on business in yarn in the Districts of Trivandrum, and Nagercoil in the Travancore-Cochin State. For the accounting year 1118 M. E. August 17, 1942 to August 16, 1943 , the appellants submitted a return under the Income Tax Act showing a net return of Rs.4,78,5945-0 as assessable income, and they were assessed to income-tax and super tax by the Income Tax Officer on that return. In 1124 M. E., the Legislature of Travancore enacted the Investigation Act companyferring authority upon the Government of Travancore to companystitute a companymission to be called an Income Tax Investigation Commission to investigate and, report on all matters relating to taxation on income, with particular reference to the extent to which the existing law relating to, and procedure for, the assessment and companylection of such taxation was inadequate to prevent evasion thereof and to investigate in accordance with the pro-visions of the Act in cases referred, on or before February 16, 1950, to it under s. 5. The Government was authorised after companysideration of the report to direct that proceedings be taken under the various Acts including the Income Tax Act, in respect of any period companymencing after August 16, 1939. By sub-s. 4 of s. 8, all assessment or reassessment proceedings taken in pursuance of the direction under sub-s. 2 , the findings recorded by the Commission on the case or on the points referred to it were, subject to the provisions of sub-ss. 5 and 6 to be final. Sub-section 5 of s. 8 provided for a reference to the High Court on any question of law arising out of any order made by the Commission. The State of Travancore-Cochin merged with the Indian Union on March 7, 1949, but the Income Tax Act and the Investigation Act companytinued to apply to that area numberwithstanding the merger. On August 6, 1949, the Government of Travancore-Cochin passed an order referring the case of the appellants to the Commission for investigation and report under s. 5 of the Investigation Act. On the evidence led before it, the Commission held by its report dated February 1, 1950, that the appellants had in the accounting year 1118 M. E. made a secret profit of Rs. 1,31,750 which was number included in the earlier assessment. The Commission then proceeded to companypute the tax payable by the appellants and found that the amount of tax payable by the appellants on their true income was Rs. 1,35,736-8-0 and that they were liable to pay that amount subject to credit for the tax, already paid, The Government of Travancore-Cochin by order dated February 14, 1950, accepted the report of the Commission and directed that immediate steps be taken to recover, under the Income Tax Act, from the appellants the tax due according to the findings recorded by the Commission. Pursuant to this direction, the Income Tax Officer, without holding any fresh assessment proceedings, issued on March 15,1950, a demand numberice under s. 42 of the Income Tax Act for the additional tax imposed on the appellants according to the findings of the Commission and called upon the appellants to pay Rs. 13,337- 13-0 as additional tax. The Union Legislature enacted on April 17, 1950, the Opium and Revenue Laws Extension of Application Act providing for the extension of certain opium and revenue laws to certain parts of India. By s. 2 of that Act, amongst others, the Taxation on Income Investigation Commission Act, XXX of 1947 enacted by the Central Legislature and all rules and orders made thereunder which were in force immediately before the companymencement of Act XXX of 1950, were extended to the rest of India except the State of Jammu and Kashmir, but by s. 3, in so far as it is material, it was provided that, If immediately before the companymencement of this Act there is in force in any part B State other than Jammu and Kashmir any law x x x x companyresponding to the Taxation on Income Investigation Commission Act, 1947 XXX of 1947 that law shall companytinue to remain in force. with the following modifications, a all cases referred to or pending before the State Commission by whatever name called in respect of matters relating to taxation on income other than agricultural income, shall stand transferred to the Central Commission for disposal Provided b bb Any reference in the State law, by whatever form of words, to the State Government or the State Commission shall, in relation to income other than agricultural income, be companystrued as a reference to the Central Government or the Central Commission, as the case may be. Purporting to exercise authority under s. 8 2 of the Investigation Act read with s. 3, cl. c , of the Opium and Revenue Laws Extension of Application Act, 1950, the Government of India, on October 25, 1951, directed that appropriate assessment proceedings under the Income Tax Act be taken against the appellants with a view to assess or reasses the companycealed income of Rs. 1,31,750 which had escaped assessment On January 1, 1952, the Commissioner of Income Tax withdrew the numberice of demand dated March 15, 1950, and thereafter the Income Tax Officer companymenced reassessment proceedings against the appellants and by his order dated March 29, 1952, directed the appellants to pay income-tax and super tax on the companycealed income. At the instance of the appellants, a reference was made to the High Court of Travancore-Cochin under s. 8 5 of the Investigation Act and the three questions set out hereinbefore were referred to that companyrt. ID the view of the High Court, there was evidence on which the Commission companyld arrive at the companyclusion recorded by it. Evidently, the High Court was incompetent, in answering the question, to enter upon a review of the evidence in exercise of its advisory jurisdiction and Mr. Viswanatha Sastri on behalf of the appellants has fairly number attempted to challenge the answer recorded by the High Court on the first question. The Government of India had, on a companysideration of the report of the Commission, directed on October 25, 1951, that assessment proceedings be started against the appellants. Section 8 2 of the Investigation Act, in so far as it is material, reads as follows After companysidering the report, our Government shall by order in writing direct that such proceedings as they think fit under the Travancore Income Tax Act, VIII of 1096 shall be taken against the person to whose case the report relates in respect of the income of any period companymencing- after the last day of Karkadagom, 1124 August 16, 1939 and upon such a direction being given, such proceedings may be taken and companypleted under the appropriate law number- withstanding the restrictions companytained in s. 25 of the Travancore Income Tax Act, VIII of 1960 and numberwithstanding any lapse of time or any decision to a different effect given in the case by any Income Tax authority or Income Tax Appellate Tribunal . By s. 3 of the Opium and Revenue Laws Extension of Application Act, XXXIII of 1950, the Investigation Act companytinued to remain in force with the modification that reference in the State law to the State Government was in relation to income other than agricultural income, to be companystrued as a reference to the Central Government. Whatever authority companyld be exercised by the Travancore- Cochin Government before the enactment of the Opium and Revenue Laws Extension of Application Act, 1950, companyld therefore, since the application of that Act, be exercised by the Central Government, and the latter Government companyld direct in respect of a case that proceedings for reassess- ment be companymenced against a tax payer. The case of the appellants was referred to the Investigation Commission by the Travancore-Cochin Government and report was made to that Government by the Commission, and the authority of the Government of Travancore-Cochin to take action on the report having been companyferred upon the Central Government by s. 3 c of the Opium and Revenue Laws Extension of Application Act, the Central Government was primal facie companypetent to direct that proceedings under the Income Tax Act as may be justifiable be taken against the appellants. But Mr. Viswanatha Sastri appearing on behalf of the appellants companytests that view on two grounds 1 that the Central Government may direct proceedings to be taken under the Income Tax Act only if the report was made by a companymission appointed under the Taxation on Income Investigation Commission Act,, XXX of 1947, and number on a report made by a companymission appointed by the Travancore- Cochin State under the Investigation Act, and 2 that the Travancore-Cochin Government having once taken action directing recovery of the tax due, it was number companypetent to the Central Government under s. 8 2 of the Investigation Act again to take any action on the report. In our view, there is numberforce in either of these company- tentions. The expression the report in s. 8 2 refers to the report made under s. 8 1 by the members of the Commission appointed by the Travancore-Cochin Government under the Investigation Act and on a companysideration of that report, the Government of India has, since the enactment of the Opium and Revenue Laws Extension of Application Act, 1950, power to direct that proceedings for assessment or re- assessment be taken under the Income Tax Act. On the plain language used by the Legislature in s. 3 c of the Opium and Revenue Laws Extension of Application Act, 1950, the companytention raised on behalf of the appellants is unsustainable. By order dated February 14, 1950, the Government of Travancore-Cochin had accepted the report of the Commission and had directed the Board of Revenue to take necessary action for recovery of the amount of tax due from the appellants, and pursuant to that direction, without holding proceedings for assessment or reassessment, a demand numberice was issued by the Income Tax Officer. The order passed by the Government of India on October 25, 1951, is number in any way inconsistent with the order dated February 14, 1950. Both the orders direct that steps be taken for recovery of the amount of income tax due from the appellants But, if as appears evident from s. 8 4 of the Investigation Act, liability to pay income-tax companyld arise only on an effective order of assessment, the Income Tax Officer number having assessed the income before the demand numberice was issued, the Government of India, was, in our judgment, companypetent to direct that proceedings be taken for assessing the liability of the appellants to pay tax companysistently with the provisions of the Income Tax Act. The order passed by the Government of India on October 25, 1951, may there. fore be regarded as effectuating the earlier order passed by the Travancore-Cochin Government on February 14, 1950. In any event, there IN numberhing in s. 8 2 which justifies the companytention that action may be taken thereunder only once. If an unauthorised direction is given under s. 8 2 , there is numberhing in that provision which prevents rectification of that order. By sub-s. 4 of s. 8 of the Investigation Act, the findings recorded by the Commission in cases or points referred to them are made final in all assessment or reassessment proceedings. The Act has, by sub-s. 2 of s. 8 removed the bar of limitation which arose by s. 25 of the Income Tax Act. It was companypetent therefore to the Income Tax Officer to reopen the assessment proceedings numberwithstanding any lapse of time and the previous order of assessment did number operate as a bar to such reassessment. The High Court was therefore in our judgment right in recording its answers on the three questions submitted by the Commissioner of Income Tax.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE, JURISDICTION Civil Appeals Nos. 273 and 274 of 1955. Appeals from the judgment and order dated December 10, 1954, of the Patna High Court in Appeals from Original Decree Nos. 309 and 310 of 1954. K. Jha, J. C. Sinha, S. Mustafi and R. R. Biswas, for the appellants. Lal Narayan Sinha, Bajrang Sahai and R. C. Prasad, for the respondents 1960. September 19. The Judgment of the Court was delivered by K. DAS J.-These two appeals on a certificate granted by the High Court of Patna are from the judgment and decree of the said High Court dated December 10, 1954. By the said judgment and decree the High Court dismissed two appeals which arose out of two suits, Title Suit number 42 of 1950 and Title Suit No. 23 of 1952, which were tried together and dismissed with companyts by the learned Subordinate Judge of Deoghar. The plaintiffs of those two suits are the appellants before us. One of the appellants Thakur Manmohan Deo was the holder of a ghatwali tenure companymonly known as the Rohini ghatwali, situate within the subdivision of Deoghar in the district of the Santa Parjanas. The other appellant Tikaitni Faldani Kumari was the holder of the Pathrole ghatwali also situate in the same sub-division. Both these ghatwali tenures were formerly known as Birbhum ghatwalis and were governed by Bengal Regulation XXIX of 1814. In the year 1950 was enacted the Bihar Land Reforms Act 1950 Bihar Act 30 of 1950 , hereinafter called the Act. The Act came into force on September 25, 1950. The validity of the Act was challenged in the Patna High Court on grounds of a violation of certain fundamental rights and the High Court held it to be unconstitutional on those grounds. The Constitution First Amendment Act, 1951, was enacted on June 18, 1951, and in appeals from the decision of the Patna High Court, this Court held in The State of Bihar v. Maharajadhiraja Sir Kameshwar Singh of Darbhanga 1 that the Act was number unconstitutional or void on the grounds alleged, except with regard to the provisions in s. 4 b and s. 23 f thereof The validity of the Act is, therefore, numberlonger open to question on those grounds, though in one of the suits out of which these two appeals have arisen, it was companytended that the Act was ultra vires the Constitution. The principal issue in the two suits which number survives is issue number 3 which said ,Do the provisions of the Bihar Land Reforms Act, 1950, purport to acquire the plaintiffs ghatwalis ? If so, are they ultra vires in their application to such ghatwalis ? This issue was decided against the appellants by the learned Subordinate Judge and the decision of the learned Subordinate Judge was upheld on appeal by the High Court of Patna in its judgment and decree dated December 10, 1954, from which decision these two appeals have companye to us. Three main points have been urged on behalf of the appellants. The first point is one of companystruction and the appellants companytend that on a proper companystruction ,of the relevant provisions of the Act, it does number apply to ghatwali tenures like the Rohini and Pathrole ghatwalis. Secondly, it is companytended that if the provisions of the Act apply to the appellants ghatwali tenures, then the State legislature was number companypetent to enact it, because ghatwali tenures like the Rohini and Pathrole ghatwalis, were of a quasi-military nature and if the Act applies to them, it must be held to relate to items 1 and 2 of the Union List List I and, therefore, outside the companypetence of the State- 1 1952 S.C.R. 898. legislature. The third companytention is that the Act does number purport to repeal Bengal Regulation XXIX of 1814 and in as much as the said Regulation deals ,With special tenures, the special law enacted with regard to such tenures would number be affected by the general law with regard to land reforms as embodied in the Act. We shall deal with these three companyten- tions in the order in which we have stated them. But before we do so, it is necessary to explain, briefly, the nature of these ghatwali tenures. We may quote here some of the provisions of Bengal Regulation XXIX of 1814. The Regulation says in s. 1 that lands held by the class of persons denominated ghatwals in the district of Birbhum form a peculiar tenure to which the provisions of the existing Regulations are number expressly applicable it then states that according to the former usages and companystitution of the companyntry, this class of persons are entitled to hold their lands, generation after generation, in perpetuity, subject nevertheless to the payment of a fixed and established rent to the zamindar of Birbhum and to the performance of certain duties for the maintenance of the public peace and support of the police. The Regulation then lays down certain rules to give stability to the arrangement established among the ghatwals and these rules are companytained in ss. 2, 3, 4 and 5. It would be enough if we quote ss. 2, 3, and a part of s. 5. S. 2. A, settlement having lately been made on the part of the Government with the ghatwals in the district of Birbhum, it is hereby declared that they and their descendants in perpetuity shall be maintained in possession of the lands so long as they shall respectively pay the revenue at present assessed upon them, and that they shall number be liable to any enhancement of rent so long as they shall punctually discharge the same and fulfill the other obligations of their tenure. S. 3. The ghatwali lands shall be companysidered, as at present, to form a part of the zamindari of Birbhum, but the rent of ghatwals shall be paid direct to the Assistant Collector stationed at Suri, or to such other public officer as the Board of Revenue may direct to receive the rents. S. 5. Should any of the ghatwals at any time fail to discharge their stipulated rents, it shall be companypetent for the State Government to cause the ghatwali tenure of such defaulter to be sold by public sale in satisfaction of the arrears due from him, in like manner, and under the same rules, as lands held immediately of Government, or to make over the tenure of such defaulter to any person whom the State Government may approve on the companydition of making good the arrears due or to transfer it by grants assessed with the same revenue, or with an increased or reduced assessment, as to the Government may appear meet or to dispose of it in such other form and manner as shall be judged by the State Government proper. In a number of decisions of the Privy Council the nature of these tenures has been explained and in Satya Narayan Singh Satya Niranjan Chakravarti 1 Lord Sumner thus summarised the position at pages 198-199 of the report In the Santal Parganas there are for practical purposes three classes of ghatwali tenures, a Government ghatwalis, created by the ruling power b Government ghatwalis, which since their creation and generally at the time of the Permanent Settlement have been included in a zamindari estate and formed into a unit in its assessment and, c zamindari ghatwalis, created by the zamindar or his predecessor and alienable with his companysent. The second of these classes is really a branch of the first. The matter may, however, be looked at broadly. In itself ghatwal is a term meaning an office held by a particular person from time to time, who is bound to the performance of its duties, with a companysideration to be enjoyed in return by the incumbent of the office. Within this meaning the utmost variety of companyditions may exist. There may be a mere personal companytract of employment for wages, which takes the form of the use of land or an actual estate in land, heritable and I.L.R. 3 Pat. 183. perpetual, but companyditional upon services certain or services to be demanded. The office may be public or private, important or the reverse. The ghatwal, the guard of the pass, may be the bulwark of a whole companyntry-side against invaders he may be merely a sentry against petty marauders he may be numbermore than a kind of gamekeeper, protecting the crops from the ravages of wild animals. Ghatwali duties may be divided into police duties and quasi-military duties, though both classes have lost much of their importance, and the latter in any strict form are but rarely rendered. Again the duties of the office may be such as demanded personal companypetence for that discharge they may, on the other hand, be such as can be discharged vicariously, by the creation of shikmi tenures and by the appointment and maintenance of a subordinate force, or they may be such as in their nature only require to be provided for in bulk. It is plain that where a grant is forthcoming to a man and his heirs as ghatwal, or is to be presumed to have been made though it may have been since been lost, personal performance of the ghatwali services is number essential so long as the grantee is responsible for them and procures them to be rendered Shib Lall Singh v. Moorad Khan 1 . So much for the ghatwal. The superior who appoints him, may also in the varying circumstances of the Organisation of Hindostan be the ruling power over the companyntry at large, the landholder responsible by custom for the maintenance of security and order within his estates, or simply the private person, to whom the maintenance of watchmen is in the case of an extensive property, important enough to require the creation of a regular office. It is number disputed before us that the Rohini and Pathrole ghatwalis are Government ghatwalis and admittedly they are governed by Regulation XXIX of 1814. The question number is, does the Act apply to these ghatwalis ? It is necessary number to read some of the provisions of the Act. Section 2 is the definition section, cl. o whereof defines a proprietor cl. q 1 1868 9 W.R. 126. defines a tenure and cl. r defines a tenure-holder . The definition of the two expressions tenure and tenure- holder was amended by Bihar Act 20 of 1954. The amendments were made with retrospective effect and the amending Act said that the amendments shall be deemed always to have been substituted. Now, the three clauses o , q and r of s. 2 are in these terms S. 2 o - Proprietor means a person holding in trust or owning for his own benefit an estate or part of an estate, and includes the heirs and successors-interest of a proprietor and, where a proprietor is a minor or of unsound mind or an idiot, his guardian, companymittee or other legal curator q tenure means the interest of a tenure. holder or an under-tenure-holder and includes- a ghatwali tenure, a tenure created for the maintenance of any person and companymonly known as kharposh, babuana, etc., and a share in or of a tenure, but does number include a Mundari Khunt Kattidari tenancy within the meaning of the Chota Nagpur Tenancy Act, 1908, or a bhuinhairi tenure prepared and companyfirmed under the Chota Nagpur Tenures Act, 1869 r tenure-holder means a person who has acquired from a proprietor or from any other tenure-holder a right to hold land for the purpose of companylecting rent or bringing it under cultivation by establishing tenants on it and includes- the successors-in-interest of persons who have acquired such right, a person who holds such right in trust, a holder of a tenure created for the maintenance of any person, a gbatwal and the successors-in-interest of a ghatwal, and where a tenure-holder is a minor or of unsound mind or an idiot, his guardian, companymittee or other legal curator. The definition clauses q and r state in express terms that tenure includes a ghatwali tenure and, tenure- holder includes a ghatwal and the successors-in-interest of a ghatwal. The argument on behalf of the appellants is that the definition clauses should be so companystrued as to include zamindari ghatwalis only and number Government ghatwalis. Firstly, it is pointed out that cl. r in its substantive part says that a tenure-holder means a person who has acquired from a proprietor or from any other tenure- holder a right to hold land for the purpose of companylecting rent or bringing it under cultivation by establishing tenants on it this part, it is submitted, cannot apply to a Government ghatwal, because a Government ghatwal does number acquire from a proprietor or from any other tenure-holder a right to hold land for any of the two purposes mentioned therein. In this companynection our attention has been drawn to el. o which defines a proprietor and it is further pointed out that, as stated by Lord Sumner, Government ghatwals were either created by the ruling power or were since their creation and generally at the time of the Permanent Settlement included in a zamindari estate and formed into a unit in its assessment therefore, it is argued that Government ghatwalis did number acquire any right from a proprietor or any other tenure-holder. Secondly, it. is Submitted that sub-cl. i of el. q and sub cl. iv of cl. r must be read in the light of the sub. stantive part of the two clauses, even though the subclauses state in express terms that a tenure includes a ghatwali tenure and a tenure-holder includes a ghatwal. It is pointed out that a zamindari ghatwal acquires his interest from a proprietor and the substantive part of clauses q and r may apply to a zamindari ghatwal and his tenure but the substantive part.of the two clauses cannot apply to a Government ghatwal and his tenure. We are unable to accept this line of argument as companyrect. Where a statute says in express terms that the expression tenure includes a ghatwali tenure and the expression tenure-holder includes a ghatwal and the successors-in- interest of a ghatwal, there must be companypelling reasons to out down the amplitude of the two expressions. The Bihar legislature must have been aware of the distinction between Government ghatwalis and zamindari ghatwalis and if the intention was to exclude Government gbatwalis, numberhing companyld have been easier than to say in the two definition clauses that they did number-include Government ghatwalis. On the companytrary, the legislature made numberdistinction between Government ghatwalis and zamindari ghatwalis but included all ghatwali tenures within the definition clauses. There are numberrestrictive words in the definition clauses and we see numberreasons why any restriction should be read into them. It is worthy of numbere that the two definition clauses first state in the substantive part what the general meaning of the two expressions is, and then say that the expressions shall inter alia include a ghatwali tenure and a ghatwal and the successors-in-interest of a ghatwal. Thus, the two definition clauses are artificially extended so as to include all ghatwali tenures and all ghatwals and their successors-in-interest, irrespective of any companysideration as to whether they companye within the general meaning stated in the substantive part of the two clauses. Such artificial extension of the two definition clauses is also apparent from sub-cl. v of el. r and sub-cl. iii of cl. q . Sub-clause iii of el. q excludes certain tenures from the definition clause which would otherwise companye within the general meaning of the expression tenure and sub-cl. v of cl. r extends the expression tenure- holder to guardians companymittees and curators. When we are dealing with an artificial definition of this kind which states means and shall include etc., there is numberroom for an argument that even though the definition expressly states that something is included within a particular expression, it must be excluded by reason of its number companying within the general meaning of that expression. The learned Counsel for the appellants has also called to his aid certain other provisions of the Act in support of the argument that the Act does number apply to Government ghatwalis. He has referred to s. 23 1 f and s. 32 4 of the Act. Section 23 deals with the companyputation of net income for the purpose of preparing a Compensation Assessment-roll, by deducting from the gross asset of each proprietor or tenureholder, certain sums mentioned in clauses a to f . It must be stated that what was el. g of s. 23 1 before has number become el. f , because the original el. f of s. 23 1 was held to be unconstitutional by this Court in The State of Bihar v. Maharajadhiraja Sir Kameshwar Singh of Darbhanga 1 . Section 23 1 so far as it is relevant for our purpose states S. 23 1 For the purpose of preparing a Compensation Assessment-roll, the net income of a proprietor or a tenure- holder shall be companyputed by deducting from the gross asset of such proprietor or tenure-holder, as the case may be, the following, namely- a ----------------------------------- b ---------------------------------- c ---------------------------------- d ---------------------------------- e ---------------------------------- f any other tax or legal imposition payable in respect of such estate or tenure number expressly mentioned in clauses a to e or the value, to be companymuted in the prescribed manner, of any services or obligations of any other form to be rendered or discharged as a companydition precedent to his enjoyment of such estate or tenure . Now, the argument before us is that el. f of s. 23 1 cannot apply to a Government ghatwal, because he can still be asked to perform the services and obligations which he had undertaken by reason of the office which he held. It is submitted that the Act does number purport to abolish the ghatwali office and as the office and the tenure are inseparably companynected, the calculation referred to in el. f cannot be made in the case of a Government ghatwali. Our attention has also been drawn to a later decision of the Patna High Court Election Appeals number. 7 and 8 of 1958 of March 20, 1959, wherein a distinction was drawn 1 1952 S.C.R. 898. between acquisition and resumption of a ghatwali tenure and the argument that on the acquisition of the ghatwali tenure the office lapsed was number accepted. We have been informed at the Bar that that decision is under appeal to this Court. Therefore, we do number propose to say anything about the companyrectness or otherwise of the view expressed therein. It is enough to point out that assuming that the argument of the appellants is companyrect and el. f of s. 23 1 does number apply, it does number necessarily follow that the appellants ghatwali tenures cannot be acquired by the State Government under s. 3 of the Act. Section 23 1 f provides only for the deduction of a particular item from the gross asset of the tenure-holder for the purpose of companyputing the net income. Even if el. f does number apply, the statute provides for other deductions mentioned in clauses a to e . Those clauses indisputedly apply to a ghatwali tenure and a Compensation Assessment-roll can be prepared on their basis. It would number be companyrect to say that because a particular item of deduction does number apply in the case of a Government ghatwali, such ghatwali tenure must be excluded from the ambit of the Act such a view will be inconsistent with the scheme of s. 23. The scheme of s. 23 is that certain deductions have to be made to companypute the net income some of the items may apply in one case and some may number apply. The section does number companytemplate that all the items must apply in the case of each and every proprietor or tenure-holder. We number companye to s. 32 of the Act. Section 32 4 states S. 32 4 if the estate or tenure in respect of which the companypensation is payable is held by a limited owner or the holder of life-interest, the Compensation Officer shall keep the amount of companypensation in deposit with the Collector of the district and the Collector shall direct the payment of the interest accruing on the amount of companypensation to the limited owner or the holder of the life interest during his lifetime. Such amount shall remain deposited with the Collector until the amount of companypensation or portion thereof after making payments, if any, under the proviso to this sub-section is made over to any person or persons becoming absolutely entitled thereto Provided that numberhing in this sub-section shall be deemed to affect the right of any limited owner or the holder of a life interest to apply to the District Judge for the payment of a part of the amount of companypensation to defray any expenses which may be necessary to meet any legal necessity. It is argued that sub-s. 4 of s. 32 is also number applicable to a Government ghatwali, because the expression limited owner occurring therein has been used in the sense in which it is understood in Hindu Law and the holder of a Government ghatwali is number a limited owner in that sense. Learned Counsel for the appellants has drawn our attention to the expression legal necessity occurring in the proviso to sub-s. 4 in support of his argument that the expression limited owner has the technical sense ascribed to it in Hindu Law. On behalf of the respondent State it has been argued that the expressions limited owner and legal necessity are number used in any technical sense and may apply to persons who under the companyditions on which they hold the tenure cannot alienate or divide it. Here again we companysider it unnecessary to pronounce on the true scope and effect of sub-s. 4 of s. 32. The short question before us is are Government ghatwalis excluded from the ambit of the Act by reason of sub.s. 4 of s. 32 ? Let us assume without deciding, that sub-s. 4 does number apply to ghatwali tenure. What is the result ? Section 32 merely provides for the manner of payment of companypensation. If sub-s. 4 does number apply, the payment of companypensation will have to be made in accordance with sub-s. 1 of s. 32 which says S. 32 1 . When the time within which appeals under section 27 may be made in respect of any entry in or omission from a Compensation Assessment-roll has expired or where any such appeal has been made under that section and the same has been disposed of, the Compensation Officer shall proceed to make payment, in the manner provide in this section, to the proprietors, tenure holders and other persons who are shown in such Compensation Assessment-roll as finally published under section 28 to be entitled to companypensation, of the companypensation payable to them in terms of the said roll after deducting from the amount of any companypensation so payable any amount which has been ordered by the Collector under clause c of section 4 or under any other section to be so deducted. Therefore, the result is number that Government ghatwalis will go out of the Act, because sub-s. 4 does number apply. The result only is that the holders of such tenures will be paid companypensation in a different manner. What rights others having a proprietary interest in a ghatwali tenure have against the companypensation money does number fall for decision here. Therefore, we are of the view that neither s. 23 1 f number s. 32 4 have the necessary and inevitable result companytended for by the appellants, viz., that the appellants, ghatwali tenures must be excluded from the operation of the Act even though the definition clauses expressly include them. This brings us to the second point urged before us. That point can be disposed of very shortly. It is companytended that if the provisions of the Act apply to Government ghatwalis, then the Act falls outside the legislative companypetence of the State Legislature in as much as the Act then becomes legislation with regard to items 1 and 2 of the Union List. These two items are- Defence of India and every part thereof including preparation for defence and all such acts as may be companyducive in times of war to its prosecution and after its termination to effective demobilisation. Naval, military and air forces any other armed forces of the Union. It is, we think, quite obvious that the Act has numbercon- nection whatsoever with the defence of India or the armed forces of the Union. As Lord Sumner had pointed out as far back as 1923, though ghatwali duties might be divided into police duties and quasi military duties, both classes find lost their importance and the latter were rarely if ever demanded. This Court had observed in The State of Bihar v. Maharajadhiraja Sir Kameshwar Singh of Darbhanga and Others 1 The pith and substance of the legislation, how. ever, in my opinion, is the transference of ownership of estates to the State Government and falls within the ambit of legislative head entry 36 of List II. There is numberscheme of land reform within the frame work of the statute except that a pious hope is expressed that the companymission may produce one. The Bihar Legislature was certainly companypetent to make the law on the subject of transference of estates and the Act as regards such transfers is companystitutional. per Mahajan, J., at p. 926 of the report . We think that in pith and substance the legislation was companyered by item 36 of List II as it then stood and it has numberrelation to items 1 and 2 of List I. Now, as to the last argument founded on Regulation XXIX of 1814. In our view the Act in pith and substance related to acquisition of property and companysequently numberquestion of the repeal of Regulation XXIX of 1814 arose number is it necessary to companysider the principle that a special law relating to special tenures is number affected by a subsequent general law of land reforms. Such a principle has numberapplication in the present case. The Act expressly includes all ghatwali tenures within its ambit and provides for the vesting of all rights therein absolutely in the State of Bihar on the issue of a numberification under s. 3 and under s. 4 certain companysequences ensue on the issue of such a numberification numberwithstanding anything companytained is any other law for the time being in force. It is worthy of numbere that the Bengal Permanent Settlement Regulation, 1793 Bengal Regulation 1 of 1793 , did number stand in the way of acquisition of other permanently settled estates, and it is difficult to see how Regulation XXIX of 1814 can stand in the way of acquisition of ghatwali tenures. The point is really companyered by the decision of this Court in Raja Suriya Pat Singh v. The State of U. P. 2 where it was observed 1 1952 S.C.R. 898. 2 1952 S.C.R. 1o56, 1078-79. The Crown cannot deprive a legislature of its legislative authority by the mere fact that in the exercise of its prerogative it makes a grant of land within the territory over which such legislative authority exists and numbercourt can annul the enactment of a legislative body acting within the legitimate scope of its sovereign companypetence. If, therefore, it be found that the subject of a Crown grant is within the companypetence of a provincial legislature, numberhing can prevent that legislature from legislating about it, unless the Constitution Act itself expressly prohibits legislation on the subject either absolutely or companyditionally. For the reasons given above, we hold that numbere of the three points urged on behalf of the appellants has any substance.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 755 of 1957. Appeal by special leave from the judgment and order dated March 23, 1955, of the former Nagpur High Court in Misc. Civil Case No. 240 of 1953. N. Rajagopal Sastri, R. H. Dhebar and D. Gupta, for the appellant. Veda Vyasa, S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the respondent. 1960. October, 17. The Judgment of the Court was delivered by. HIDAYATULLAH J.-This appeal, with special leave, has been filed against the judgment of the Nagpur High Court in a reference under s. 66 1 of the Indian Income-tax Act, 1922, by which the High Court answered the following question in the negative Whether the proportionate profits on the goods of the value of Rs. 4,10,785 were received or were deemed to be received in British India, in the year of, account, by or on behalf of the assessee Company within the meaning of Section 4 1 a of the Indian Income-tax Act, 1922 . The Commissioner of Income-tax, Madhya Pradesh and Bhopal is the appellant, and the Bhopal Textiles Ltd., Bhopal, is the respondent. For the assessment year 1944-45, the Company which was number-resident was treated as resident and ordinarily resident under s. 4 1 c of the Income-tax Act. In the year of account, it had supplied its manufactured articles either to the Government of India or its numberinees at Agra, Allahabad and Delhi. Under the orders of the Government, the goods were sent direct to the persons numberinated, who made the payment against the goods. The goods were all sent for Bhopal, and the railway freight and other charges were to be borne by the buyers to whom the railway receipts made out in the name of the companysignees were sent by the Company through the Imperial Bank at Bhopal. The Bhopal Branch sent the railway receipts to branches of the Bank at Agra, Allahabad and Delhi, which companylected the amounts due from the buyers, and transmitted them to the Imperial Bank, Bhopal, to the credit of the Company. On these facts, a total sum of Rs. 4,40,373 was held by the Department to have been received in British India. of that sum, an amount of Rs. 29,588 which represented the receipts for supplies direct to Government is numberlonger in dispute. The balance represents the sum, which was the subject-matter of the reference. The usual appeals followed, and the companytention of the Company that the money was number received in, British India was number accepted by the Tribunal. The Tribunal did number decide about the place of accrual. A reference was then made by the Tribunal of the question quoted above. The High Court in deciding the reference went into the question of passing of property under the Indian Sale of Goods Act, 1930, and came to the companyclusion that since the property in the goods had passed to the buyers, the Imperial Bank of India, Bhopal, must be deemed to have received the railway receipts as agents of the buyers . Continuing the reason, the learned Judges observed So also the branches of the Bank at Agra, Allahabad and Delhi acted as the agents of the buyers when they companylected the money from them and transmitted it to the Bhopal branch. In this view, the profits cannot be said to be received by the assessee Company in British India. It received the money only when it reached the Bhopal branch as a credit to its own account and that was number in British India at the material time . The case was number decided by the Tribunal on the basis of accrual of the income, profits or gains to the Company. It was decided on the fact of actual receipt, whether it was in British India or in Bhopal, which was then outside the taxable territories. We need number, therefore, companycern ourselves with the problem whether property in the goods companyld be said to have passed absolutely to the buyers without any right of disposal being reserved by the Company. It is a matter of some doubt whether the goods were absolutely at the disposal of the buyers after the rail. way receipts were handed over to the Bank. It is in evidence- and has been adverted to by the Incometax Officer-that the Company, when it handed over the railway receipt to the Imperial Bank at Bhopal, did so along with a companyering letter in which it asked the Bank to deliver the railway receipt and the bill to the buyers against payment of the bill amount plus companylection charges. In this view of the matter, though we do number express any final opinion, we doubt whether the right of disposal was parted with by the, Company. A railway receipt is a document of title to goods, and, for all purposes, represents the goods. When the railway receipt is handed over to the companysignee on payment, the property in the goods is transferred. In this case, it is a matter of companysiderable doubt whether the property in the goods can be said to have passed to the buyers by the mere fact of the railway receipts being in the name of the companysignees, as has been held by the High Court. Since we are number deciding the question of accrual, we do number elaborate the point. Coming number to the question as to where the amount was received, we have numberdoubt that the view of the Tribunal was companyrect. This income was received at Agra, Allahabad or Delhi from the buyers by the Imperial Bank acting as the agent of the Company. The Company had handed over the railway receipts to the Bank, and asked the Bank number to hand over the railway receipts to the buyers, unless payment was received. This was sufficient to make the Bank an agent of the Company. The buyers companyld number have companyntermanded the instructions given by the Company to the Bank, which they would, indubitably, have been able to do, if the Bank was their agent. This was laid down by this Court in The Commissioner of Income-tax v. P. M. Rathod and Company 1 . Mr. Veda Vyasa companytends that the case is distinguishable on the ground that the railway receipts there were to self whereas here the railway receipts, were made out in the name of the companysignee. Nothing turns upon this distinction. The document of title to goods was still the property of the Company till payment for it was received and it was handed over. In this view of the matter, we are of opinion that the ruling in question app- lies. Mr. Veda Vyasa finally companytended that the agreement between the parties was that the goods were to 1 1960 1 S.C.R. 401. be sent for Bhopal, and that the price was also to be paid there. He companytended that the handing over of the railway receipts to the Bank at Bhopal was in furtherance of the agreement, that the money was ultimately obtained by the Bank and handed over at Bhopal also, and that, thus, the money must be deemed to have been received there. This, in our opinion, does number truly represent the character of the transaction. No doubt, under the agreement, payment was to be made at Bhopal but the circumstances show that that was departed from, and the ordinary mercantile practice of handing over the railway receipts to ones own bankers with a request to hand over the receipts against payment to the buyers was followed. The Bank, as we have shown above, was thus the agent of the sellers, as was laid down in the ruling of this Court, and the fact of payment to the agent determines the place where the money can be said to be received by the Company. That place was at Agra, Allahabad or Delhi. In this view, the income, profits or gains must be deemed to have been received in the taxable territories, and the answer to the question ought to have been in the affirmative. We accordingly allow the appeal, and answer the question in the affirmative.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 716 of 1957. Appeal from the judgment and decree dated July 29, 1955, of the former Bombay High Court in Appeal No. 50 of 1953 under the Letters Patent against the judgment and decree dated September 3, 1953, of the said High Court in First Appeal No. 547 of 1952. N. Sanyal, Additional Solicitor-General of India, T. V. Tatachari and M. S. K. Sastri, for the appellants. Purshottam Trikamdas, H. R. Gokhale and R. Gopalakrishnan, for the respondent. 1960. October 28. The Judgment of Jafer Imam and Raghubar Dayal, JJ., was delivered by Jafer Imam, J. A. K. Sarkar, J., delivered a separate judgment. IMAM J.-This is an appeal against the judgment of a Division Bench of the Bombay High Court in Letters Patent Appeal No. 50 of 1953, reversing the decision of Shah, J. and restoring the order passed by the executing companyrt which had been set aside by him. Two Questions arise for decision in this appeal 1 whether the Wada house ordered to be attached by the executing companyrt is Watan property, and if so, can it be attached in execution of a decree ? 2 If the Wada is number Watan property, is it exempted from attachment by virtue of the provisions of s. 60 of the Code of Civil Procedure ? It is necessary number to state a few facts. One Rao Ba. Vithalrao Laxmanrao Thube, hereinafter referred to as Laxmanrao, brought Civil Suit No. 313 of 1943 against Tuljaramarao Narainrao Desai, hereinafter referred to as Tuljaramarao, to recover Rs. 80,000 which had been borrowed by him from the plaintiff. Laxmanraos suit was decreed on December 20, 1943. Tuljaramarao having died his legal representatives, the present appellants, were brought on the record on September 21, 1944. In April, 1949, Laxmanrao filed an application for the execution of the decree. He sought the attachment, with a view to their subsequent sale, of certain properties including the Wada which is the subject-matter of this appeal. The appellants objected to the proposed attachment on various grounds. The executing companyrt on December 17, 1951, issued a warrant of attachment only against the Wada in question. The appellants appealed to the Bombay High Court. Their appeal was heard by Shah, J., who by his order dated September 23, 1953, set aside the order of attachment relying on the decision of Chagla, J., in second Appeal No. 760 of 1942. He, however, gave numberdecision on the question whether s. 60 of the Code of Civil Procedure gave protection to the Wada from attachment. Against the decision of Shah, J., there was an appeal under the Letters Patent of the High Court which was heard by a Division Bench. The Division Bench, as already stated, reversed the decision of Shah, J. and restored the order made by the executing companyrt. Subsequently, the High Court gave a certificate that the case was a fit one for appeal to this Court. It is undisputed that the whole of village Nandi had been granted as inam to the ancestor of Tuljaramarao and his descendants as per Sanad, Ext. 54, and the Inam Patrak, Ext. In that Sanad there is numbermention of any Wada existing on the Inam land. According to the executing companyrt the Wada appears to have been built after the grant. It appears that- the opinion of the Division Bench of the High Court was also to the same effect. There is numberfinding of Shah, J., to the companytrary. We must, therefore, proceed on the basis that the Wada in question was number the subject of the original grant. This Wada came to be companystructed on the land in the inam village of Nandi sometime subsequent to the grant. What has to be decided is, do the attributes of Watan Property accrue to the Wada which was companystructed after the grant on land which was admittedly Watan Property as defined by the Bombay Hereditary Offices Act, 1874 Bombay Act No. III of 1874 , hereinafter referred to as the Act. In appeal No. 760 of 1942, Chagla, J., took the view that the house in that case was an accession to the site on which it stood. Accordingly, it must partake of the character of the land on which it stood. The learned Judge stated that the question which he had to determine was whether the house was immovable property held for the performance of the duty appertaining to an hereditary office within the meaning of s. 4 of the Act. Having regard to the definition of immoveable property in the Bombay General Clauses Act he was of the opinion that the house certainly formed part of the immoveable property which was held for the performance of the duty appertaining to the hereditary office of the Watan and that the only answer to the question what is the immoveable property which is held for the performance of the duty under section 4? can be both the land and the house. If the house forms part of the immoveable property it is number possible to sever the two and to say that it is only the land which is Watan property and number the house which is permanently fastened to it. Shah, J., relied upon the decision of Chagla, J., and held that the land on which the Wada in the present case stood, being Watan property, the Wada must also be deemed to have acquired that character. The Division Bench which heard the appeal against the decision of Shah, J., was of the opinion that although a house built on land must be regarded as immoveable property it did number follow that like the land on which it was built the house became Watan property. The fact that a house subsequently built became immoveable property would have numbermaterial bearing on the question whether it was Watan property or number. In order that the house may be regarded as Watan property it must satisfy the test laid down by the definition of the word Watan Property in s. 4 of the Act and that if the word held was companystrued in the way in which the learned Judges of the Division Bench thought it should be, it would be difficult to accept the view that a house subsequently built by a watandar on a part of the Watan land companyld be said to be held by him for the performance of his duties of a hereditary office. The learned Judges of the Division Bench accordingly were of the opinion that Shah, J., erred in so holding. Watan Property has been defined in the Act to mean The moveable or immoveable property held, acquired, or assigned for providing remuneration for the performance of the duty appertaining to an hereditary office. It includes a right to levy customary fees or perquisites, in money or in kind, whether at fixed times or otherwise. It includes cash payments in addition to the original watan property made voluntarily by the State Government and subject periodically to modification or withdrawal. The inam lands of Nandi were undoubtedly held as remuneration for the performance of the duty appertaining to an hereditary office and therefore were Watan properties. On the findings of the companyrts below the Wada in question was number the subject of the grant. In our opinion, therefore, at numbertime was it held for providing remuneration for the performance of the duty appertaining to a hereditary office. Nor companyld it be said to have been acquired for performance of any such duty. It had been companystructed some time subsequent to the grant either by the grantee or his descendants and there is numberindication on the record that it was companystructed for the purpose of providing remuneration for the performance of the duty appertaining to a hereditary office. To that extent at least it appears to be clear that the Wada in question does number companye within the definition of Watan property as defined in the Act. The only question is whether having been companystructed on land which is Watan property and being immovable property within the meaning of the Bombay General Clauses Act, does it partake of the character of the land on which it stood ? On behalf of the appellants it was argued that the Wada is an accession to the Watan property, namely, the land of village Nandi. It seems to us, however, that companystruction of a Wada on land which is Watan property is number an accession to it, as accession to the land would suggest that over a companyrse of years imperceptible accretion to the land has taken place and it was impossible to distinguish the original land from the accreted land. In such a case the accreted land may possibly partake of the character of the original land. Adjacent lands to the original land which have been acquired and can be distinguished cannot partake of the character of the original land. On behalf of the appellants it was argued that the right, title and interest of the grantor had to be looked at first in companystruing a grant and if it appeared from the terms thereof that it did number companytain any reservation or exception then all the rights, title and interest of the grantor which he was capable of granting would pass to the grantee. The grantor in this case was the Government which companyld have built a companystruction on the land granted or dug tube wells on it. The grantee, therefore, companyld also build a house or any other structure on the land. On the other hand, it was companytended on behalf of the respondent that the position of a watandar was number that of an absolute owner of the land. He held the land on certain companyditions. The land was liable to forfeiture if he was guilty of certain acts mentioned in s. 60 and Schedule 11 of the Act. We will assume, there being numberhing to the companytrary in the Sanad, that the grantee was number restricted from companystructing a building on the land. From that, however, it does number necessarily follow that the building so companystructed became Watan property within the meaning of the Act. If the Government companyld have built a companystruction on the land it companyld also have dismantled it and removed the material with which it was made. Similarly, the grantee companyld do so, there being numberrestriction in that regard in the terms of the Sanad. It seems to us that on a proper companystruction of the Sanad there was numberimpediment in the way of the grantee from dismantling the house which he had built and removing the materials with which it had been companystructed and selling the same. Indeed, unless it is held that a house companystructed on the land partakes of the character of the land, it is difficult to see how the grantee is prevented from selling or mortgaging it but number the land on which it stood. It seems to us, therefore, that the Wada in the present case although immovable property did number partake of the character of the land on which it was companystructed because it was severable from the land and was capable of being dismantled and the materials of which companyld be removed and sold without violating any of the provisions of the Act. In our opinion, the decision of the Division Bench of the High Court that the Wada was number Watan property appears to be companyrect. The next question for companysideration is whether the Wada is one belonging to an agriculturist and occupied by him within the meaning of cl. c of the proviso to s. 60 1 of the Code of Civil Procedure. If it is, then it is exempted from attachment by the provisions of the proviso. It was urged that as the word agriculturist has number been defined in the Code, the word must be companystrued according to its ordinary meaning. According to Shorter Oxford English Dictionary this word can also mean a farmer. Neither the extent of the land farmed by him number the amount of income derived by him from cultivating the land was a relevant companysideration in companystruing the word .agriculturist Nor would it be right to restrict the meaning of the word agriculturist to mean that an agriculturist must be a person who himself or by the aid of the members of his family tills the land and number with the aid of employed labour. On behalf of the respondent, however, it was companytended that the word agriculturist in el. c of the proviso must bear the same meaning as the word agriculturist in cl. b of the proviso. It was necessary, therefore, to companystrue the provisions of cl. b as well in order to under. stand what the Code intended the word agriculturist to mean in cl. c . On a proper companystruction of el. b number only an agriculturist must be the tiller of the land but he must also be a small agriculturist. Clause b was number intended to refer to a person who cultivated a large area of land and derived from it a large income. It was pointed out that in the present case the appellant Appasaheb was cultivating a very large area of land with the aid of employed labour and derived an income somewhere between Rs. 30,000 to 35,000 a year. Section 60 1 of the Code states in detail what property of a judgment debtor is liable to attachment and sale in the execution of a decree. It was urged that but for the proviso all the properties of Tuljaramarao other than Watan property were liable to attachment and sale in execution of Laxmanraos decree. The proviso numberdoubt exempted from attachment and sale certain properties mentioned therein but cl. b of the proviso clearly indicated that the object of the Code was to save in the case of a judgment debtor his tools as an artisan and, where he was an agriculturist, his implements of husbandry and such cattle and seed-grains as may, in the opinion of the companyrt, be necessary to earn his livelihood. It did number even exempt his agricultural produce unless there was a numberification under s. 61 of the Code specifying by a general or special order how much of the agricultural produce was, in the opinion of the State Government, necessary for the purpose of providing, until the next harvest, for due cultivation and the support of the judgment debtor and his family. It was suggested, therefore, that the Code intended to exempt from attachment and sale, in the case of an agriculturist, only that much which was necessary to enable him to earn his livelihood as such. interpreted by various High Courts in India. Reference to only some of these cases need be made. In the case of Hanmantrao Annarao v. Dhruvaraj Pandurangrao 1 it was held by the Bombay High Court that the word agriculturist in cls. b and c of the proviso to s. 60 1 of the Code of Civil Procedure denotes persons who are personally engaged in tilling and cultivating the land and whose livelihood depends upon the proceeds of such tillage and cultivation of the soil. It does number include large landed proprietors even though they may be tilling the land and cultivating it through their servants. In the case of Parvataneni Lakshmayya v. The Official Receiver of Kistna 2 a Full Bench of the Madras High Court arrived at the following companyclusion after companysidering various decisions of some of the High Courts in India- We think that, having regard to the scheme of the section exempting from attachment, as it does, tools of artisans, and, where the judgment debtor is an agriculturist his implements of husbandry and such cattle and seed-grain as may in the opinion of the Court be necessary to enable him to earn his livelihood, and his houses and other buildings occupied by him, protection is intended to be given to those who are real tillers of the land, and that an agricul- turist in the section is a person who is really dependent for his living on tilling the soil and unable to maintain himself otherwise. Main, chief, or principal sources of income are number, in our view, the proper tests. A mans main source of income may be from tilling the soil but his other source or sources of income may be more than sufficient to maintain him. The fact that a mans income from tilling the soil may be larger than his income from his ownership of land or other sources does number seem to us to make him an agriculturist within the meaning of the section. At the same time we see numberreason for depriving an agriculturist of the exemption under the section because he may have invested money in a business or businesses as alleged in the present case and may 1 1946 49 B.L.R.867. I.L.R. 1937 Mad. 777. derive some income therefrom or do companylie work and add to his earnings in bad times. The test of sole source of income if applied would deprive him of the benefit of the section and we prefer the tests which we have already laid down, viz., that he must be a tiller of the Boil really dependent for his living on tilling the soil and unable to maintain himself otherwise. in the case of Tirloki Prasad Kunj Behari Lal 1 the Allahabad High Court held that the test to be applied in deciding whether a person is an agriculturist is whether his main source of income is derived from cultivation or number. In the case of Dwarka Prasad v. Municipal Board, Meerut 2 the same High Court held that there was numberreason for holding that cl. b of the proviso to s. 60 1 applied only to the case of very small farmers and number to the case of large farmers. Clause b aimed at protecting the implements of every farmer so as to enable him to companytinue to earn his livelihood in the same way as he had been doing previously. There was numberhing to indicate that the clause was limited to small farmers. In the case of Gowardhandas v. Mohanlal 3 the companyclusions of the Nagpur High Court were Whether a person is an agriculturist or number is number a question turning on source of income but on nature of occupation. A person may have many occupations. If one of them is agriculture and for that purpose a house or building is occupied, protection can be claimed. A person who owns land and lets it reserving either money or produce is number an agriculturist but a landlord. A person who cultivates the land as a labourer, though neither a landowner number a tenant, is an agriculturist. If a man cultivates the land with his own hands or by means of labourers whose activities he directs he is an agriculturist whether he operates on a large or a small scale. If he has numberconnection with A.I.R. 1935 All. 448. 2 A.I.R. 1958 All. 561. I.L.R. 1938 Nag. 461. the land except that he owns it and people work for him, he may or may number be an agriculturist according to circumstances. In the case of Nihal Singh v. Siri Ram 1 the Lahore High Court held that the word agriculturist means a person who personally engages in the occupation of tilling the soil and derives his livelihood from that occupation and cannot or does number maintain himself from other sources. On the facts of the case that Court held that a man who merely received rent from tenants or the income of the produce derived by the employment of servants or partners companyld number be said to depend for his livelihood upon the proceeds derived from so engaging himself in the tillage of the soil. In the case of Anantalal v. Bibhuti 2 the Patna High Court held that an agriculturist was one who tilled the soil and thereby earned his livelihood and was expected to have implements of husbandry, cattle and seed-grain. This, however, did number mean that he must till the land with his own hands or that he must necessarily have his own implements of husbandry. In any event, cultivation must be his main source of income though this would number be the sole test. The question whether a person was an agriculturist or number would have to be decided with reference to the facts of each particular case. In the present case the evidence of the appellants own witness, Balaji, shows that Tuljaramarao had reserved some lands for a home farm about 8 years before his death. The area reserved was about 35 acres and that he maintained about 12 bullocks and 8 servants. He was getting an income of Rs. 20,000 to Rs. 25,000 a year from these lands. He used to keep his cattle in the Wada where his servants also stayed and his agricultural implements were kept. The pro- duce of the lands was also stored in the Wada. Tuljaramarao used to supervise the agricultural operations and his servants. After his death his son appellant Appasaheb became the owner. Appasaheb increased the acreage of the cultivation of the home farm to about 60 acres. He has 14 bullocks and 10 1 1939 I.L.R. 21 Lah.23. 2 1944 I.L.R. 23 Pat. 348. or 12 servants and the income is Rs. 30,000 to Rs. 35,000 a year. The cattle and the produce are kept in the Wada where he also resides. This witness also stated that the appellant Appasaheb had inams in 4 villages. Furthermore, in 10 or 12 villages he owns lands and he gets about Rs. 35,000 to Rs. 40,000 from his lands. The said Appasabeb and his brother sometimes worked personally in the fields. It is clear, from this evidence, that Appasaheb is by numbermeans entirely dependent for his livelihood upon the income from the home farm. Apart from the income of the home farm he has a substantial income from other lands and there is numberhing to show that this income derived from his other lands is the result of cultivation by him. It was companytended on behalf of the appellants that the Bombay High Court had taken an extreme view in the case of Hanmantrao Annarao v. Dhruvaraj Pandurangrao 1 . Reliance was placed on the decision of the Allahabad High Court in Dwarka Prasad v. Meerut Municipality 2 where it was held that a tractor was an implement of husbandry and it was number subject to attachment although it was used for cultivating an area of about 1,200 bighas of a farm. The decisions of the Madras High Court in the case of Parvataneni Lakshmayya The Official Receiver of Kistna 3 , of the Lahore High Court in the case of Nihar Singh v. Siri Ram and Others 4 and of the Nagpur High Court in the case of Gowardhandas v. Mohanlal 5 were also relied upon on behalf of the appellants in order to show that to be an agriculturist a person did number have to personally cultivate the land and that it was immaterial whether the area cultivated or the income derived therefrom was large or small. The real test was, was the cultivation his main source of livelihood ? It was submitted, on the facts of the present case, that the appellant Appasaheb depended for his livelihood on the income derived from the land cultivated by him and that the Wada 1 1946 49 B.L.R. 867. A.I.R. 1958 All. 561 I.L.R. 1937 Mad. 777. 4 1939 I.L.R. 21 Lah. 23. I.L.R. 1938 Nag. 461. on the land was occupied by him as an agriculturist for the purpose of his cultivation. Such being the position the Wada was occupied by him as an agriculturist and was therefore exempted from attachment under cl. c of the proviso to s. 60 1 of the Code of Civil Procedure. Sub-section 1 of s. 60 of the Code of Civil Procedure makes all saleable property, movable and immovable, belonging to the judgment debtor and over which he has a disposing power liable to attachment and sale in execution of a decree against him. In this subjection unless the terms of the proviso came to the rescue of the judgment debtor, all lands and houses or other buildings, goods and money, amongst other things, belonging to him would be liable to be attached. The Legislature, however, recognized that it would number be expedient to leave the matter at that. Hence the proviso. The relevant clauses in order to determine what the word agriculturist means are clauses b and c of the proviso. Under cl. b the tools of an artisan are exempted from attachment. According to the Shorter Oxford English Dictionary the word artisan means a mechanic, handicraftsman or an artificer. The object of the Legislature in exempting from attachment tools of an artisan was obviously to leave him his tools in order to enable him to make a living. Without his tools the artisan would be destitute, a situation which the Legislature intended to avoid. In the case of a judgment debtor who was an agriculturist, the Legislature intended that his implements of husbandry and such cattle and seed-grain as, in the opinion of the companyrt, were necessary to enable him to earn his livelihood as an agriculturist should be exempted from attachment. Here again, the intention of the Legislature was to leave in the hands of an agriculturist sufficient means whereby he companyld earn his livelihood as an agriculturist. According to Shorter Oxford Dictionary one of the meanings of the word husbandry is the business of husbandry, that is to say, a person who tills and cultivates the soil or a farmer. The same dictionary states that one of the meanings of the word livelihood is means of living maintenance. It can also mean income, revenue, stipend. In the case of an agriculturist his implements of husbandry must therefore mean implements with which he tills the soil. These are saved from attachment. So far as his cattle and seed-grain are companycerned, only that much is exempted which, in the opinion of the companyrt, would be necessary to enable him to earn his livelihood and by which he companyld earn his maintenance. It is to be numbericed that under cl. b the land which an agriculturist tills is number exempted from attachment. The agricultural produce of the land is exempted to the extent as numberified in the Official Gazette issued under s. 61 of the Code. On a fair reading of the provisions of cl. b , that which is saved to an agriculturist are his implements with which he tills the soil and such cattle and seed-grain which, in the opinion of the companyrt, are necessary for him to use in order to enable him to maintain himself. The provisions of cl. b in the case of an agriculturist, therefore, suggest a person who tills the soil in order to maintain himself. Under cl. c houses and other buildings with the materials and the sites thereof and the land immediately appurtenant thereto and necessary for their enjoyment belonging to an agriculturist and occupied by him are exempted from attachment. The word agriculturist in this clause must carry the same meaning as the word agriculturist in cl. b and the house must be occupied by him as such. The object of the exemption in el. c apparently is that an agriculturist should number be left without a roof over his head. In other words, the Legislature intended by cls. b and c to prevent an agriculturist becoming destitute and homeless. It was, however, argued on behalf of the appellants that there are numberrestrictive words in cl. c . So long as it was a house belonging to an agriculturist and occupied by him, it was exempted from attachment numbermatter what other income than agriculture was earned by him. The Wada in question was clearly occupied by the appellants for the purpose of tilling the land of the home farm and for storing the produce thereof, the implements of husbandry and tethering of cattle employed in cultivating the land. It seems to us, on the evidence of the appellants own witness, that they do number themselves till the land of the home farm which is done by a large number of labourers employed by them. Tuljaramarao did number himself cultivate the land. He merely supervised the work of cultivation by the labourers. The witness, however, did state that sometimes Appasaheb and his brother worked personally in the fields. This is a vague statement which does number necessarily mean that they did any act of cultiva- tion themselves. The Wada in question is a big structure where the appellants reside but if they are number agriculturists within the meaning of that word in S. 60, the Wada cannot be exempted from attachment. It seems to us that even if it is number necessary that a person must till the land with his own hands to companye within the meaning of the word agriculturist he must at least show that he was really dependent for his living on tilling the soil and was unable to maintain himself otherwise. In the present case it is quite obvious that even if the appellants can be described as agriculturists in the widest sense of that term, they are number agriculturists who are really dependent for their maintenance on tilling the soil and that they are unable to maintain themselves otherwise. The evidence shows that Tuljaramarao was getting an income of nearly 20,000 to 25,000 rupees from lands cultivated in the home farm and that the appellant Appasaheb by extending the acreage of that farm was receiving an income of Rs. 30,000 to Rs. 35,000. In addition he had lands in 10 or 12 other villages and his income from the lands was Rs. 35,000 to Rs. 40,000. Assuming that these figures include the income from the lands of the home farm, they would show that in addition to that income he had an additional income of at least Rs. 5,000 from lands in villages other than Nandi. Furthermore, the appellant Appasaheb is receiving a cash allowance of Rs. 700 to Rs. 800 per annum and Rs. 4,000 to Rs. 5,000 from the village, officers of the four inam villages. In these circumstances, it can hardly be said that the appellant Appasaheb is really dependent for his maintenance by tilling the soil and unable to maintain himself other. Wise. From this point of view it seems to us that he cannot be regarded as an agriculturist within the meaning of that word in s. 60 of the Code. In our opinion, the decision of the High Court that the Wada in question was number Watan property and that it was number exempted from attachment by virtue of the provisions of s. 60 1 of the Code is companyrect. The appeal is accordingly dismissed with companyts. SARKAP. J.-The appellants are the legal representatives of one Tuljaram Desai. Tuljaram was the owner of certain watan properties. On his death, his son the appellant Appasaheb became entitled to them. The other appellants are the widow and younger son of Tuljaram. Sometime in 1943 one Vithalrao Thube obtained a decree for Rs. 80,000 against Tuljaram. By 1949 both Tuljaram and Vithalrao had died. The respondent is the successor in interest of Vithalrao. The present appeal arises out of the proceedings for the execution of the decree started by the respondent against the appellants. In this appeal we are companycerned only with a wada building belonging to the appellant Appasaheb, standing on watan land which the respondent seeks to have attached and sold in execution. It is number number in dispute that watan properties are number saleable properties and cannot therefore be attached and sold in execution. The wada stands on watan land and the respondent seeks to proceed against the structure apart from the land. The appellant Appasaheb companytends that he is an agriculturist and that wada belonging to and occupied by him is protected from attachment and sale by cl. c of the proviso to sub-s. 1 of s. 60 of the Code of Civil Procedure. He also companytends that the wada itself is watan property and is number in view of sub-s. 1 of s. 60 liable to attachment and sale as it is number a saleable property. Now sub-s. 1 of s. 60 makes all saleable property ,liable to attachment and sale in execution. The proviso to it so far as material runs thus Provided that the following particulars shall number be liable to such attachment or sale, namely-- b tools of artisans and where the judgmentdebtor is an agriculturist, his implements of husbandry and such cattle and seed-grain as may, in the opinion of the companyrt be necessary to enable him to earn his livelihood as such c houses and other buildings with materials and the sites thereof and land immediately appurtenant thereto and necessary for their enjoyment belonging to an agriculturist and occupied by him. I propose number to companysider the question whether the wada is saved from execution under el. c of the proviso to sub-s. 1 of s. 60. In order that the clause may apply two companyditions have to be fulfilled. First, the person claiming benefit under it must be an agriculturist and secondly the wada must belong to and be occupied by him. First, then, was the appellant Appasaheb an agriculturist within the meaning of the clause ? Now the plain meaning of the word agriculturist in the present companytext, is a person who occupies himself with agriculture, that is, cultivation of land for raising crops. Anybody who is engaged in cultivating land for raising crops would be an agriculturist. So far there is numberdifficulty. It appears however from the reported decisions that the High Courts have expressed sharply divergent opinions on the question as to who is an agriculturist within the meaning of the clause. The difference however is number on the point that an agriculturist must be one who cultivates but as to whether the agriculturist companytemplated in cls. b and c is one who cultivates with his own hands and whether all persons who carry on agricultural operations are agriculturists within the clauses. These differences have arisen number because any difficulty was felt as to the meaning of the word agriculturist , but from the intention of the legislature to be gathered from the other words used in the clauses. In this appeal these authorities have been relied on by the parties as it suited the companytention of each. It is necessary therefore to companysider the views expressed in these cases and decide whether the word agriculturist is to be given its plain meaning or has to be qualified in some way. It is of some significance to state that by and large, the view of one High Court has been discarded by another. One view is that an agriculturist is a person whose main source of livelihood is agriculture see Tirloki Prasad v. Kunj Behari Lal 1 . It is said that this is the right view for an agriculturist must be one who is so by profession. Now the main source of livelihood of a person may vary from time to time therefore at one period of time a person might be ail agriculturist but number at another. It is number reasonable to hold that such a result was intended. Again it would often be difficult to decide which is the main source of livelihood of a person. Indeed it is number quite clear as to what is meant by main source of livelihood unless it means the livelihood producing the largest income. I find numberhing in the clauses to warrant this view they do number say anything about agriculture being a persons main source of livelihood in any sense of the word main . Furthermore if this view is accepted, a rich farmer who has income from other sources, which income is smaller than his income from agriculture, would be protected by these clauses while a poor peasant who makes a slightly bigger income, say as a day labourer, than he does from agriculture, would be deprived of the protection. I am unable to accept a view which produces such a result. I find numberreason why a person who has a profession besides agriculture, should be protected if agriculture is his main profession and number otherwise, particularly when what is protected is agricultural implements, cattle, seed-grain and house used for agricultural purposes. Another view taken is that the agriculturist must be one whose sole means of livelihood is cultivation of land but excluding persons carrying on farming in a large way Muthuvenkatarama Reddiar v. The Official Receiver of South Arcot 1 . This view has been discarded in a later full bench decision of the same High Court in Parvataneni Lakshmayya v. The Official Receiver of Kistna 2 to which reference will be made later. For myself, I find numberhing in the clauses to justify this view. Take the case of a small cultivator who, in order to maintain himself, takes up the other work and so supplements his income. There is numberhing in the clauses to indicate that such a cultivator should be deprived of the protection. It is well known that agricultural operations do number occupy a person for the whole year and as the income from agriculture is for quite a large number number enough to meet their needs, many small cultivators have to supplement their in. companye by other work when they are number engaged in the fields. There is numberhing in the clauses to lead to the view that these persons were number intended to get the protection. It seems to me manifest that there is numberreason to deprive these persons of the benefit of the protection. Neither do I find any words in the clauses to support the view that big farmers are number intended to get the protection. This aspect of the matter will be discussed further later. The view taken in Muthuvenkatarama Reddiars case 1 does number therefore appear to me to be well founded. In Nihal Singh v. Siri Ram 3 a full bench of the Lahore High Court held that an agriculturist must be one who personally tills and number through servants and does number maintain himself from other sources of income. The reason given to support this view appears to be as follows The word agriculturist must mean the same thing in cls. b and c . In cl. b it is in juxtaposition with the word artisan. An artisan is one who himself practices a handicraft and furthermore he must practice the handicraft number as a hobby but as a living. So in cl. b an agriculturist must be one who personally tills and number through servants and maintains himself by agriculture alone. I am number companyvinced by this reasoning. If the word agriculturist means one who must till with his own 1 1925 I.L.R. 49 Mad. 227. 2 I.L.R. 1937 Mad. 777. 3 1939 I.L.R. 21 Lah. 23. hands, then it is wholly unnecessary to rely on the juxtaposition of the words artisan and agriculturist in cl. b for reaching the companyclusion that the Lahore High Court did. It is only if the word agriculturist as ordinarily understood includes one who carries on agricultural operations through persons employed by him that it becomes necessary to rely on the reasoning based on the juxtaposition of the two words in the clause. But I am wholly unable to appreciate the logic of this reasoning. Assume that an artisan must be one who works with his own hands. It does number follow that an agriculturist if it does number mean exclusively one who tills with his own hands, must be one who tills only with his own hands when that word is used in juxtaposition with the word artisan. Such juxtaposition would afford numberreason for departing from the numbermal meaning of the word agriculturist. In Hanmantrao v. Dhruvraj 1 also it was said that an agriculturist within the meaning of the clauses is one who tills with his own hands. The reason there put is that since in el. b reference is made to implements of husbandry, cattle and seed-grain necessary for earning a livelihood as a cultivator, therefore primafacie, only an agriculturist who cultivates with his own hands is meant. Again I am unable to follow the reasoning for a person who lives on cultivation carried on by hired labour would also require implements of husbandry, cattle and seed-grain. An agriculturist, as I have said, is one who carries on cultivation. Now one may carry on cultivation himself or through hired labour. In the latter case also he would be an agriculturist within the plain meaning of that word. Then it seems to me that if we exclude from the clause an agriculturist who does number till with his own hands, a most unreasonable situation would ensue. Old and incapacitated small farmers and most women would have to be denied the protection of the clauses. Again, it may so happen that a person carrying on agricultural operations himself becomes unable to do so through ill health for two or three years when he gets the cultivation done I.L.R. 1947 Bom. 687. by employing labour and resumes cultivation when he regains his health. If the view number under discussion is companyrect, then such a person would cease to be an agriculturist during the period of ill health though before and after that period he would be an agriculturist. It does number seem to me that such results companyld have been intended. I companye number to the view taken in Parvataneni Lakshmayya v. The Official Receiver of Kistna 1 earlier referred to. It was there said, We think that, having regard to the scheme of the section exempting from attachment, as it does, tools of artisans, and, where the judgment-debtor is an agriculturist , his implements of husbandry and such cattle and seedgrain as may in the opinion of the companyrt be neces- sary to enable him to earn his livelihood and his houses and other buildings occupied by him, protection is intended to be given to those who are real tillers of the land, and that an agriculturist in the section is a person who is really dependent for his living on tilling the soil and unable to maintain him otherwise. I am unable to agree with this view. It leads to obvious anomalies. Take the case of a person whose sole means of living is agriculture. Suppose he carries on agriculture on a large scale and makes a big income out of it. He would still be dependent on agriculture for his living and unable to maintain himself otherwise. He would be an agriculturist for the purpose of the clauses within the meaning of Parvatanenis case 1 , for that case does number say that a large scale farmer is number an agriculturist. Such a person would be entitled to protection under the clauses even though his income from agriculture is, say Rs. 25,000 a year. Now take the case of a small farmer whose income from agriculture is Rs. 1,000 a year but who also makes Rs. 1,500 from other sources and is able to maintain himself from the latter income. According to Parvatanenis case 1 such a person would number be an agriculturist for the purpose of the clauses and would number be entitled to any protection under them. I find I.L.R. 1937 Mad. 777. it impossible that the legislature companyld have intended such a result. Then again I find numberhing in the language of the clauses clearly leading to the view accepted in Parvatanenis case 1 however. The only reference to a living is in cl. b and it is to be found in the words such cattle and seed- grain as may be necessary to enable him to earn his living as such , that is, as an agriculturist. I do number think that these words lead to the companyclusion that the agriculturist companytemplated must depend for his living on agriculture. They are intended to define the limit of the protection which an agriculturist is entitled to for his cattle and seed-grain. These words must therefore mean such cattle and seed-grain as are necessary for the agriculturist to earn his livelihood from agriculture if that was his sole means of livelihood. If that were number so we would have to hold that this part of the clause companytemplated an agriculturist whose livelihood depended on agriculture alone and who had numberother source of income. Obviously where a person earned his livelihood from agriculture and another source, it companyld number be decided what cattle and seed-grain he would require to earn his living as an agriculturist for the simple reason that he did number earn his living as an agriculturist only. Parvatanenis case 1 however accepts the view that a person may be an agriculturist within the meaning of the clauses though he may have besides agriculture another source of income. And with that view, for the reasons earlier stated, I entirely agree. There seems to me to be other reasons also why the view taken in Parvatanenis case 1 is number the companyrect one. So far as the tools of an artisan are companycerned, cl. b does number limit the protection to such of them as are necessary to enable him to earn his living as an artisan. Therefore, there is numberreason to think that an artisan is one who must be dependent for his living on the handicraft practised by him. Likewise all implements of husbandry of an agriculturist are exempt from attachment and sale. The word such occurring before the words I cattle and seed-grain in cl. b I.L.R. 1937 Mad. 777. shows that these are protected only to the extent indicated and that there is numberlimit to the protection afforded to the implements of husbandry of an agriculturist. If this is the companyrect reading of the clause, as I think it is, then it seems to me impossible to say that an agriculturist whose implements of husbandry are intended to be protected must be one who companyld number maintain himself apart from agriculture. Likewise, there is numberhing in cl. c to indicate that the agriculturist there mentioned must be one who depends for his living on agriculture There remains one other view to companysider. It has been said that the agriculturist must be a very small farmer Muthuvenkatarama Reddiar v. The Official Receiver of South Arcot 1 . For this qualification for an agriculturist again, I find numberwarrant in the clauses or indeed anywhere else in s. 60. The various clauses in the proviso to s. 60, sub-sec. 1 exempting diverse things from attachment and sale are numberdoubt based on public policy, but the companysideration of public policy in each case appears to me to be different. I find it impossible to say that the central idea was to protect the poor or to prevent a person being left destitute. Thus el. a protects the necessary wearing apparel, companyking vessels beds and bedding of the judgment. debtor. Even a very rich judgment debtor is entitled to protection under this clause. Clause d protects books of account. Here again it is number a poor man alone that is companytemplated number would deprivation of books of account leave one destitute in all cases. Clause g protects political pensions which may be and often are of substantial amounts. Clause h protects wages of labourers and domestic servants. This clause of companyrse deals with a poor man and is intended to relieve against poverty. Since however, there is numberone specific central idea running through all the clauses, each clause has to be companystrued by itself. Coming then to cls. b and c , I find numberjustification for the view that they deal only with poor people or are intended to protect against destitution. Thus there 1 1925 I.L.R. 49 Mad. 227. is numberhing in el. b to indicate that the tools of only poor artisans are to be protected. The same thing can be said of an agriculturist. The fact that his cattle and seed-grain are protected to the extent necessary to enable him to earn his livelihood does number lead to the view that he must be a poor agriculturist. On the companytrary, the clause companytemplates an agriculturist who has more cattle and seed- grain than he needs for his livelihood. It clearly companytemplates a rich and large scale agriculturist. Therefore it seems to me that there is numberwarrant for imposing any qualification on the plain meaning of the word I agriculturist in cls. b and c . In my view, an agriculturist companytemplated by the clauses is any person who occupies himself with agriculture. This is the view taken in Gowardhandas v. Mohan Lal 1 and with it I agree. A person occupying himself with agriculture would be an agriculturist though he does number cultivate with his own hands and carries on agriculture in a very large scale. He would still be an agriculturist though he has other means of livelihood besides agriculture. I companye number to the facts of this case. The question is, is Appasaheb such an agriculturist as I have indicated ? The evidence clearly shows that he is. It can be said to have been established beyond doubt and number questioned in the Courts below, that Appasaheb was carrying on agricultural operations under his supervision through labour employed by him and with his own cattle and agricultural implements on fifty to sixty acres of land. The evidence also establishes that Appasahebs income from agriculture came to Rs. 30,000 to Rs. 35,000 per year. It appears that he was in receipt of cash allowances of Rs. 700 to Rs. 800 per year in respect of the watan and Rs. 4,000 to Rs. 5,000 per year from village officers of the watan villages, neither of which was income from agriculture. These facts in my view make Appasaheb an agriculturist for the purpose of cls. b and c though it may be that he was number dependent for his living upon agriculture and was a large scale farmer who did number till with his own hands. I wish however to state that there is uncontradicted testimony that Appasaheb personally took part in the agricultural operations. Now cl. c protects from attachment and sale houses and other buildings with the sites thereof and land immediately appurtenant thereto and necessary for their enjoyment, belonging to an agriculturist and occupied by him. I think it is a fair reading of this clause to say that the houses, buildings and lands must be occupied by the agriculturist for the purpose of agriculture for the object of these clauses is to protect an agriculturist only so far as is necessary for his agricultural operations. If an agriculturist occupied a house, say as a holiday resort, there would be numberreason to protect that house from attachment and sale. The question then arises whether Appasaheb occupied the wada for the purposes of his agricultural operations. I think the evidence makes it perfectly clear that he did so. It shows that the larger part of the wada was used for storing crops, keeping agricultural implements, residence of the farm servants and tethering cattle used for agriculture. Appasaheb and his family lived in a part of the wada but that also was clearly occupation for purposes of agriculture, for it is from there that he supervised the agricultural operations. I have therefore companye to the companyclusion that the wada is saved from attachment and sale in execution by cl. c of the proviso to sub-s. 1 of s. 60 of the Code of Civil Procedure. The other companytention of the appellants does number seem to me to be sustainable. It is said that the maxim accession credit principali applies and the wada standing on watan land has acquired the character of watan as an accession to it. It is number in dispute number that the wada was number in existence when the watan was first created but had been built subsequently by one of the watandars. It is also said that the grant of the watan carried full right of ownership in the subject of the grant that the grantee had the right to make such use of the land granted as any owner of it companyld have done. So it was said that the wada had been put up rightfully by the watandar and became part of the watan as an accession to it. There is numberdoubt that the wada was rightfully companystructed. It may be that it became on such companystruction a part of the land on which it stands and assumed the character of immovable property. But I am unable to agree that it thereupon assumed the inalienable character of watan property and was therefore hot liable to attachment and sale in execution. I do number think that the maxim accessio cedit principali applies in giving the wada put up on watan the character of a watan. Watan is a creation by government grant. It is inalienable under a special Act. The inalienable character attaches under the Act only to the property granted by the government. This peculiar character cannot be extended to other property by the application of the maxim. Therefore it seems to me that the wada is number inalienable though it stands on land which is inalienable as a government grant under a special Act. I would for this reason reject this companytention of the appellant. As however in my view, the wada is protected from attachment and sale in execution under cl. c to the proviso to sub-s. 1 of s. 60 of the Code of Civil Procedure, I would allow the appeal.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 287 of 1958. Appeal from the Judgment and Order dated the 10th September, 1956, of the former Travancore-Cochin in Original Petition No. 191 of 1955. Sardar Bahadur, for the Appellants. P. Abraham, P. George, and M.R. Krishna Pillai, for the Respondent. 1960. October 31. The Judgment of the Court was delivered by AYYANGAR J.-This is an appeal from the judgment of the High Court of Travancore-Cochin on a certificate of fitness granted by it under Art. 133 1 of the Constitution and raises for companysideration the liability of the respondent-The Cochin Coal Company Ltd.to sales-,tax under the United State of Travancore and Cochin General Sales Tax Act, 1125 1950 . The following are briefly the facts which it is necessary to state in order to appreciate the points in companytroversy in the appeal. The Cochin Coal Company Ltd. which will be referred to as the respondent-Company are, as their name indicates, dealers in companyl. The companymodity, the sales of which have given rise to the dispute in this appeal is what is known as Bunker companyl. The companypany have their offices at a place called Fort Cochin which was formerly within the State of Madras. They import and keep stocks of bunker companyl stacked at a place called Candle Island which at the date relevant to these proceedings was also within the State of Madras. Part of the activities of the respondent-company companysist in the supply of bunker companyl from their depots in Candle Island to steamers arriving in or calling at, the port of Cochin in the State of Travancore-Cochin for the outward voyage of the steamers from the said port. The usual procedure by which bunker companyl was thus supplied by the respondent companypany was briefly this Before the arrival of the steamers, the steamer agents would enter into companytracts with the respondent companypany for trimming companyl into the bunker of the steamer. As soon as a steamer arrived in Cochin port, the steamer- agents would inform the respondent-company and these agents after securing the necessary papers from the customs and the port authorities for the loading of the companyl into the steamer, would take these papers to the respondent-companys office in Fort Cochin for enabling the latter to perform their part of the companytract. The respondent-company would thereupon send the goods ordered to the steamer through their transport companytractor. Delivery orders would be issued to the transport companytractor on the strength of which goods would be released from their stock in Candle Island. Coal would then be taken to the steamer berthed in the port in Travancore-Cochin State waters. The Chief Engineer of the steamer would inspect the companyl and when the same was to his satisfaction as regards quality, the companyl would be per- mitted to be trimmed into the bunkers of the ships. The price of the companyl would thereafter be paid to the respondent-company on bills drawn on the steamer-agent. The above being the nature of the transactions companyducted by the respondent-company, sales-tax was claimed on the sales of bunker companyl by the Travancore-Cochin State. The assessment years with which this appeal is companycerned are 1951-52 and 1952-53, and the assessment therefore was companypleted on February 2, 1954, by the sales-tax officer, Circle, Mattancherry. The respondent-companys companytention that numbersales-tax companyld be levied on the value of the bunker companyl supplied, since the sale was either in the companyrse of export , or in the companyrse of inter-State trade and therefore exempted from taxation by the State under sub-cl. 1 b or 2 of Art. 286 was rejected by the assessing officer for the reason that the sales in question fell within the Explanation to Art. 286 1 a and were therefore inside the State of Travancore-Cochin, since the delivery in pursuance of the sale took place within the State and the goods were delivered for the purpose of companysumption within the State and that numberwithstanding that there was an inter- State element involved in the sale, by the goods being moved from Candle Island, the same did number affect the power of the delivery State to levy the tax. The point urged by the companypany, that the same sales had been assessed to tax in Madras State as sales actually taking place there, was also rejected as irrelevant The respondent-company thereafter filed an appeal to the Appellate Assistant Commissioner who allowed the appeal of the companypany holding that the sales were in the companyrse of export within Art. 286 1 b , and that even if they were number such but were ,inside sales falling within the Explanation to Art. 286 1 a of the Constitution, still a numberification by the State Government dated February 5, 1954, exempting such sales from tax, operated for the benefit of the assessee. Thereafter the Deputy Commissioner of sales-tax who was the Revisional authority took up the matter suo motu, called upon the assessee to show cause why the appellate order should number be set aside and the entire turnover assessed to sales-tax as the sales had taken place inside the State only. After hearing the assessee-company the order of the appellate Assistant Commissioner was set aside and that of the Sales Tax Officer restored. The respondent-company then moved the High Court of Travancore-Cochin under Arts. 226 and 227 of the Constitution to set aside the order in revision and the learned Judges of the High Court ordered accordingly. They, however, granted a certificate under Art. 133 1 of the Constitution to enable the State Government to file an appeal to this Court and that is how the matter is number before us. Though the respondent-company appear to have presented before the High Court several lines of argument in support of their companytention that they were entitled to exemption from sales-tax in respect of bunker companyl trimmed by them into steamers in the waters of Travancore-Cochin, the learned Judges rested their decision in favour of the respondent-company on practically a single ground. Their reasoning was briefly as follows Following the Bengal Immunity case 1 , the learned Judges held that, the bans 1 1955 2 S.C.R. 603. imposed by cls. 1 a and 2 of Art. 286 were independent and that the sale of the companyl by the respondent-company which was in the companyrse of inter-State trade was companyered by the ban companytained in Art. 286 2 of the, Constitution numberwithstanding that the sale might satisfy the terms of the Explanation to sub-cl. 1 a . The learned Government Pleader, however, had submitted that if the exemption was derived, from Art. 286 2 , the, same would number assist the assessee, since the validity of the tax was saved by the Sales-tax Law Validation Act, 1956. The learned Judges how- ever held that the validation Act companyld number avail the State because on their companystruction of s. 26 of the Travancore- Cochin General Sales Tax Act, 1125 companyresponding to s. 22 of the Madras Sales Tax Act, 1939 numbertax had been levied or was leviable on sales in the companyrse of inter-State trade or companymerce and that the Validation Act having validated only taxes already levied companyld number enable the State to levy a tax which had number been imposed by the States Sales-tax Act. There is numberdoubt that the transaction of sale in the present case was in the companyrse of inter-State trade and would be companyered by the ban on taxation imposed by Art. 286 2 . But the view of the learned Judges of the High Court regarding the companystruction of s. 26 of the Travancore- Cochin General Sales Tax Act must number be held to be incorrect in view of the decision of this Court in M. P. V. Sundararamier Co. v. The State of Andhra Pradesh 1 . If therefore the assessee-company companyld rely only on Art. 286 2 for claiming relief, it must be held to be number available to them since the Sales Tax Validation Act, 1956, would have validated the levy. Before us, however, learned Counsel for the respondent- companypany urged two grounds to sustain the decree of the High Court in its favour., The first was that as the companyl trimmed into the steam-ships were. meant to be carried outside the territory of India, the sale was in the companyrse of export within Art. 286 1 b of the Constitution and was therefore exempt from the levy of sales-tax by the State. This companytention however has to be rejected in view of the decision 1 1958 S.C.R. 1422. of this Court in Burmah Shell Oil Storage Distributing Co., of India, Ltd. v. The Commercial Tax Officer 1 in which it was held that in the companytext and setting in which the expression export out of the territory of India occurs in Part XIII of the Constitution, it was number sufficient that goods were merely moved out of the territory of India but that it was further necessary that the goods should be intended to be transported to a destination beyond India, so that they were in the companyrse of import into some other locality outside India and accordingly that aviation spirit sold to an aircraft for enabling it to fly out of the companyntry was number exported out of the companyntry. The reason was that there was numberdestination at which it companyld be said that the spirit was imported and that a mere movement of the goods out of the companyntry following a sale would number render the sale one in the companyrse of export within Art. 286 1 b of the Constitution. In other words, the companycept of export in Art. 286 postulates just as the word import, the existence of two termini as those between which the goods are intended to move or between which they are intended to be transported, and number a mere movement of goods out of the companyntry without any intention of their being landed in specie in some fore- ign port. The other point urged by learned Counsel was that, in any event, the sale fell within the Explanation to Art. 286 1 a inasmuch as the delivery of the companyl was effected in the State of Travancore-Cochin for the purpose of companysumption in that State. There is numberdoubt that the goods having originally been located in Candle Island in Madras State were moved out of that State by reason of the companytract of sale into the territory of Travancore-Cochin. It had therefore an interState element which rendered the Explanation applicable. The delivery was admittedly effected in the State of Travanoore-Cochin as a direct result of that sale and was trimmed into the steam-ships in the Cochin waters. If the purpose of the delivery was C.A. 751 of 1957 C.A. 10 of 1958 Unreported . number export as we have held earlier, it must follow that in the circumstances of this case it was for the purpose of companysumption in the State since the delivery was to the ultimate companysumer who was to use the goods for his own purposes and number for the purpose of re-export or with a view to other transactions of a companymercial character in the goods. It would be numbericed that the ultimate buyer-the steam-ship companypany companyld, if it desired, companysume the goods in the sense of exhaust the goods by companysumption within the State or it companyld take it outside the State and companysume it there, but that was a matter of its choice, dependent on its will and pleasure. This would number therefore detract from the delivery to it being for companysumption within the State. Goods might be companysumed either by destruction or by way of use depending on the nature of the goods. Thus edible articles are generally companysumed in a literal sense while other articles like clothing or furniture etc. are companysumed by being used, though they are number destroyed by such use. If edible articles are sold and delivered to an ultimate companysumer within a State, it is delivered for the purpose of companysumption within the State, numberwithstanding, that the buyer may number choose to companysume the whole of his purchase within the State but takes part of it outside the State and companysumes it there. If, for instance, a vehicle is sold to the actual user and the sale is number in the companyrse of export or with a view to further companymercial transactions in it by the purchaser by way of resale etc., the delivery to the user is for the purpose of his companysumption within the State. The fact that such a purchaser might in the exercise of the enjoyment of his property-by way of use or companysumption - drive the vehicle to other States does number detract from the original delivery to him falling within the Explanation to Art. 286 1 a . In the present case, the companyl having been delivered into the ship for being companysumed by it, it was open to the master of the vessel to use the companyl while the ship was in the waters of Travancore-Cochin, or if he so chose take it outside those limits. The position might be different if the buyer were obliged by companytract or by law number to use or companysume the goods sold within the State of delivery, i.e., where he has numberchoice to companysume it there. In the case on hand, part of the companyl delivered companyld and would certainly have been used by the ship during the period of her stay in the harbour for loading and if such stay were prolonged owing to unforeseen causes even the entire companyl might have been exhausted and of companyrse it would have to be used till the ship left the limits of the port and the limits of State territory. The crucial fact therefore was that the companyl was delivered to the actual companysumer who was at liberty to companysume it wherever he desired-the choice depending on his companyvenience and necessity. In the circumstances, therefore, learned Counsel for the respondent was right in his submission that the sale of the bunker companyl by the assessee-company fell within the Explanation to Art. 286 1 a . If there were numberhing more and the liability of the assessee had to be judged with reference to the charge imposed by the Sales-tax Act of the State, read in the light of the Constitution, the tax liability of the respondent-company would number have been open to doubt or dispute. But the submission of learned Counsel was that the State Government had power to exempt sales of any particular designated type from tax liability under s. 6 of the Sales-Tax Act, and that the Government had by a numberification dated February 5, 1954, and published in the official Gazette, exempted sales such as by the respondent- companypany in the present case from the levy of sales-tax during the assessment years number in question. The exemption under this numberification was numberdoubt number referred to by the learned Judges of the High Court but had been one of the grounds on which the sales-tax appellate authority had set aside the tax imposition by the Sales-tax Officer and the point had been specifically urged in the petition filed in the High Court under Art. 226, and the respondent cannot, therefore, be denied the benefit of the numberification if it applied. Section 6 of the Travancore-Cochin Sales-tax Act enacts The Government may, by numberification in the Gazette, make an exemption in respect of any tax payable under this Act - on the sale of any specified class of goods at all points or at any specified point or points in the series of sales by successive dealers or of any specified class of persons in regard to the whole or any part of their turnover. It is number necessary to set out the rest of the section. In the Travancore-Cochin Gazette dated February 16, 1954, the following numberification dated February 5, 1954, appeared According to the interpretation given by the Supreme Court to Art. 286 1 of the Constitution in their judgment in the State of Bombay v. United Motors India Ltd. certain categories of inter-State transactions companye within the taxing powers of the State Government. While the judgment enables the Government of Travancore-Cochin to levy sales- tax on certain categories of number-resident dealers selling goods for delivery and companysumption in Travancore. Cochin State from the 1st April 1951, the Government have, after due companysideration, decided to levy sales-tax on such transactions only from the 1st April 1953-the date immediately following that on which the Supreme Court delivered its judgment and to forego the levy prior to that date . Then followed provisions detailing the interim arrangements for submission of returns, of declarations to be filed and the manner in which the tax should be assessed and paid. Though the learned companynsel for the appellant-State urged that the numberification companyld number have the statutory effect of granting exemption, we are clearly of the opinion that this was and must be deemed to be one issued in exercise of the power companyferred on the State Government by s. 6 1 whose relevant terms we have already extracted. Besides, this is rather a curious submission to make in view of what had transpired earlier. The appellate Assistant Commissioner who set aside the assessment of the respondent-company stated in his order Even if it is companysidered that the sale is for companysumption in this State, the companypany need number pay tax on the turnover since Government have exempted from payment of tax on the sales which took place before April 1, 1953 . When this appellate order was set aside by the Deputy Commissioner acting suo motu in revision, there is numberreference made to the numberification in the order and it was number stated that it had numberstatutory effect. In its petition to the High Court under Art. 226, the respondent-company claimed the benefit of the exemption granted by the numberification dated February 5, 1954, and published in the Gazette of February 16, 1954, relating to the assessment for the period April 1, 1951 to April 1, 1953 and it added that the assessment in question came within the exemption companytained in the Gazette numberification. In answer to this a companynter-affidavit was filed by the sales-tax officer who said The numberification referred to in the petitioners affidavit has numberapplication to the case as the sales in question did number companye within their orbit . In other words, the objection was number that the numberification was number a statutory exercise of the power under s. 6 1 and effective to grant an exemption to the cases companyered by it, but that the transactions of the respondent-company were number companyered by the numberification. The extract we have quoted from the numberification shows that it is specially designed to afford relief to cases of number-resident dealers engaged in inter- State transactions which were held to be intra-State transactions by reason of the application of the Explanation to Art. 286 1 a to such sales by the decision of this Court in the United Motors Case. As the respondent companypanys transactions in question clearly fall within the numberification by reason of their nature as well as the assessment years companycerned, the respondent-company would be entitled to the benefit of the tax exemption companyferred by the numberification.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 517 of 1958. Appeal from the judgment and order dated October 31, 1957, of the Kerala High Court in O. P. No. 215 of 1957. B. Pai and Sardar Bahadur, for the appellant. Hardyal Hardy and D. Gupta, for the respondents. 1960. November 29. The Judgment of the Court was delivered by SHAH, J.-C. A. Abraham hereinafter referred to as the appellant and one M. P. Thomas carried on business in food grains in partnership in the name and style of M. P. Thomas Company at Kottayam. M. P. Thomas died on October 11, 1949. For the account years 1123, 1124 and 1125 M.E. companyresponding to August 1947-July 1948, August 1948-July 1949 and August 1949-July 1950, the appellant submitted as a partner returns of the income of the firm as an unregistered firm. In the companyrse of the assessment proceedings, it was discovered that the firm had carried on transactions in different companymodities in fictitious names and had failed to disclose substantial income earned therein. By order dated November 29, 1954, the Income Tax Officer assessed the suppressed income of the firm in respect of the assessment year 1124 M.E. under the Travancore Income Tax Act and in respect of assessment years 1949-50 and 1950-51 under the Indian Income Tax Act and on the same day issued numberices under s. 28 of the Indian Income Tax Act in respect of the years 1949-50 and 1950-51 and under s. 41 of the Travancore Income Tax Act for the year 1124 M.E., requiring the firm to show cause why penalty should number be imposed. These numberices were served upon the appellant. The Income Tax Officer after companysidering the explanation of the appellant imposed penalty upon the firm, of Rs. 5,000 in respect of the year 1124 M.-E., Rs. 2,O00 in respect of the year 1950-51 and Rs. 22,000 in respect of the year 1951-52. Appeals against the orders passed by the Income Tax Officer were dismissed by the Appellate Assistant Commissioner. The appellant then applied to the High Court of Judicature of Kerala praying for a writ of certiorari quashing the orders of assessment and imposition of penalty. It was claimed by the appellant inter alia that after the dissolution of the firm by the death of M. P. Thomas in October, 1949, numberorder imposing a penalty companyld be passed against the firm. The High Court rejected the application following the judgment of the Andhra Pradesh High Court in Mareddi Krishna Reddy v. Income Tax Officer, Tenali 1 . Against the order dismissing the petition, this appeal is preferred with certificate of the High Court. In our view the petition filed by the appellant should number have been entertained. The Income Tax Act provides a companyplete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed by the Income Tax authorities, and the appellant companyld number be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under Art. 226 of the Constitution when he had adequate remedy open to him by an appeal to the Tribunal. But the High Court did entertain the petition and has also granted leave to the appellant to appeal to this companyrt. The petition having been entertained and leave having been granted, we do number think that we will be justified at this stage in dismissing the appeal in limine. On the merits, the appellant is number entitled to relief. The Income Tax Officer found that the appellant had, with a view to evade payment of tax, 1 1957 31 I.T.R. 678. deliberately companycealed material particulars of his income. Even though the firm was carrying on transactions in food grains in diverse names, numberentries in respect of those transactions in the books of account were posted and false credit entries of loans alleged to have been borrowed from several persons were made. The companyditions prescribed by s. 28 1 c for imposing penalty were therefore fulfilled. But says the appellant, the assessee firm had ceased to exist on the death of M. P. Thomas, and in the absence of a provision in the Indian Income Tax Act whereby liability to pay penalty may be imposed after dissolution against the firm under s. 28 1 c of the Act, the order was illegal. Section 44 of the Act at the material time stood as follows Where any business,carried on by a firm has been discontinued every person who was at the time of such discontinuance a partner of such firm, shall in respect of the income, profits and gain of the firm be jointly and severally liable to assessment under Chapter IV for the amount of tax payable and all the provisions of Chapter IV shall, so far as may be, apply to any such assessment. That the business of the firm was discontinued because of the dissolution of the partnership is number disputed. It is urged however that a proceeding for imposition of penalty and a proceeding for assessment of income-tax are matters distinct, and s. 44 may be resorted to for assessing tax due and payable by a firm business whereof has been discontinued, but an order imposing penalty under s. 28 of the Act cannot by virtue of s. 44 be passed. Section 44 sets up machinery for assessing the tax liability of firms which have discontinued their business and provides for three companysequences, 1 that on the discontinuance of the business of a firm, every person who was at the time of its discontinuance a partner is liable in respect of income, profits and gains of the firm to be assessed jointly and severally, 2 each partner is liable to pay the amount of tax payable by the firm, and 3 that the provisions of Chapter, so far as may be, apply to such assessment. The liability declared by s. 44 is undoubtedly to assessment under Chapter IV, but the expression assessment used therein does number merely mean companyputation of income. The expression assessment as has often been said is used in the Income Tax Act with different companynotations. In Commissioner of Income Tax, Bombay Presidency Aden v. Khemchand Ramdas 1 , the Judicial Committee of the Privy Council observed One of the peculiarities of most Income-tax Acts is that the word assessment is used as meaning sometimes the companyputation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the tax-payer. The Indian Income-tax Act is numberexception in this respect A review of the provisions of Chapter IV of the Act sufficiently discloses that the word assessment has been used in its widest companynotation in that chapter. The title of the chapter is Deductions and Assessment. The section which deals with assessment merely as companyputation of income is s. 23 but several sections deal number with companyputation of income, but determination of liability, machinery for imposing liability and the procedure in that behalf. Section 18A deals with advance payment of tax and imposition of penalties for failure to carry out the provisions there- in. Section 23A deals with power to assess individual members of certain companypanies on the income deemed to have been distributed as dividend, s. 23B deals with assessment in case of departure from taxable territories, s. 24B deals with companylection of tax out of the estate of deceased persons s. 25 deals with assessment in case of discontinued business, s. 25A with assessment after partition of Hindu Undivided families and ss. 29, 31, 33 and 35 deal with the issue of demand numberices and the filing of appeals and for reviewing assessment and s. 34 deals with assessment of incomes which have escaped assessment. The expression assessment used in these sections is number used merely in the sense of companyputation of income and there is in our judgment numberground for holding 1 1938 6 I.T.R. 414. that when by s. 44, it is declared that the partners or members of the association shall be jointly and severally liable to assessment, it is only intended to declare the liability to companyputation of income under s. 23 and number to the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof. Nor has the expression, all the provisions of Chapter IV shall so far as may be apply to such assessment a restricted companytent in terms it says that all the provisions of Chapter IV shall apply so far as may be to assessment of firms which have discontinued their business. By s. 28, the liability to pay additional tax which is designated penalty is imposed in view of the dishonest companytumacious companyduct of the assessee. It is true that this liability arises only if the Income-tax Officer is satisfied about the existence of the companyditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case. The penalty is number uniform and its imposition depends upon the exercise of discretion by the Taxing authorities but it is imposed as a part of the machinery for assessment of tax liability. The use of the expression so far as may be in the last clause of s. 44 also does number restrict the application of the provisions of Chapter IV only to those which provide for companyputation of income. By the use of the expression so far as may be it is merely intended to enact that the provisions in Ch. IV which from their nature have numberapplication to firms will number apply thereto by virtue of s. 44. In effect, the Legislature has enacted by s. 44 that the assessment proceedings may be companymenced and companytinued against a firm of which business is discontinued as if discontinuance has number taken place. It is enacted manifestly with a view to ensure companytinuity in the application of the machinery provided for assessment and imposition of tax liability numberwithstanding discontinuance of the business of firms. By a fiction, the firm is deemed to companytinue after discontinuance for the purpose of assesment under Chapter IV. The Legislature has expressly enacted that the provisions of Chapter IV shall apply to the assessment of a business carried on by a firm even after discontinuance of its business, and if the process of assessment includes taking steps for imposing penalties, the plea that the Legislature has inadvertently left a lacuna in the Act stands refuted. It is implicit in the companytention of the appellant that it is open to the partners of a firm guilty of companyduct exposing them to penalty under s. 28 to evade penalty by the simple expedient of discontinuing the firm. This plea may be accepted only if the companyrt is companypelled, in view of unambiguous language, to hold that such was the intention of the Legislature. Here the language used does number even tend to such an interpretation. In interpreting a fiscal statute, the companyrt cannot proceed to make good deficiencies if there be any the companyrt must interpret the statute as it stands and in case of doubt in a manner favourable to the tax-payer. But where as in the present case, by the use of words capable of companyprehensive import, provision is made for imposing liability for penalty upon tax-payers guilty of fraud, gross negligence or companytumacious companyduct, an assumption that the words were used in a restricted sense so as to defeat the avowed object of the Legislature qua a certain class will number be lightly made. Counsel for the appellant relying upon Mahankali Subbarao v. Commissioner of Income Tax 1 , in which it was held that an order imposing penalty under s. 28 1 c of the Indian Income Tax Act upon a Hindu Joint Family after it had disrupted, and the disruption was accepted under s. 25A 1 is invalid, because there is a lacuna in the Act, submitted that a similar lacuna exists in the Act in relation to dissolved firms. But whether on the dissolution of a Hindu Joint Family the liability for penalty under s. 28 which may be incurred during the subsistence of the family cannot be imposed does number fall for decision in this case it may be sufficient to observe that the provisions of s. 25A and s. 44 are number in pari materia. In the absence of any such phraseology in s. 25A as is used in s. 44, numberreal analogy between the companytent of that section and s. 44 may be assumed. Undoubtedly, 1 1957 31 I.T.R. 867. by s. 44, the joint and several liability which is declared is liability to assessment in respect of income, profits or gains of a firm which has discontinued its business, but if in the process of assessment of income, profits or gains, any other liability such as payment of penalty or liability to pay penal interest as is provided under s. 25, sub-s. 2 or under s. 18A sub-ss. 4 , 6 , 7 , 8 and 9 is incurred, it may also be imposed, discontinuation of the business numberwithstanding. In our view, Chief Justice Subba Rao has companyrectly stated in Mareddi Krishna Reddys case supra that Section 28 is one of the sections in Chapter IV. It imposes a penalty for the companycealment of income or the improper distribution of profits. The defaults made in furnishing a return of the total income, in companyplying with a numberice under sub-s. 4 of s. 22 or sub-s. 2 of s. 23 and in companycealing the particulars of income or deliberately furnishing inadequate particulars of such income are penalised under that section. The defaults enumerated therein relate to the process of assessment. Section 28, therefore, is a provision enacted for facilitating the proper assessment of taxable income and can properly be said to apply to an assessment made under Chapter IV. We cannot say that there is a lacuna in s. 44 such as that found in s. 25A of the Act. We are unable to agree with the view expressed by the Andhra Pradesh High Court in the later Full Bench decision in Commissioner of Income Tax v. Rayalaseema Oil Mills 1 , which purported to overrule the judgment in Mareddi Krishna Reddys case supra . We are also unable to agree with the view expressed by the Madras High Court in S. V. Veerappan Chettiar v. Commissioner of Income Tax, Madras 2 .

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 5 of 1959. Appeal from the judgment and order dated February 16, 1954, of the former Hyderabad High Court in Reference No. 347/B- 5/2 of 1953-54. K. Daphtary, Solicitor-General of India, K. N. Rajagopala Sastri and D. Gupta, for the appellant. Sanat P. Mehta and J. B. Dadachanji, for the respondent. 1960. November 8. The Judgment of the Court was delivered by K. DAS J.-This is an appeal on a certificate of fitness granted by the High Court of Judicature at Hyderabad under s.66-A 2 of the Indian Income-tax Act, 1922. The Commissioner of Income-tax, Hyderabad, is the appellant before us. The respondent is Dewan Bahadur Ramgopal Mills Ltd., a public limited companypany incorporated in the erstwhile State of Hyderabad. The respondent companypany was assessed under the Hyderabad Income-tax Act in respect of the assessment years 1357-F, 1358-F and 1359-F. In the assessment for those years depreciation allowance was given to it on the basis of the written down value of its assets, such as buildings, machinery, plant, etc., in accordance with the provisions of cl. c of s. 12 5 of the Hyderabad Income-tax Act. That clause provided that in the case of assets acquired before the previous year and before the companymencement of the Act, the written down value would be the actual companyt to the assessee less i depreciation at the rates applicable to the assets calculated on the actual companyt for the first year since acquisition and for the next year on the actual companyt diminished by the depreciation allowance for one year and so on, for each year upto the companymencement of the Act, and ii depreciation actually allowed to the assessee on such assets for each financial year after the companymencement of the Act. The erstwhile State of Hyderabad merged in the Union of India on January 26, 1950, and became a Part B State. The Finance Act, 1950, by s. 13 thereof repealed the taxation laws in force in Part B States except for certain purposes number relevant to this case, and by s. 3 extended the Indian Income-tax Act, 1922, to the whole of India except the State of Jammu and Kashmir. In exercise of the powers companyferred by s. 12 of the Finance Act, 1950, the Central Government was pleased to make the Taxation Laws Part B States Removal of Difficulties Order, 1950 hereinafter referred to as the Removal of Difficulties Order, 1950 , by a numberification dated December 2, 1950. Paragraph 2 of the said Order, in so far as it is relevant to this case, was in these terms Computation of aggregate depreciation allowance and written down value In making any assessment under the Indian Income-tax Act, 1922, all depreciation actually allowed under any laws or rules of a Part B State, relating to Income-tax and Super- tax, or any law relating to tax on profits of business, shall be taken into account in companyputing the aggregate depreciation allowance referred to in sub-clause c of the proviso to clause vi of sub-section 2 and the written down value under clause b of sub-section 5 of sec. 10 of the said Act. For the assessment year 1951-52 which was in respect of the account year ending June 30, 1950, the respondent was assessed for the first time under the Indian Income-tax Act, 1922, read with paragraph 5 of the Part B States Taxation Concessions Order, 1950. Basing its claim on paragraph 2 of the Removal of Difficulties Order, 1950, the respondent asked for depreciation allowance in respect of its assets such as buildings, machinery, plant, etc., to the tune of Rs.8,12,244. It worked out the value of the assets at their inception and deducted therefrom such depreciation as was allowed for the three assessment years in which the respondent was assessed under the Hyderabad Income-tax Act and calculating the written down value in that manner, it claimed depreciation according to the prescribed rates. By his order dated November 30, 1951, the Income-tax Officer disallowed this claim. He held that the claim of the respondent was against the principle inherent in granting depreciation allowance which must decrease from year to year, and further held that the word allowed in paragraph 2 of the Removal of Difficulties Order, 1950, should be companystrued as meaning companysidered only. Accordingly, he took the figures of the written down value from the income-tax proceedings of 1359-F and allowed depreciation at the prescribed rate on those figures. Against the order of the Income-tax Officer, the respondent went in appeal to the Appellate Assistant Commissioner, Hyderabad Division. That Officer by an order dated May 23, 1952, upheld the view of the Income-tax Officer and dismissed the appeal. Then there was an appeal to the Income-tax Appellate Tribunal which was heard by the Bombay Bench of the said Tribunal. By its order dated December 12, 1952, the Appellate Tribunal held that in view of the pro- visions in paragraph 2 of the Removal of Difficulties Order, 1950, the companytention of the respondent must prevail, and it pointed out that the words used in paragraph 2 were depreciation actually allowed under any laws or rules of a Part B State , and those words did number mean the aggregate allowance for depreciation taken into account in companyputing the written down value under the Hyderabad Act therefore, the respondent was entitled to the depreciation allowance which it claimed. It directed the Income-tax Officer to companypute the written down value on the basis of the actual companyt to the assessee of the assets in question minus the depreciation allowance actually allowed to the assessee under the Hyderabad Income-tax Act. The appellant herein then moved the Appellate Tribunal for a reference to the High Court under s. 66 1 of the Indian Income-tax Act. In the meantime, that is, on March 9, 1953, the Central Government purporting to exercise its powers companyferred by s. 60-A of the Indian Income-tax Act, 1922, added an Explanation to paragraph 2 of the Removal of Difficulties Order, 1950. Explanation said Explanation --For the purpose of this paragraph, the expression all depreciation actually allowed under any laws or rules of a Part B State means and shall be deemed to have always meant the aggregate allowance for depreciation taken into account in companyputing the written down value under any laws or rules of a Part B State or carried forward under the said laws or rules . The Explanation in terms gave effect to the companytention urged on behalf of the Department and said that what has to be allowed is the aggregate allowance for depreciation taken into account in companyputing the written down value under any law or rules of a Part B State. In support of the application for a reference, the appellant relied on the aforesaid Explanation and companytended that in view of the Explanation the respondent companyld number claim depreciation allowance on the basis of actual companyt minus the depreciation allowances actually allowed under the Hyderabad Income-tax Act. On this application the Tribunal expressed the view that if the Explanation applied to the case on hand, then the companytention of the Department was companyrect and must be upheld. It said, however, that it had numberpower to review its own order and, therefore, companysidered it unnecessary to express any opinion whether the Explanation was valid and affected the case before it. It said finally that the following question of law did arise out of its order and accordingly stated a case thereon Whether in making the assessment for the year 1951-52 under the Indian Income-tax Act is the assessee companypany entitled to claim depreciation allowance on the basis of the written down value companyputed at the time of the assessment for the year 1359-F, or is to be companyputed on the basis of the actual companyt minus the depreciation allowances granted under the Hyderabad Income-tax Act. The reference was then heard by the High Court of Judicature at Hyderabad which by its order dated February 16, 1954, held that the Explanation added to paragraph 2 of the Removal of Difficulties Order, 1950, by the numberification dated March 9, 1953, was void on certain grounds one of which was that the Explanation was ultra vires the powers of the Central Government under s. 60-A of the Indian Income-tax Act. Therefore, it answered the question in favour of the respondent. The appellant then obtained the necessary certificate of fitness and preferred the present appeal. In the meantime, there was a further change of law. On May 8, 1956, the Central Government made a numberification No. S. O. 1139 in exercise of the powers companyferred on it by s. 12 of the Finance Act, 1950, whereby an Explanation in identical terms as the earlier Explanation made under s. 60- A of the Indian Income-tax Act, was added to paragraph 2 of the Removal of Difficulties Order, 1950. The arguments before us have proceeded on the basis of the Explanation added by the numberification aforesaid and it is number disputed that if the Explanation is valid and applies to the present case, then the appeal must be allowed and the question of law answered in favour of the appellant. If, on the companytrary, the Explanation is number valid or it does number apply to the present case, then the appeal must be dismissed. We proceed number to a companysideration in detail of the different companytentions urged before us on behalf of the appellant and the respondent. We may first read s. 12 of the Finance Act, 1950, under which numberification No. S. R. O. 1139 dated May 8, 1956, was made. Section 12 reads If any difficulty arises in giving effect to the provisions of any of the Acts, rules or orders extended by section 3 or section 11 to any State or merged territory, the Central Government may by order, make such provision, or give such direction, as appears to it to be necessary for removing the difficulty . On behalf of the appellant it has been argued that the numberification was validly made in exercise of the powers companyferred on the Central Government under s. 12 aforesaid that it does number suffer from any of the defects pointed out by the High Court in regard to the earlier numberification of 1953 made under s. 60-A of the Income-tax Act and that it adds an Explanation which in terms gives effect to the companytention of the appellant and this Court must companysider the change in law made thereby and give effect to it in answering the question of law arising out of the Tribunals order. On the other hand, the validity of the numberification has been very strenuously companytested before us by learned Counsel for the respondent. He has challenged its validity and also its applicability to the present case on the following grounds 1 that it is ultra vires the powers companyferred on the Central Government by s. 12 2 that it can have numberretrospective effect and 3 that it companytravenes Art. 14 of the Constitution. We shall companysider these arguments in the order in which we have stated them. The first question is whether the numberification is validly made under s. 12 or is it ultra vires the powers companyferred on the Central Government by that section ? On behalf of the respondent it is urged that a companydition for the exercise of the power under s. 12 is companytained in the opening clause, which says If any difficulty arises in giving effect to the provisions of any of the Acts, rules or orders extended by section 3 or section II to any State etc. The companytention is that numberdifficulty arose in giving effect to the provisions of any of the Acts, rules or orders referred to in the opening clause, to any State etc. and, therefore, the companydition for the exercise of the power is number fulfilled and on that ground the numberification is invalid. We are unable to accept this argument as companyrect. Section 10 of the Income-tax Act says, in its first subsection, that the tax shall be payable by an assessee in respect of the profits or gains of any business, profession or vocation carried on by him. Sub-s. 2 thereof says that such profits or gains shall be companyputed after making certain allowances, and one of these allowances is in respect of the depreciation of such buildings, machinery, plant, etc. as are used for the purpose of the business cl. vi . The depreciation except in certain cases is calculated on the written down value, which expression is explained in sub-s. 5 of s. 10. Clause b of the sub-section states S.10 5 -- a In the case of assets acquired before the previous year the actual companyt to the assessee less all depreciation actually allowed to him under this Act, or any Act repealed thereby or under executive orders issued when the Indian Income-tax Act, 1886 11 of 1886 , was in force . It is obvious that in applying cl. b to an assessee in a Part B State there would be an initial difficulty, in as much as prior to 1950 when the Indian Income-tax Act came into force in a Part B State numberdepreciation companyld have been actually allowed to such an assessee under the Income-tax Act or under any Act repealed thereby for example, the Hyderabad Income-tax Act was repealed by the Finance Act, 1950 and number by the Income-tax Act, and would number therefore be companyered by cl. b . Such and other difficulties led to the Removal of Difficulties Order, 1950, which has number been seriously challenged before us. Indeed, the High Court said that it was number open to the respondent to challenge the validity of the Removal of Difficulties Order, 1950, because such a point was number taken before the Tribunal. Learned Counsel for the respondent has then submitted that what. ever initial difficulty there might have been in giving effect to the Indian Income-tax Act in a Part State, that difficulty was solved by paragraph 2 of the Removal of Difficulties Order, 1950, and, in any view, there was numberfresh difficulty which companyld necessitate the addition of an Explanation in 1953 or 1956. Here again we think that the submission is number companyrect. The basic and numbermal scheme of depreciation under the Indian Income-tax Act is that it decreases every year, being a percentage of the written down value which in the first year is the actual companyt and in suc- ceeding years actual companyt less all depreciation actually allowed under the Income-tax Act or an Act repealed thereby etc. The Hyderabad Income-tax Act number having been repealed by the Income-tax Act but by the Finance Act, 1950, there was a difficulty in allowing depreciation to an assessee in a Part B State in the first year of assessment under the Indian Income-tax Act. This difficulty was sought to be removed by paragraph 2 of the Removal of Difficulties Order, 1950. If, however, depreciation actually allowed under the Hyderabad Income-tax Act was taken into account in companyputing the aggregate depreciation allowance and the written down value, an anomalous result would follow as in the present case, namely, depreciation allowance to be allowed to the assessee in the accounting year under the Indian Income-tax Act would be more than what was allowed in previous years under the Hyderabad Income-tax Act. This would create a disparity and be against the scheme of the Indian Income-tax Act. It was therefore necessary to explain paragraph 2 of the Removal of Difficulties Order, 1950, to assimilate or harmonise the position regarding depreciation allowance, and the Explanation added in 1953 or 1956 was obviously intended to remove the difficulty arising out of that disparity or disharmony. Furthermore, the true scope and effect of s. 12 seems to be that it is for the Central Government to determine if any difficulty of the nature indicated in the section has arisen and then to make such order, or give such direction, as appears to it to be necessary to remove the difficulty. Parliament has left the matter to the executive but that does number make the numberification of 1956 bad. In Pandit Banarsi Das Bhanot v. The State of Madhya Pradesh Ors. 1 we said at page 435 Now, the authorities are clear that it is number unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods and the like . We are, therefore, of the view that the numberification of 1956, was validly made under s. 12 and is number ultra vires the powers companyferred on the Central Government by that section. The second question is-does the numberification apply 1 1959 S.C.R. 427. to the assessment in the present case, which is an assessment for the year 1951-52 ? The numberification was made in 1956 and it added an Explanation to paragraph 2 of the Removal of Difficulties Order, 1950. It says that a particular expression occurring in that paragraph means and shall be deemed always to have meant the aggregate allowance for depreciation taken into account in companyputing the written down value etc., under any law of a Part B State. The argument on behalf of the respondent is that the law which governs an assessment for the assessment year 1951-52 is the law in force at the time when the Finance Act, 1951, came into force accordingly, so the argument proceeds, paragraph 2 of the Removal of Difficulties Order, 1950, as it stood on April 28, 1951, when the Finance Act, 1951, came into force, will apply in the present case. We companysider this argument to be unsound. The Explanation, though added in 1956, explains the meaning of paragraph 2 of the Removal of Difficulties Order, 1950 and says in express terms that the paragraph shall be deemed always to have had that meaning. Section 12 by the very nature of its intent and purpose companyfers on the Central Government power to make an order to remove a difficulty which has already arisen, and the power to re. move the difficulty must necessarily include the power to remove the difficulty from the time it arose. The Central Government has, therefore, the power to make an order or give a direction so as to remove the difficulty from the very beginning, and that is what the numberification of 1956 does. It applies to the assessment of 1951-52 indeed it applies to all assessments made under the Indian Income-tax Act in which paragraph 2 of the Removal of Difficulties Order, 1950, operates. The last challenge to the validity of the numberification of 1956 is that it companytravenes Art. 14 of the Constitution, because it discriminates between different classes of tax payers. Learned Counsel for the respondent has asked us to companysider the cases of assessees in three different areas which subsequently companye in a Part B State in one area there was numberlaw relating to income-tax in, the second there was a law relating to income-tax under which written down value was companyputed on the basis of depreciation actually allowed year after year, while in the third the written down value was companyputed in the manner provided under the Hyderabad Income-tax Act it is pointed out that on the extension of the Indian Income- tax Act read with paragraph 2 of the Removal of Difficulties Order, 1950 and the Explanation to those areas, the assessee in the first area will get depreciation allowance on the actual companyt in the second area he will get such allowance on the basis of actual companyt less depreciation actually allowed and in the third area he will get such allowance on the actual companyt less depreciation taken into account. It is companytended that this resultant discrimination is arbitrary and without any rational justification, We think that learned Counsel for the respondent has ignored one essential companysideration which clearly vitiates his argument. In the matter of depreciation allowance, the assessee in the three areas in the example given by him do number stand on the same footing they are number situated alike so as to be entitled to be treated alike. It is obvious that an assessee from an area where there was numberincome-tax law at all can never say that in the matter of depreciation allowance as respects buildings, machinery, plant etc., he is on a par with a person in an area where there was a law relating to income-tax allowing depreciation on such buildings, machinery, plant etc. The same would be the position with regard to areas where the previous law as to depreciation was different. Indeed, to treat all these persons alike would be tantamount to unequal treatment. In our view, the numberification of 1956 creates numberunequal treatment of persons in a like situation it applies to all who are in a like situation, namely, all those to whom paragraph 2 of the Removal of Difficulties Order, 1950, applies. We companysider that the challenge to the numberification based on Art. 14 is wholly unsubstantial. It has number been disputed before us that a change in law validly made and applicable to a case pending in appeal must be companysidered and given effect to by the Appellate Court. The companyclusion we have reached is that the numberification of 1956 was validly made and applies to the present case. In view of this companyclusion we have companysidered it unnecessary to examine the numberification of 1953 or the reasons for which the High Court held that numberification to be bad. For the reasons given above, we allow this appeal and set aside the judgment and order of the High Court dated February 16, 1954. The question referred to the High Court is answered in favour of the appellant.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No.232 of 1960. Appeal from the Judgment and Order dated October 6, 1958, of the Bombay High Court in Income Tax Reference No. 10 of 1958. J. Kolah, Dwaraka Das, S. N. Andley, Rameshwar Nath, J. Dadachanji and P. L. Vohra for the Appellants. Hardyal Hardy and D. Gupta for the Respondent. 1960. November 29. The Judgment of J. L. Kapur and J. C. Shah, JJ., was delivered by Kapur, J. M. Hidayatullah, J., delivered a separate Judgment. KAPUR, J.-This is an appeal pursuant to a certificate of the High Court of Bombay against the judgment and order of that Court in Income-tax Reference No. 10 of 1958, answering the question referred to it against the assesses whose legal representatives are the appellants before, us, the respondent being the Commissioner of Income-tax. The facts which have given rise to the appeal are that the late Mr. Annantrai P. Pattani, hereinafter called the assessee was, by Hazur Order dated December 10, 1937, appointed the Chief Dewan of Bhavnagar State. On January 15, 1948, the Maharaja of Bhavnagar introduced responsible Government in his State and appointed the assessee as the Chairman of the Bhavnagar Durbar Bank but he received numbersalary for that post. On the same date by another Hazur Order the Maharaja granted a monthly pension of Rs. 2,000 to the assessee. The order was in the following terms He looked after us well in our childhood and rendered valuable services sincerely and with single-minded loyalty to us and our State during extremely difficult period of the last war and thereafter, which has enhanced the prestige and prosperity of the State and given the State and the people a place of pride in India. In appreciation of this, it is hereby decided to grant him a monthly pension of Rs. 2,000 two thousand which is the monthly salary he is drawing at present. Date 22-1-1948. On May 31, 1950, the Maharaja directed Messrs. Premchand Roychand Sons, Bombay, with whom he had an account to pay by cheque to Mr. A.P. Pattani Rs. 5 lacs out of the amount lying to the credit of my account with you. This sum was paid to the assessee on June 12, 1950. It is stated that the accountant of the Maharaja asked for instructions as to how that amount of Rs. 5 lacs was to be adjusted in the accounts and on December 27, 1950, the Maharaja made the following order- In companysideration of Shri Annantrai P. Pattani the Ex-Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 Rupees Five Lacs are given to him as gift. Therefore, it is ordered that the said amount should be debited to our Personal Expense Account. On March 1, 1948, Bhavnagar State was merged in the United States of Saurashtra and the Maharaja ceased to be the ruler of the said State as from that date. The assessability of this sum of Rs. 5 lacs was raised in the companyrse of the assessment proceedings for the assessment year 1951-52 and at the request of the assessee which is stated to be oral the Maharaja wrote on March 10, 1953, the following I companyfirm that in June 1950, 1 gave you a sum of rupees five lacs Rs. 5,00,000 which wag a gift as a token of my affection and regard for you and your family. This amount was paid to you by Premchand Roychand Sons according to my letter of 31st May, 1950, from moneys in my account with them. On these facts the Income-tax Officer held that Rs. 5,00,000 received on June 12, 1950, was liable to income-tax under s. 7 1 read with explanation 2 of that section as it stood before the amendment by the Finance Act, 1955. The assessee took an appeal to the Appellate Assistant -Commissioner which was dismissed. Against that order an appeal was taken to the Income-tax Appellate Tribunal but the Tribunal also dismissed the appeal. The Tribunal held that looking to the circumstances they would attach more importance to the companytemporaneous document, i.e., the order of the 27th December, 1950 which clearly mentioned why the sum of Rs. 5,00,000 was paid to the assessee. The Tribunal was number inclined to believe in the companytents of that letter and would leave the matter at that. The reference is to the letter of the Maharaja dated March 10, 1953. The Tribunal further held that there was numberdistinction between the Maha- raja and the State and assuming for a moment that this view of ours is number found to be companyrect, still it is clear from the Huzur Order No. 13 dated 22-1-1948 vide para 2 above that the assessee rendered services number only to the State, if it is distinct from. the Maharaja but to the Maharaja as well for that Huzur Order clearly refers to assessee rendering valuable services sincerely and companyscientiously to us and our State. We would, therefore, hold that the amount of Rs. 5 lacs is a taxable receipt falling under Section 7 1 read with Explanation 2. At the instance of the assessee the following question of law was referred to the High Court Whether the sum of Rs. 5 lacs has been properly ,brought to tax in the hands of the assessee for the assessment year 1951-52? and a further question as to the applicability of s. 4 3 of the Income-tax Act was number referred on the ground that it did number arise out of the order of the Tribunal. The High Court, on the findings given by the Tribunal came to the companyclusion that s. 7 1 explanation 2 of the Income-tax Act applied. It-held that it was number possible to regard the receipt of this sum of money by the assessee as a windfall number as a personal gift of the nature of a testimonial that the gift was number made in appreciation of the personality or character of the assessee number was it symbolical of its appreciation of his personal qualities that the companysideration for the gift was in terms stated to be past services and therefore it companyld number be treated as a mere gift by an employer to an employee when the Court did number know what motivated the making of that gift. On the facts of the case the High Court reached the companyclusion, though with some reluctance, that the case fell within the ambit of s. 7 1 , Explanation 2 . The High Court also held that this sum companyld number be exempted from tax on the ground that it was merely a casual or numberrecurring receipt because once companynection with the employment was established there was numberquestion of companysidering the recurring or the casual nature of the receipt. During the pendency of the proceedings in the High Court the assessee died and his heirs and legal representatives were brought on the record and hence they are the appellants. It was argued on behalf of the appellants that the facts showed that the sum paid cannot fall within s. 7 1 , Explanation 2 , of the Income-tax Act. By Hazur Order dated January 22, 1948, the Maharaja had companypensated the assessee for valuable services rendered and single-minded loyalty to the Maharaja and to his State during the difficult period of the war and thereafter, which had added to the prestige and prosperity of the State and in appreciation of that the Maharaja had granted to the assessee a monthly pension of Rs. 2,000, which was paid to the assessee even after the merger and of the establishment of the United States of Saurashtra from out of the public revenue. At the time when Rs. 5,00,000 were paid, the State of Bhavnagar as such had ceased to exist. The Maharaja was numberlonger a Ruling Chief but was the Governor of the State of Madras. The order by which Messrs. Premchand Roychand Sons, Bombay, were directed to pay the sum of Rs. 5,00,000 out of the account of the Maharaja does number mention any reason for payment. When as is alleged an accountant of the Maharaja asked as to how that amount of Rs. 5,00,000 was to be adjusted in the accounts, the Maharaja wrote on December 27, 1950, what is described as an order and directed that the sum should be debited to his Personal Expense Account. It also stated, why it is number clear, that that sum was to be given to the assessee in companysideration of the assessees loyal and meritorious services as a gift. When asked later to clarify the reasons for making this gift the Maharaja made it clear that the gift was as a token of affection and regard for the assessee and his family and that the amount was paid by Messrs. Premchand Roychand Sons from out of the private monies of the Maharaja with that firm. The Income-tax Appellate Tribunal took into account the two documents the first of which has been described as an order of December 27, 1950, which was treated as a companytemporaneous document and the other the letter of March 10, 1953, which was about two years later. The Tribunal did number accept the companyrectness of what was stated in the letter but attached a great deal of importance to the document of December 27, 1950, which the Tribunal thought was a company- temporaneous document. It appears to us that the Tribunal was in error in treating the document of December 27, 1950, as a companytemporaneous document and because of this erroneous approach the finding that it has given cannot be treated as a finding of fact which should bind the companyrt in its decision. It is obvious that the reason why the Tribunal attached all this importance to the document of December 27, 1950, was that it was companytemporaneous. It would be difficult to accept that a document written six months after the fact of payment companyld be termed as companytemporaneous document particularly when the object of that document was only to instruct an accountant as to how he should make a particular entry. The letter which was written by the Maharaja on March 10, 1953, was rejected because of the circumstances of the case one of which was the companytemporaneous document. It does number appear to us that the Tribunal gave sufficient or any companysideration to the fact that the Maharaja had already passed an order of a liberal and almost generous grant of a pension of Rs. 2,000 per mensem which was in lieu of the services rendered by the assessee both to the State as well as to the Maharaja and his family and that pension was ordered before the merger of the State and when the employment of the assessee as the Dewan terminated. According to what was stated in the letter of the Maharaja dated March 10, 1953, the sum of Rs. 5,00,000 was given as a gift in token of Maharajas affection and regard for the assessee and the assessees family. There is numberreason shown why the Maharaja should have aided and abetted the assessee in escaping income-tax. The only reason stated by the Tribunal is based on a wrong assumption as. to the nature of the document of December 27, 1950. The payment of Rs. 5,00,000 was sought to be brought within the purview of s. 7 1 of the Act read with explanation 2 . This section at the relevant time provided- S. 7 1 The tax shall be payable by an assessee under the head Salaries in respect of any salary or wages, any annuity, pension or gratuity and any fees, companymissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are due to him from whether paid or number or are paid by or on behalf of any private employer Explanation 2 A payment due to or received by an assessee from an employer or former employer or from a provident or other fund, is to the extent to, which it does number companysist of companytributions by the, assessee or interest on such companytributions a profit received in lieu of salary for the purpose of this subsection, unless the payment is made solely as companypensation for loss of employment and number by way of remuneration for past services Counsel for the appellants companytended that the payment did number fall within this section because it was a gift made on account of personal qualifications and was a testimonial unconnected with any service rendered. The submission was that the assessee had already been companypensated for his services to the Maharaja personally and the State and this sum of Rs. 5 lacs was a gift in token of affection and regard and number as a payment in companysideration of the services already rendered to the State or the Maharaja or both. It will number be inappropriate to mention that in the document dated December 27, 1950, it is stated that Rs. 5,00,000 was -paid to the assessee as ex-Dewan of Bhavnagar State in companysideration of his having rendered loyal and meritorious services to Bhavnagar State. There is numbermention in the document of December, 1950, of any services rendered to the Maharaja and it does number seem to have been companysidered by the Tribunal as to why the Maharaja should make out of his personal account the gift of such a large amount for something which was number done for the Maharaja specifically, particularly when the services to the State and to the Maharaja and his family had already been well companypensated. This lends support to the submission of the appellants that the amount was paid merely as a gift in token of Maharajas affection and regard for the assessee. Mr. Kolah for the appellants relied on several cases in support of his companytention that the amount was number liable to tax under s. 7. In Beynon v. Thorpe 1 the assessee resigned his position as a Managing Director of the Company did numberwork for the companypany did 1 1928 14 T.C. 1. number attend any Board meetings and received numberremuneration as a Director of the Company. It was, however, a custom of the companypany to give to its retiring employees voluntary pension or allowance and the companypany voted a pension of pound 5,000 a year to the assessee but this resolution was rescinded and by another resolution pound 5,000 was voted to the assessee number as or because he is a Director but as a personal gift. The assessee was assessed under Schedule E in respect of both the pension and the final payment but these assessments were discharged on appeal by the Special Commissioners who decided that the allowances were gifts of personal nature only. It was hold that the payments were number income assessable to income-tax in the hands of the assessee. Rowlatt, J., said at p. 14 Now the question is whether this ceases to be a mere gift because what has led to it is a past employment, an employment which has ceased. It has been. made abundantly clear by the Court in Scotland in Duncans case 1 that this sort of sums received by a person cannot possibly be put as receipts from his office or in respect of his office or employment, and they said in terms of that kind in a case like this that these emoluments cannot be taxed under Schedule E, and I am bound to say I think that goes a very long way to companyclude this case. But it is said that nevertheless they are in respect of the employment. -Well, it seems to me that is a companyplete fallacy. It is numberhing but a gift moved by the remembrance of past services already efficiently remunerated as services in them. selves it is merely a gift moved by that sort of gratitude or that sort of moral obligation if you please it is merely a gift of that kind. In this ease it happens to be very large in many cases it is very small, but in all the cases it seems to me, whether it is large gift like this or whether it is a small gift to a humble servant they are exactly on the same footing as gifts which are made to a child or gifts which are made to any other person whom the giver thinks he ought to supply with funds for one reason or another and as the 1 1909 5 T.C. 417 Lord President in Scotland points out it is only a matter of history that the feeling between the parties which has generated the gift arises out of an employment. Mr. Kolah also relied on Reed v. Seymour 1 . In that case a companymittee of a Cricket Club granted a benefit match to a professional cricketer in their service. Out of the profits of the benefit match the beneficiary, who was the assessee purchased a farm and assessment was made on him under ScheduleE in respect of the proceeds of the benefit match but this was discharged by the General Commissioner on appeal. This sum was held to be in the nature of a personal gift and number assessable to income-tax. Viscount Cave in his speech posed the question which Rowlatt, J., put, i.e., is it in the end a personal gift or is it remuneration if the latter it is subject to tax, if the former it is number. In that case the test applied by Viscount Cave was that the terms of the assessees employment did number en-title him to a benefit the purpose for which the amount was paid was to express gratitude of the employers and of the cricket-loving public for what he had done and in their appreciation of his personal qualities. It was also stated that if the benefit had taken place after Seymours retirement numberone would have sought to tax the proceeds as his income and the circumstance that it was given before but in companytemplation of, retirement does number alter its quality and the whole sum was a testimonial and number a perquisite and therefore it was number a remuneration for services but a personal gift. Counsel also relied on Moorehouse v. Dooland 2 . In that case a cricket professional was employed under a companytract in which it was provided that companylections shall be made for any meritorious performance by him in accordance with the rules for the time being of the employing Cricket League Club. The assessee played twenty matches and on eleven occasions companylections were made on his behalf under the rules of the Club and a total sum of pound 48 15s. was companylected. This was sought to be taxed as fees, wages perquisites or profits 1 1927 XI T.C. 625. 2 1955 28 I.T.R. 86. arising from his employment. It was held that 1 the test of liability to tax on voluntary payments from the standpoint of the person who receives it was that it accrued to him by virtue of his office or employment, i.e., byway of remuneration of his services 2 that if the assessees companytract of employment entitled him to receive voluntary payments and 3 that the payment was of a periodic and recurring character. On the other hand if a voluntary payment was made in circumstances which showed that it was given by way of a present or a testimonial on grounds personal to the recipient, the proper companyclusion was that the payment was number profit accruing to the recipient by virtue of his office or employment but a gift to him as an individual paid and received by reason of his personal needs or by reason of his personal qualities. Applying these principles the proceeds were by the terms of the companytract of employment received by way of remuneration and were liable to tax. In that case the payment was treated as being subject to tax because it was substantially in respect of services and accrued to the assessee by reason of his office. It is quite clear that had the gift been as a testimonial or a companytribution for specific performance peculiarly due to the personal qualities of the recipient, it would have been treated as a mere present. The next case relied upon was David Mitchell v. Commissioner of Income-tax 1 where the test laid was whether the payment was made in appreciation of .the personality and character of the assessee or in appreciation of the professional services rendered by him in order to give him an extra profit over and above the share of profit he might get from the firm for the services rendered. Counsel for the respondent argued that the gift made by the Maharaja was number in respect of personal qualities of the recipient but was relatable to his office although made by an ex-employer and was therefore taxable that the gift was voluntary is clear but it is number quite clear how the amount can be said to be relatable to the office held by the recipient. Even 1 1956 30 I.T.R. 701. according to the case of the respondent the amount was paid about two years after the assessee had ceased to be an employee of the Maharaja or the State and immediately on his ceasing to be the Dewan of Bhavnagar State, the Maharaja had granted him a pension from out of the public funds for his services to the State as Dewan and for services rendered to the Maharaja and his family a handsome and a generous monthly pension of Rs. 2,000 per mensem. Apart from the fact that the Tribunal relied upon a document which was number companytemporaneous, it seems to have overlooked the fact that there was a gap of two years before the amount of Rs. 5,00,000 was paid by the Maharaja out of his personal funds. Counsel for the respondent relied upon a judgment of this Court in P. Krishna Xenon v. The Commissioner of Income-tax, Mysore, Travancore-Cochin and Coorg, Bangalore 1 . In that case the assessee was a teacher who taught his disciples Vedanta philosophy without any motive or intention of making any profit. One of the disciples made gifts of money to him on several occasions and it was companytended by the assessee that he was number liable to tax on the amounts received from his disciple as he was number carrying on any vocation. But it was held that in teaching Vedanta philosophy the assessee was carrying on a vocation and that the payments made by the disciple were received by the recipient from his vocation. It was also held that if the voluntary payments had been made for reasons purely personal to the donee and number companynected with his office or vocation, they would number be taxable but if they were made because of the office they would be taxable. The question was number what the donor thought he was doing but why the donee received it. The first thing to numberice about that case is that those gifts were number made by the disciple as a gift to mark his esteem and affection for his preceptor but as was stated by the disciple in his affidavit he had paid those amounts because he had obtained the benefit of the teachings by the preceptor on Vedanta. It was found in that case and the disciple admitted 1 1959 Supp. 1 S.C.R. 133. that he had received benefit from the teaching of his preceptor and that the gifts that he had made, even though as a mark of esteem and affection, were the result of teaching imparted by the preceptor and because the amounts were paid to the preceptor as preceptor and the imparting of the teaching was the causa causans of the making of the gift, it was number merely causa sine qua number. The payments were repeated and came with some regularity as the disciple visited the preceptor for receiving instructions. It was in these circumstances that this companyrt held the payments to the preceptor as payments because of the imparting of the teaching and therefore they were income arising from the vocation of the recipient as a teacher of Vedanta philosophy. In our opinion the sum of Rs. 5,00,000 was number paid to the assessee in token of appreciation for the services rendered as a Dewan of Bhavnagar- State but as a personal gift for the personal qualities of the assessee and as a token of personal esteem. The appeal is therefore allowed and the order of the High Court set aside and the reference is answered against the Commissioner of Income-tax. The appellants will have their companyts throughout. HIDAYATULLAH, J.-I have had the advantage of reading the judgment just delivered by my brother, Kapur, J. I regret very much my inability to agree that the appeal should be allowed and the order of the High Court set aside. In my opinion, the High Court had companyrectly answered the question referred to it. The facts of the case have been stated in detail in the judgment of my learned brother, and I need number repeat them but refer only to some of them briefly. On June 12, 1950, a sum of Rs. 5 lakhs was given by the Maharaja of Bhavnagar to the predecessor of the appellants, who was an ex-Dewan of the State. This was paid by Messrs. Premchand Roychand Sons, Bombay, with whom the Maharaja had an account. There is numbercontemporaneous record to show why this payment was made but it appears that when the accountant of the Maharaja enquired how the amount was to be entered in the books of account, the Maharaja issued an order on December 27, 1950, to the following effect In companysideration of Shri Annantrai P. Pattani the Ex-Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 Rupees Five lacs are given to him as gift. Therefore, it is ordered that the said amount should be debited to our Personal Expense Account. After the assessment proceedings had companymenced in this case, the original assessee produced a letter written by the Maharaja on March 10, 1953, as follows I companyfirm that in June, 1950, I gave you a sum of rupees five lacs Rs. 5,00,000 which was a gift as a token of my affection and regard for you and your family. This amount was paid to you by Premchand Roychand Sons according to my letter of 31st May, 1950, from moneys in my account with them. The question in this case was whether s. 7 1 of the Income- tax Act read with Explanation 2 to that section as it stood prior to the amendment in 1955, applied to this payment. That section, so far as it is material, is as follows 7 1 . The tax shall be payable by an assessee under the head Salaries in respect of any salary or wages, any annuity, pension or gratuity and any fees, companymissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are allowed to him by or are due to him, whether paid or number, from, or are paid by or on behalf of any private employer Explanation 2.-A payment due to or received by an assessee from an employer or former employer or from a provident or other fund, is to the extent to which it does number companysist of companytributions by the assessee or interest on such companytributions a profit received in lieu of salary for the purpose of this subsection, unless the payment is made solely as companypensation for loss of employment and number by way of remuneration for past services To determine whether the second Explanation applies to the facts in this case, it has to be found if this pay- ment was received by the assessee from a former employer by way of remuneration for past services. The Tribunal did number accept the letter of the Maharaja, and observed as follows In support of the latter view Mr. Tricumdas strongly relied upon the letter dated 10-3-1953 addressed by the Maharaja to the assessee, vide para 2 above. We have already indicated the circumstances in which that letter came to be written and would merely observe that we find it difficult to bring ourselves to believe in sic the companytents of that letter and would leave the matter at that. This, in my opinion, is a finding upon the evidentiary .value of the letter of the Maharaja, and though the order of the Tribunal is worded mellifluously, the Tribunals decision is quite clearly that it was number per- suaded to accept it. Indeed, of the two documents, greater worth has to be attached to one which was issued before the companytroversy started and was written number to the assessee but to the Maharajas accountant who enquired how the account was to be adjusted. The use of the word companytemporaneous to describe the order to the accountant meant numbermore than this that it was earlier in time and very soon after the amount was given. The Tribunal did number rely on any extra- neous evidence in reaching its companyclusion, but on something which had proceeded from the Maharaja himself. The motive of the Maharaja may be irrelevant, because what has to be seen is number why the payment was made but for what the assessee had received it. The Maharaja numberdoubt had been generous in fixing the pension at Rs. 2,000 per month. But the payment of such a large sum was number just bounty but to reward the past services, which judged from the scale of the pension had number adequately been paid for in the -past. In this companynection, the words of the Maharaja himself and what better evidence can there be? were that the amount was paid in companysideration of Shri Annantrai P. Pattani the Ex-Dewan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 are given to him as gift. The word gift does number alter the nature of the payment. The Maharaja indeed made a gift, as he had stated over again but this order quite clearly disclosees that it was by way of remuneration for past services. The case, therefore, falls within the ruling of the a Supreme Court reported in P. Krishna Menon v. The Commissioner of Income- tax, Mysore, Travancore-Cochin and Coorg, Bangalore 1 , and is indistinguishable from it. In the earlier case of this Court, the person who gave the money did number even mention any past services but this Court found that because the recipient had taught him Vedanta philosophy, the payment was really in the nature of remuneration for past services. The facts in P. Krishna Menons case 1 were that the assessee was teaching his disciples Vedanta philosophy without any motive or intention of making a profit out of such activity. One J. H. Levy who used to go to Travancore from England at intervals attended his teachings. Levy had an account with Lloyds Bank at Bombay, and on December 31, 1944, Levy transferred the entire amount of Rs. 2,41,103-11- 3 to the credit of an account which Levy got the assessee to open in his own name. Levy made further remittances and by August 19, 1951, had paid about Rs. 4,50,000. It was held by this Court that the assessee was carrying on a vocation. In deciding the question whether the amounts were assessable to tax, this Court observed as follows- it seems to us that the present case is too plain to require any authority. The only point is, whether the moneys were received by the appellant by virtue of his vocation. Mr. Sastri companytended that the facts showed that the payments were purely personal gifts. He drew our attention to the affidavit of Levy where it is stated all sums of money paid into his account by me have been gifts to mark my esteem and affection for him and for numberother reason. But Levy also there said, I have had the benefit of his teachings on Vedanta. It is important to remember however that the point is number what the donor 1 1959 Supp. 1 S.C.R. 133. thought he was doing but why the donee received it. Sarkar, J., then referred to the dictum of Collins, M. R., in Herbert v. Mc-Quade 1 , which may be quoted here Now that judgment, whether or number the particular facts justified it, is certainly an -affirmation of a principle of law that a payment may be liable to income-tax although it is voluntary on the part of the persons who made it, and that the test is whether, from the standpoint of the person who receives it, it accrues to him in virtue of his office if it does, it does number matter whether it was voluntary or whether it was companypulsory on the part of the persons who paid it. That seems to me to be the test and if we once get to this-that the money has companye to or accrued to, a person by virtue of his office-it seems to me that the liability to income-tax is number negatived merely by reason of the fact that there was numberlegal obligation on the part of the persons who companytributed the money to pay it. The learned Judge also referred to the observations of Rowlatt, J., in Reed v. Seymour 2 and of Viscount Cave, L. C., in Seymour v. Reed 3 , and observed that the real question was, is the payment in the nature of a personal gift or is it a remuneration?, and quoted as the reply the words of the Lord Chancellor-If the latter, it is subject to the tax if the former, it is number. Sarkar, J., also referred to the observations of Lord Ashbourne in Blakiston Cooper 4 , which were It was suggested that the offerings were made as personal gifts to the Vicar as marks of esteem and respect. Such reasons numberdoubt played their part in obtaining and increasing the amount of the offerings, but I cannot doubt that they were given to the vicar as vicar and that they formed part of the profits accruing by reason of his office., and companycluded as follows We have numberdoubt in this case that the imparting 1 1902 2 K.B. 631. 3 1927 A.C. 554. 2 1926 1 K.B. 588. 4 1909 A.C. 104. of the teaching was the causa causans of the making of the gift it was number merely a causa sine qua number. The payments were repeated and came with the same regularity as Levys visits to the appellant for receiving instructions in Vedanta. We do number feel impressed by Mr. Sastris companytention that the first payment of Rs. 2,41,103-11-3 was too large a sum to be paid as companysideration. In any case, we are number companycerned in this case with that payment. We are companycerned with payments which are of much smaller amounts and as to which it has number been said that they were too large to be a companysideration for the teaching. And one must number forget that these are cases of voluntary payments and the question of the appraisement of the value of the teaching received in terms of money is number very material. If the first payment was too big to have been paid for the teaching received, it was too big to have been given purely by way of gift. In my opinion, the case of this Court companycludes the matter, and the Tribunal was within its rights in accepting one piece of evidence in preference to another, and the finding on the evidentiary value of the letter of the Maharaja was a matter essentially for the Tribunal to decide finally. I thus agree with the High Court in the answer which it gave, in agreement on facts with the Tribunal, and the reasons for which the answer was given. I would, therefore, dismiss the appeal with companyts.

Case appeal was accepted by the Supreme Court

Hidayatullah, J. This appeal with special leave has been filed by Messrs. Bhaichand Amolukh Co. referred to in this judgment as the firm against the judgment and order of the High Court of Bombay, by which the High Court asked for a reference on question of law but declined to include therein a question or questions which, the firm companytended, also arose out of the Tribunals order. The facts leading up to the appeal may be stated shortly. One Bhaichand Amolukh Vora, father of Chhotalal Bhaichand, started a firm in 1910, to work as principal agents for a number of insurance companypanies. In that firm, in addition to Bhaichand Vora and Chhotalal Bhaichand, one Nathubhai Patel was also a partner. Bhaichand Vora died in 1948, and the two surviving partners companytinued as the firm. Nathubhai Patel died in 1949, and it is stated that the firm thereafter companysisted of Chhotalal Bhaichand and his wife, Bai Lalitaben. In the years that followed, the business of the firm was treated as the sole business of Chhotalal Bhaichand to which numberobjection was taken, because, as is number explained, the income of the wife would, in any event, have been included in the income of Chhotalal Bhaichand under section 16 3 of the Income-tax Act. In June 1950, the Insurance Amendment Act, 1950 No. 67 of 1950 , came into force, which amended the Insurance Act 1938 No. 4 of 1938 , by adding a new section 42B by which the insurers were prohibited after the expiration of seven years from the companymencement of Act No. 67 of 1950, from appointing, or transacting any insurance business in India through a principal agent. Contracts between an insurer and a principal agent were also required to be in writing, and the model terms companytained in Part I of the Sixth Schedule to the Act were to be deemed to be incorporated in and form part of every such companytract. The case of the firm is that Chhotalal Bhaichand, realising that the business of principal agents was to companye to an end after the expiry of sever years, looked for other sources of employment and accepted a job as assistant manager of the New India Assurance companypany. He withdrew from the firm, and the old firm was reconstituted from January 1, 1953, though the deed of partnership was executed on April 22, 1953. By this deed, the partnership companysisted of three persons with shares as follows Bai Manibai mother of Chhotalal Bhaichand - 5 annas in the rupee. Mr. Khambatta - 3 annas in the rupee. Mr. Premchand D. Parikh - 3 annas in the rupee. Two minor sons of Chhotalal Bhaichand, Jayant and Harshad, were also admitted to the benefits of the partnership to the extent of 1 1/2 annas in the rupee, each. The balance of 2 annas in the rupee was earmarked to build up a reserve fund of Rs. 10,000. For the assessment year 1954-55, companyresponding to the year of account, calendar year 1953, an application for the registration of this new firm was made under section 26A of the Income-tax Act. The Income-tax Officer by his order dated September 30, 1954, declined registration, holding that the firm belonged solely to Chhotalal Bhaichand had number made by formal transfer of the business to the new partners, that the deed stated that neither Khambatta number Premchand claimed any interest in the goodwill of the business, that there was numberconsideration for which Bai Manibai, the mother of Chhotalal Bhaichand the assessee , and his two minor sons became entitled to the income from the business, and that the reason that the goodwill was reserved for her because the business had been started by her late husband was fallacious. A fifth reasons was given that a cheque for Rs. 6,400 being Manibais share of profits was drawn by the firm to self, and in later years the amount was traced to the account of Commissioner. The explanation of Manibai that she received Rs. 5,000 out of that amount and spent it on charities was number accepted. On appeal to the Appellate Assistant Commissioner, registration of the firm was ordered. On further appeal to the Tribunal, the order of the Appellate Assistant Commissioner was, in its turn, set aside, and the Tribunal reached the companyclusion that Manibai and the two minor sons were number the real partners of the new firm, but that the partnership companysisted of Chhotalal Bhaichand and two others. The Tribunal, in spite of this finding, restored the order of the Income-tax Officer. The firm then applied for a reference of the questions arising from the Tribunals order, and suggested as many as 18 questions. The Tribunal declined the reference by an order, which set out the grounds on which its decision in the appeal proceed, adding reasons which had number been given before. To those reasons we shall refer later. The firm then applied to the High Court under section 66 2 , and set out the 18 questions which it alternatively summarised into two, as follows Whether the finding of the Tribunal that the partnership is number genuine but is in reality a partnership between Chhotalal, Premchand and Khambatta is supported by any material on record and or is based wholly or partly on companyjectures, suspicions, surmises, incorrect assumptions or irrelevant materials, and or amounts to an error or misdirection in law ? If the above question is answered against the applicant, then, in view of the Tribunals finding that there was a partnership between Chhotalal, Premchand and Khambatta, whether the Tribunal ought to have directed an assessment to be made on that firm as an unregistered firm and whether the action of the Tribunal is setting aside the order of the Appellate Assistant Commissioner and restoring that of the Income- tax Officer is valid ? The High Court declined to raise the first question, and asked for a reference only on the second question, which it recast as follows In view of the Tribunals finding that there was a partnership between Chhotalal, Premchand and Khambatta, whether the Tribunal ought to have directed an assessment to be made on that firm as an unregistered firm and whether the action of the Tribunal in setting aside the order of the Appellate Assistant Commissioner and restoring that of the Income- tax Officer is valid ? We are number companycerned in this appeal with the question on which the High Court has called for a reference. That is a matter which, we presume, will be decided hereafter. We are companycerned only with the refusal to raise and call for a reference on the first question, which we have set out above. In dealing with the matter, the Income-tax Officer had taken statements from Chhotalal Bhaichand, Manibai, Premchand and Khambatta. The Tribunal in its order stated that the alleged partnership with Manibai and admitting Jayant and Harshad to the profits of the partnership was numberhing short of a farce. In its reasons, the Tribunal referred to various matters. It observed that with the exit of Chhotalal, numberadjustment entries were made in the books of the business, which was carried on as before by the partnership, that an employee and an agent of the firm were taken as partners but had numberright to the goodwill of the business, which was stated in the deed to belong solely to the assessees old mother, that the monthly drawings of Premchand and Khambatta were limited to Rs. 300 which was almost equal to their remuneration or companymission in the past, that the old business had three bank accounts which companytinued as before, one of them being operated by Chhotalal himself and the other two, by the new partners under a power-of-attorney which was number withdrawn, that numbernew letter of appointment was issued by the three insurance companypanies for whom the old firm was acting as principal agents, and that numberwritten companymunication was given to them. In disposing of the matter, the Tribunal stated that Chhotalal probably wished to retain the business which had been build up by the family, and devised a scheme to transfer the business to a sham partnership companysisting of his mother, an employee and an agent of the firm, with the benefits of the partnership to his two minor sons, that the New Indian Assurance Company lent its support to a practice by which insurance business was being done, in addition to being an employee of the companypany, that Manibai, mother of Chhotalal, was number capable of taking any part in the business and had signed documents as desired by Chhotalal, and that the assessee perhaps attended to the business personally outside office hours. The Tribunal also stated that there was numberreason why the goodwill of the firm was assigned to Manibai, whose only qualification was that she was Chhotalals mother. When the Tribunal rejected the application for a reference, it again adverted to some of these reasons, adding that Manibai was examined, hinting thereby that her statement was number satisfactory. When the High Court called for a reference, it presumably companysidered the finding of the Tribunal, which was recorded in the following words In order to get over the legal difficulty, the assessee companyverted the old business into a partnership companycern by taking the two employees as working partners. These employees were given only three annas share which perhaps at the material times the approximate remuneration earned by them in preceding year. It is in reality a partnership between the assessee, Premchand and Khambatta. Manibai and the two minor sons are bogus parties The High Court, therefore, raised the question whether the order of the Income-tax Officer companyld be restored in toto in view of this finding, because the Income-tax Officer had taken the whole of the income of the firm into Chhotalals individual assessment. In this appeal, it is companytended that the High Court was in error in number calling for a reference, because a there were numbermaterials on which the finding that the firm seeking registration was a pretense, companyld be rested, and b in any event, the Tribunal having acted on suspicions, companyjecture and surmises, its decision is erroneous, in view of the decisions of this companyrt reported in Dhirajlal Girdharilal v. Commissioner of Income-tax, Omar Salay Mohamed Sait v. Commissioner of Income-tax, and Lalchand Bhagat Ambica Ram v. Commissioner of Income-tax. Reference was also made to Umacharan Shaw Bros. v. Commissioner of Income-tax. The respondent relied upon a recent pronouncement of this companyrt in Homi Jehangir Gheesta v. Commissioner of Income-tax. Regarding the first ground, it is quite obvious that there was material on which the finding companyld be based. If Chhotalal withdrew from the business, his wife, Lalitabai, would be left as the sole proprietor. No mention of her interest what ever was made in the subsequent deed, and she seems to have disappeared companypletely. On the termination of the old firm and the setting up of the new firm, one would expect some adjustment entries in the books of account, and there were singularly lacking. One would also expect a companymunication by the new agents to the various insurance companypanies in writing about the change of principal agents and an appointment letter in the name of the new firm by them. The bank accounts would have been transferred to the new partnership firm, and the power-of-attorney in favour of Premchand and Khambatta would have been cancelled and the new firm would have been authorised to deal with the accounts. Without any such action, the decision of the Tribunal, that the firm which asked for registration was number a real firm, cannot be said to be founded on numbermaterial. In so far as the addition of certain other reasons, which are characterised as surmises, companyjectures and suspicious, is companycerned, this companyrt has observed in Gheetas case as follows We must read the order of the Tribunal as a whole to determine whether every material fact, for and against the assessee, has been companysidered fairly and with due care whether the evidence pro and company has been companysidered in reaching the final companyclusion and whether the companyclusion reached by the Tribunal has been companyoured by irrelevant companysideration or matters of prejudice. Learned companynsel for the appellant has taken us through the entire order of the Tribunal as also the relevant materials on which it is based. Having examined the order of the Tribunal and those materials, we are unable to agreed with learned companynsel for the appellant that the order of the Tribunal is vitiated by any of the defects adverted to in Dhirajlal Girdharilal v. Commissioner of Income-tax, or Omar Salay Mohamed Sait v. Commissioner of Income-tax. We must make it clear that we do number think that those decisions required that the order of the Tribunal must be examined sentence by sentence, through a microscope as it were, so as to discover a minor lapse here or an incautious opinion there to be used as a peg on which to hang an issue of law. In view of the arguments advanced before us it is perhaps necessary to add that in companysidering probabilities properly arising from the facts alleged or proved, the Tribunal does number indulge in companyjectures, surmises or suspicions. The Tribunal was trying to motive for the formation of the new firm with an old lady and two minor sons in place of Chhotalal, and what was observed by the Tribunal was in companynection with the motive which suggested itself to unravel the motive for the formation of the new firm with an old lady and two minor one in place of Chhotalal, and what was observed by the Tribunal was in companynection with the motive which suggested itself to it, and was number based on any material. Even if the Tribunal mentioned those suspects, we do number think that they entered into the solution of the problem before it. Suspicious and surmises are best avoided but in the present case, the order of the Tribunal proceeded on such solid facts that the speculation about the motive of Chhotalal did number make any material difference to the finding reached, though we cannot held saying that the Tribunal would have been well-advised to leave speculation out altogether. We are of opinion that this case falls within the ruling in Gheetas case.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION. Criminal Appeal No. 106 of 1956. Appeal from the Judgment and Order dated the 7th April, 1956, of the former Judicial Commissioners Court, Vindhya Pradesh, Rewa in Misc. Crl. Application No. 70 of 1956. D. Mathur for the Appellant. K. B. Naidu and I. N. Shroff for the Respondent. 1960. November 18. The Judgment of the Court was delivered by IMAM, J.-The Judicial Commissioner of Vindhya Pradesh granted a certificate under Art. 132 1 of the Constitution of India as in his opinion the case involved a substantial question of law as to the interpretation of the Constitution. Hence the present appeal. The appellant was companyvicted under s. 307, Indian Penal Code and s. 19 f of the Indian Arms Act by the Sessions Judge of Chatarpur. He was sentenced to 10 years rigorous imprisonment under s. 307, Indian Penal Code and to 3 years rigorous imprisonment under s. 19 f of the Indian Arms Act. He filed an appeal while he was in jail which was summarily dismissed on merits on October 28, 1955. Thereafter, on October 31, 1955, he filed a Memorandum of Appeal through a pleader which was rejected on November 1, 1955, on the ground that it was number maintainable owing to his appeal from jail under s. 420 of the Code of Criminal Procedure having been dismissed on October 28, 1955. Thereafter, he filed a petition before the Judicial Commissioner that the order dated October 28, 1955, dismissing his appeal from jail should be reviewed and his appeal should be reheard on merits. This petition was also dismissed by the Judicial Commissioner. The appellant had prayed for a certificate under Arts. 132 and 134 c of the Constitution. The Judicial Commissioner was of the opinion that numberground had been established for grant of a certificate under Art. 134 c but a certificate should issue under Art. 132 1 . The only question for determination in this appeal is whether the case involves any substantial question of law as to the interpretation of the Constitution. It had been urged before the Judicial Commissioner that s. 421 of the Code of Criminal Procedure which enabled a companyrt to dismiss an appeal filed by a companyvicted person, while he was in jail, without hearing him offended against Art. 14 of the Constitution as it discriminated between him and a companyvicted person who presented his appeal either in person or through a pleader. Before we companysider whether s. 421 of the Code offends against the provisions of Art. 14 of the Constitution it is desirable to set out shortly the scheme of appeals under Chapter XXXI of the Code of Criminal Procedure before its amendment which came into force in 1956. Section 404 expressly states that numberappeal shall lie from any judgment or order of a criminal companyrt except as provided for by the Code or by any other law for the time being in force. This provision is in accordance with the general principle that numberappeal lies as a matter of right unless the right of appeal is companyferred by law. There are various provisions in Chapter XXXI providing for an appeal from various orders and sentences passed by the Criminal companyrts. Section 410 enables any person companyvicted at a trial held by a Sessions Judge or an Additional Sessions Judge to appeal to the High Court. The Court of Judicial Commissioner, Vindhya Pradesh, was a High Court for the purposes of the Code. The appeal of the appellant from jail against his companyviction and sentence by the Sessions Judge therefore lay to the Court of the Judicial Commissioner. Under s. 418 an appeal may lie on a matter of fact as well as a matter of law, except where the trial was by jury, in which case, the appeal would lie only on a matter of law, except in a case where a person had been sentenced to death, his appeal would lie on a matter of fact as well as a matter of law although he was tried by a jury. The section also enables any other person companyvicted at the same trial with a person so sentenced to appeal on a matter of fact as well as a matter of law. Section 419 enjoins that every appeal shall be made in the form of a petition in writing presented by the appellant or his pleader and every such petition shall, unless the companyrt to which it is presented otherwise directs, be accompanied by a companyy of the judgment or order appealed against and in cases tried by jury a companyy of the heads of the charge recorded under S. 367. Section 420 enables a person who is in jail to present his petition of appeal and the companyies accompanying the same to the Officer-In-charge of the jail who shall thereupon forward such petition or companyy to the proper Appellate Court. Under s. 421 on receiving the petition and companyy under s. 419 or s. 420 the Appellate Court shall peruse the same and if it companysiders that there are numbersufficient grounds for interfering, it may dismiss the appeal summarily. There is a proviso to this section which states that numberappeal presented under s. 419 shall be dismissed unless the appellant or his pleader has had a reasonable opportunity of being heard in support of the same. The only other section for the purpose of this appeal, to which reference need be made, is s. 430 which states that judgments and orders passed by an Appellate Court upon appeal shall be final, except in the cases provided for in s. 417 and Chapter XXXII. It will be seen from these provisions of the Code that a companyvicted person, in cases where an appeal is provided for by the Code, may file a petition of appeal in writing presented by him or his pleader and that if he is in jail he may file his petition of appeal through the jail authorities who are obliged to forward the petition to the Appellate Court companycerned. Whether an appeal is filed under s. 419 or under s. 420 of the Code, the Appellate Court has been expressly authorized, after perusing the petition of appeal and companyies of the judgment or charge to the jury, if it company- siders that there is numbersufficient ground for interference, to dismiss the appeal summarily. In the present case, the appellant was in jail and he presented his petition of appeal to the Court of the Judicial Commissioner under s. 420 through the jail authorities. It was summarily dismissed on merits on October 28, 1955. If that order was lawfully made the decision of the Appellate Court was final under s. 430 of the Code. Consequently, the appeal presented by the appellant through his pleader on October 31, 1955, was patently number maintainable. We companye number to the question whether s. 421 offends against the provisions of Art. 14 of the Constitution which states that the State shall number deny to 1 any person equality before the law or the equal protection of the laws within the territory of India. This Court has decided in many cases what are the matters to be companysidered in order to determine whether a particular piece of legislation is discriminatory and companysequently in companytravention of the provisions of Art. 14. It is unnecessary to refer to them. The object of Chapter XXXI of the Code of Criminal Procedure was to make provisions for appeals against companyviction in certain cases. Where numberappeal is provided by this Chapter numberfurther question arises because numberone can claim that he has a right to appeal from any decision of a criminal companyrt. Every person companyvicted at a trial held by a Sessions Judge or an Additional Sessions Judge has been given the right to appeal to the High Court by virtue of the provisions of s. 410 of the Code. The right to appeal having been so given the Code provided the manner in which such appeal should be presented which is to be found in ss. 419 and 420 of the Code. These two sections companytemplate various possibilities 1 that a companyvicted person who is number in jail presents his petition of appeal in person 2 that a companyvicted person though unable to present his petition of appeal personally owing to various reasons, including his being in jail, can present it through his pleader and 3 where the companyvicted person is in jail and thus unable to present his petition in person and is unable to engage a pleader to present his, petition of appeal, can present it through the jail authorities. Where the companyvicted person presents his appeal in person or through a pleader under s. 421 his appeal shall number be dismissed summarily unless he or his pleader is given a reasonable opportunity of being heard in support of his petition. No such companysideration arises in the case of a companyvicted person who is unable to present his petition in person or through a pleader. There is a rational basis for making the classification mentioned above which has a reasonable companynection with the object of the legislation providing for appeals under Chapter XXXI. Under s. 410 there is numberdiscrimination as any person companyvicted at a trial held by a Sessions Judge or an Additional Sessions Judge may appeal to the High Court. Where the companyvicted person is able to present his petition of appeal in person his position is entirely different from a person who is unable to do so because he is in jail. Similarly, a companyvicted person whether in jail or number who can present his petition through a pleader is in a different position from a companyvicted person who is in jail and is unable to present his petition through a pleader. The Code intended in the case of a companyvicted person who presents his petition of appeal while in jail that his petition and the judgment of the companyrt which companyvicted him must be companysidered by the Appellate Court before it is summarily dismissed, otherwise the right of appeal companyferred on such a person under s. 410 would be meaningless. In the case of such a person numberquestion companyld arise of his being heard in person because he has number presented the appeal in person number companyld there be any question of his pleader being heard because numberpleader had been engaged by him to present the appeal. Different companysiderations arise in the case of a companyvicted person who presents his petition of appeal in person or through a pleader in which case he or his pleader must be heard before the appeal is summarily dismissed. There is, therefore, a rational basis for making the classification into three categories which has a reasonable companynection with the object of the Code. It companyld number therefore be said that the proviso to s 421 offends against the provisions of Art. 14 of the Constitution. It was, however, companytended that although an appeal filed under s. 420 may have been dismissed summarily a subsequent appeal filed through a pleader ought to have been heard and the Judicial Commissioner erred in holding that the appeal did number lie. The appeal companyld number have been summarily rejected without the pleader having been heard. From that point of view the provisions of s. 421 had number been companyplied with. It is sufficient to say that if the order dated October 28, 1955, dismissing the appellants appeal under s. 420 was lawful, a second appeal from the same judgment of companyviction presented through a pleader was number maintainable because the previous order of the High Court dismissing the appeal was final under s. 430 of the Code of Criminal Procedure. Certain cases were relied upon to which reference has been made by the Judicial Commissioner. Those cases can be distinguished from the present case. In numbere of them was it decided that where an order dismissing the appeal is lawful a subsequent appeal filed through a pleader was maintainable. In our opinion, there is numbersubstance in this point, once it is held that the order dated October 28, 1955, was a lawful order which, we think, it was, as in our opinion the proviso to s. 421 in numberway offends against the provisions of Art.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 147 of 1959. Appeal by special leave from the judgment and order dated July 21, 1959 of the Allahabad High Court in Criminal Revision No. 503 of 1958 arising out of the judgment and order dated March 27, 1958, of the Sessions Judge, Allahabad, in Criminal Appeal No. 745 of 1957. B. Agarwala and K. P. Gupta, for the appellant. C. Mathur and C. P. Lal, for the respondent. 1960. December 16. The Judgment of the Court was delivered by SHAH, J.-The appellant, Sarjoo Prasad was companyvicted by P. M. Agra, Magistrate First Class, Allahabad of an offence under s. 7 read with s. 16 of the Prevention of Food Adulteration Act, 1954 37 of 1954 hereinafter referred to as the Act-and in view of a previous companyviction for a similar offence was sentenced to suffer rigorous imprisonment for one year and to pay a fine of Rs. 2,000. The companyviction and sentence were companyfirmed in appeal by the Court of Session at Allahabad and by the High Court of Judicature at Allahabad in revision. The appellant has appealed to this companyrt with special leave under Art. 136 of the Constitution. The appellant was an employee of one Thakur Din who carries on business at 92-C, Mirganj, Allahabad as a vendor of edible oils and provisions. On September 22, 1956, a Food Inspector of the Allahabad Municipality purchased from the appellant a sample of mustard oil exposed for sale in the shop which on analysis was found to be adulterated with linseed oil. Thakur Din and the appellant were prosecuted in the companyrt of the First Class Magistrate, Allahabad for selling adulterated food. The Magistrate companyvicted Thakur Din and the appellant and sentenced Thakur Din to pay a fine of Rs. 200 and the appellant to suffer rigorous imprisonment for one year and to pay a fine of Rs. 2,000. The expression sale is defined by s. 2 xiii in the Act as meaning sale of any article of food, whether for cash or on credit or by way of exchange and whether by wholesale or retail, for human companysumption or use, or for analysis, and includes an agreement for sale, an offer for sale, the exposing for sale or having in possession for sale of any such article, and includes also an attempt to sell any such article. The definition includes number only actual sale but agreement for sale, offer for sale, exposure for sale and even possession of articles for sale and attempt to sell. The appellant was in charge of the shop at the time when mustard oil was sold to the Food Inspector. Mustard oil was exposed for sale and it was in the possession of the appellant and he actually sold it. But companynsel for the appellant companytends that by s. 7 of the Act, the owner of a shop alone is prohibited from selling adulterated food, and a servant employed in the shop who sells food on behalf of the employer is number a person against whom the prohibition operates. Counsel says that an employee in a shop who with knowledge that an article of food is adulterated, sells it is guilty of aiding and abetting his employer, but without such knowledge he is number liable to be punished for companytravening the provisions of the Act. Section 7 of the Act in so far as it is material provides No person shall himself or by any person on his behalf -----sell--- --- 1 any adulterated food The material part of s. 16 1 provides If any person, a whether by himself or by any person on his behalf-----sells-----any article of food in companytraventionof the provisions of this Act or he shall be punishable That the mustard oil sold by the appellant was adulterated has number been challenged in this appeal. The appellants plea that the mustard oil delivered to the Food Inspector was number meant for sale was disbelieved by the Trial Magistrate and that view has been companyfirmed by the Court of Session and the High Court. The expression person has number been defined in the Act and in the companytext in which that expression occurs, it prima facie includes every one who sell adulterated food. By the companylocation of the expression, numberperson shall himself or by any person on his behalf, the employer alone is number prohibited. The intention of the Legislature is plain. Every person, be he an employer or an agent is prohibited from selling adulterated food and infringement of the prohibition is by s. 16 penalised. By s. 19 in a prosecution for an offence pertaining to the sale of any adulterated article of food, it is numberdefence merely to allege that the vendor was ignorant of the nature of the substance or quality of the food sold by him. Such a defence can only succeed if the person charged with selling adulterated food proves that the article of food was purchased as of the same in nature, sub- stance and quality as that demanded by the purchaser with a written warranty in the prescribed form, that he had numberreasons to believe at the time when he sold it that the food was number of such nature, substance, and quality and that he sold it in the same state as he purchased it, and he submits to the food inspector or the local authority a companyy of the warranty with a written numberice that he intends to rely upon it and specifies the name and address of the person from whom he received it. Prohibition of sale of adulterated food is evidently imposed in the larger interest of maintenance of public health. The prohibition applies to all persons who sell adulterated food, and for companytravention of the prohibition all such persons are penalised. Because the Legislature has sought to penalise a person who sells adulterated food by his agent, it cannot be assumed that it was intended to penalise only those who may act through their agents. If the owner of a shop in which adulterated food is sold is without proof of mens rea liable to be punished for sale of adulterated food, we fail to appreciate why an agent or a servant of the owner is number liable to be punished for companytravention of the same provision unless he is shown to have guilty knowledge. The argument that the Legislature companyld number have intended having regard to the fact that a large majority of servants in shops which deal in food are illiterate to penalise servants who are number aware of the true nature of the article sold has in our judgment numberforce. The intention of the Legislature must be gathered from the words used in the statute and number by any assumptions about the capacity of the offenders to appreciate the gravity of the acts done by them. There is also numberwarrant for the assumption that the servants employed in shops dealing in food stuff are generally illiterate. The Legislature has, in the interest of the public health, enacted the Act and has provided that all persons are prohibited from selling adulterated food. In the absence of any provision, express or necessarily implied from the companytext, the companyrts will number be justified in holding that the prohibition was only to apply to the owner of the shop and number to the agent of the owner who sells adulterated food. The view taken to the companytrary by the Madras High Court in Re S. Moses 1 is, in our judgment, erroneous. There is numbersubstance in the companytention that the companyviction of the appellant was number for a second offence companymitted by him under the Prevention of Food Adulteration Act. The prosecutor produced before the companyrt an extract dated April 7, 1956 of a judgment in criminal case No. 208 of 1956 which showed that one Sarjoo Prasad had been companyvicted by P. N. Jauhari, Magistrate F-Class, Allahabad of the offence of adulteration of mustard oil and sentenced to pay a fine of Rs. 80. In the view of the Magistrate, the extract related to the appellant. The name of the person companyvicted and his fathers name and residence were identical with the name of the appellant, I.L.R. 1959 mad. 418. his fathers name and his residence. All the details given in the extract tallied with the description of the appellant. In the memorandum of appeal filed to the Court of Session challenging the companyviction recorded by the Magistrate First Class, it was number companytended that the person companyvicted in the earlier case was some person other than the appellant. But the appellant was merely an employee of Thakur Din. It is number shown that he made himself any profit out of the transaction. Thakur Din has been sentenced to pay a fine of Rs. 200 only. The offence companymitted by the appellant is a repetition of a similar offence companymitted by him a few months earlier, but we think that having regard to all the circumstances, this is a case in which there are special and adequate reasons which would justify imposition of a penalty less than the minimum prescribed by a. 16 ii of the Act. We reduce the sentence to imprisonment to three months and we remit the fine.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 311 of 1959. Appeal from the judgment and order dated October 31, 1955, of the Travancore Cochin High Court, Ernakulam, in Original Petition No. 75 of 1955. N. Kripal and D. Gupta, for the appellant. Sardar Bahadur, for the respondent. 1960. December 13. The Judgment of the Court was delivered by KAPUR, J.-This is an appeal pursuant to a certificate of the High Court of Kerala against the judgment and order of that companyrt and the question for decision is the applicability of s. 35 of the Indian Income-tax Act hereinafter termed the Act . The facts which have given rise to the appeal are these The respondent is a limited companypany which owns a spinning mills at Alwaye. It companymenced business in January, 1951, and its first accounting year ended on December 31, 1951, and the relevant assessment year is 1952-53. It filed its return showing an income Rs. 3,21,284 without taking into account the amount allowable under s. 15C of the Act. On February 2, 1953, the net assessable income of the respondent was determined at Rs. 1,47,083 after deducting Rs. 1,79,081 under s. 15C. The respondent however declared a dividend of Rs. 4,72,415 which attracted the application of s. 2 of the Finance Act, 1952, read with Part B, proviso ii of First Schedule and thus it became liable to the payment of additional income tax and this fact was overlooked by the Income-tax Officer. After giving numberice under s. 35 of the Act, the Income-tax Officer by an order dated January 25, 1954, rectified this error and imposed an additional tax at the rate of one anna in the rupee. He later discovered that this was also erroneous and the rate should have been 5 annas in a rupee. By an order dated August 12, 1954, he rectified the error. Under s. 18A, advance income tax had to be paid and the respondent companypany had deposited only Rs. 5,000 and therefore became liable to penal interest under s. 18A 8 of the Act. By the same order this omission to impose penal interest was companyrected and this error was thus rectified. Against this order the respondent companypany went in revision under s. 33A 2 to the Commissioner of Income-tax but the revision was dismissed. Thereupon the respondent companypany filed a petition in the High Court of Kerala under Art. 226 of the Constitution on the ground that s. 35 of the Act did number apply and that on the merits additional tax companyld number be imposed. The High Court by its judgment dated October 31, 1955 held that the orders made were without jurisdiction and therefore granted a writ of certiorari quashing the orders and the Income-tax Officer has brought this appeal pursuant to a certificate of that High Court. According to the High Court, s. 35 of the Act was a provision for rectification of mistakes apparent on the record and in the opinion of the High Court it was a mistake analogous to O. 47, r. 1 of the Code of Civil Procedure for grant of review on the ground of mistake or error apparent on the face of the record and it companystrued it in the following words- i.e. an evident error which does number require any extraneous matter to show its incorrectness. The error may be one of fact but is number limited to matters of fact and include also errors of law. But the law must be definite and capable of ascertainment. An erroneous view of law on a debatable point or a wrong exposition of the law or a wrong application of the law or a failure to apply the appropriate law cannot be companysidered a mistake or error apparent on the face of the record. See Chitaleys C.P.C. Col. III pp. 3549-50, 5th edition. On the ground that the applicability of proviso ii of Part B of the First Schedule of the Finance Act was a companyplex question which companyld number be said to be apparent on the face of the record, the High Court held that the necessary foundation for the exercise of the powers under s. 35 had number been laid and therefore the Income-tax Officer had numberjurisdiction to make the order that he did. The High Court also held that the levy of penal interest under s. 18A 8 of the Act for failure to make advance deposit under s. 18A 3 was also without jurisdiction. The learned Judges of the High Court seem to have fallen into an error in equating the language and scope of s. 35 of the Act with that of O. 47, r. 1, Civil Procedure Code. The language of the two is different because according to s. 35 of the Act which provides for rectification of mistakes the power is given to the various income-tax authorities within four years from the date of any assessment passed by them to rectify any mistake apparent from the record and in the Civil Procedure Code the words are an error apparent on the face of the record and the two provisions do number mean the same thing. This companyrt in Maharana Mills Private Ltd. v. Income-tax Officer, Porbandar 1 has laid down the scope of s. 35 at p. 358 in the following words- The power under section 35 is numberdoubt limited to rectification of mistakes which are apparent from the record. A mistake companytemplated by this section is number one which is to be discovered as a result of an argument but it is open to the Income-tax Officer to examine the record including the evidence and if he discovers any mistake he is entitled to rectify the error provided that if the result is enhancement of assessment or reducing the refund then numberice has to be given to the assessee and he should be allowed a reasonable opportunity of being heard. In that case the error arose because of an initial mistake in determining the written down value which was subsequently rectified. In an earlier case M. K. Venkatachalam v. Bombay Dyeing Manufacturing Co. Ltd. 2 where as a companysequence of a subsequent amendment of the law having retrospective effect, the Income-tax Officer reduced the amount of interest under s. 18A 5 of the Act and the assessee obtained from the High Court a writ of prohibition against the Income-tax Officer on the ground that the mistake companytemplated had to be apparent on the face of the order and number a mistake resulting from an amendment of the law even though it was retrospective in its effect, it was held that it was a case of error apparent from the record. Gajendragadkar, J. in his judgment said- At the time when the Income-tax Officer applied his mind to the question of rectifying the alleged mistake, there can be numberdoubt that he had to read the principal Act as companytaining the inserted proviso as from April 1, 1952. Thus this companyrt has held that discovery of an error on 1 1959 36 I.T.R. 350. 2 1958 34 I.T.R. 143. the basis of assessment due to an initial mistake in determining the written down value is a mistake from the record and so is a misapplication of the law even though the law came into operation retrospectively. The Income-tax Officer, can, under s. 35 of the Act, examine the record and if he discovers that he has made a mistake he can rectify the error and the error which can be companyrected may be an error of fact or of law. The restrictive operation of the power of review under 0. 47 R. 1, Civil Procedure Code is number applicable in the case of s. 35 of the Act and in our opinion it cannot be said that the order of the Income-tax Officer in regard to assessment in dispute was without jurisdiction. In regard to s. 18A 8 also the learned Judges have misdirected themselves because that section is mandatory. It provides- S. 18A 8 Where, on making the regular assessment, the Income-tax Officer finds that numberpayment of tax has been made in accordance with the foregoing provisions of this section, interest calculated in the manner laid down in sub-section 6 shall be added to the tax as determined on the basis of the regular assessment. Therefore the Income-tax Officer was required to calculate the interest in the manner provided under the provisions of that sub-section and had to add it to the assessment. Counsel for the respondent sought to raise the question as to the applicability of proviso ii of Part B of First Schedule of the Finance Act 1952 and relied upon the judgments of this Court in Commissioner of Income-tax v. Elphinstone Spinning Weaving Mills Co. Ltd. 1 and similar cases reported as Commissioner of Income-tax, Bombay City v. Jalgaon Electric Supply Co. Ltd. 1 and Commissioner of Income-tax, Bombay City v. Khatau Makanji Spinning and Weaving Co. Ltd. 3 but the facts of those cases were different. In the first case there was numbertotal income and the 1 1960 40 I.T.R. 142. 2 1960 40 I.T.R. 184. 3 1960 40 I.T.A. 189. Finance Act was number applicable in that case. In the second there was numberprofit in any preceding year and therefore the fiction failed because it postulates that there should be undistributed profits of one or more years immediately preceding the previous year. In the third case also the Finance Act was inapplicable because the additional tax was number properly laid upon the total income and what was actually taxed was never a part of the total income of the previous year. In our opinion the order of the High Court was erroneous.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 35 of 1959. Appeal from the judgment and decree dated October 29, 1956, of the Allahabad High Court in Writ Petition No. 327 of 1956. N. Sanyal, Additional Solicitor-General of India, J. B. Dadachanji, S. N. Andley, Rameshwar Nath and P. L. Vohra, for the appellants. C. Mathur and C. P. Lal, for the respondents. 1960, December 13. The Judgment of Imam, Kapur, Das Gupta and Dayal, JJ. was delivered by Das Gupta, J. Ayyangar, J. delivered a separate judgment. DAS GUPTA, J.-This appeal is against an order of the High Court of Judicature at Allahabad rejecting the appellants application under Art. 226 of the Constitution. The first appellant is the Diamond Sugar Mills Ltd., a public limited companypany owning and operating a sugar factory at Pipraich in the District Gorakhpur, for the manufacture of sugar from sugarcane. The second appellant is the Director of the companypany. By this application the appellants challenged the imposition of cess on the entry of sugarcane into their factory. On February 24, 1956, when the application was made the U. P. Sugarcane Regulation of Supply and Purchase Act, 1953 U. P. XXIV of 1953 , was in force. Section 20 of this Act gave to the Governor of U. P. the power to impose by numberification a cess number exceeding 4 annas per maund on the entry of sugarcane into an area specified in such numberification for companysumption, use or sale therein. This Act it may be mentioned had taken the place of an earlier Act, the U. P. Sugar Factories Control Act, 1938, s. 29 of which authorised the Governor of U. P. to impose by a numberification after companysultation with the Sugar Control Board under the Act a cess number exceeding 10 per cent of the minimum price, if any, fixed under s. 21 or 4 annas per maund whichever was higher on the entry of sugarcane into a local area specified in such numberification for companysumption, use or sale therein. Notifications were issued under this provision for different crushing seasons starting from 1938- 39, the last numberification issued thereunder being for the crushing season of 1952-53. These numberifications set out a number of factories in a schedule and provided that during 1952-53 crushing season cess at a rate of three annas per maund shall be levied on the entry of all sugarcane into the local areas companyprised in factories mentioned in the schedule for companysumption, use or sale therein. Act No. XXIV of 1953 repealed the 1938 Act. The first numberification under the provisions of s. 20 of the 1953 Act was in these terms- In exercise of the powers companyferred by sub- section 1 of section 20 of Uttar Pradesh Sugarcane Regulation of Supply and Purchase Act, 1953 U. P. Act No. XXIV of 1953 the Governor is pleased to declare that during the 1954-55 crushing season, a cess at a rate of three annas per maund shall be levied on the entry of all sugar cane into the local areas companyprised in the factories mentioned in the Schedule, for the companysumption, use or sale therein. Similar numberifications were also issued on October 23, 1954, for the crushing season 1954-55 and on November 9, 1955, for the crushing season 1955-56. The appellants factory was one of the factories mentioned in the schedule of all these numberifications. On the date of the application, i.e., February 24, 1956, a sum. of Rs. 2,59,644-9-0 was due from the first appellant and a further sum of Rs. 2,41,416-3-0 as liability on account of cess up to the end of January, 1956, also remained unpaid. The appellant companytended on various grounds that s. 20 of Act XXIV of 1953 was unconstitutional and invalid and prayed for the issue of appropriate writs directing the respondents the State of U. P. and the Collector of Gorakhpur number to levy and companylect cess on account of the arrears of cess for the crushing season 1954-55 and in respect of the crushing season 1955-56 and successive crushing seasons and to withdraw the numberifications dated October 23, 1954, and November 9, 1955 , which have been mentioned above. During the pendency of this application under Art. 226 before the Allahabad High Court the U. P. Legislature enacted the U. P. Sugarcane Cess Act, 1956 U. P. XXII of 1956 , repealing the 1953 Act. Section 3 of this Act as originally enacted was in these words- The State Government may by numberification in the official gazette impose a cess number exceeding four annas per maund on the entry of the cane into the premises of a factory for use, companysumption or sale therein Provided that the State Government may like. wise remit in whole or in part such cess in respect of cane used or to be used in factory for any limited purpose specified in the numberification. Explanation-If the State Government, in the case of any factory situate outside Uttar Pradesh, so declare, any place in Uttar Pradesh set apart for the purchase of cane intended or required for use. companysumption or sale in such factory shall be deemed to be the premises of the factory. The cess imposed under sub-section 1 shall be payable by the owner of the factory and shall be paid on such date and at such place as may be prescribed. Any arrear of cess number paid on the date prescribed under sub-section 2 shall carry interest at 6 per cent. per annum from such date to date of payment. There is a later amendment by which the words four annas have been altered to twenty-five naye paise and the words Gur, Rab or Khandsari Sugar Manufacturing Unit have been added after the words factory in sub-section 1 . These amendments are however number relevant for the purpose of this appeal. Section 9 of this Act repealed s. 20 of the Sugar Cane Regulation of Supply and Purchase Act, 1953. Sub-sections 2 and 3 of s. 9 are important. They are in these words- Without prejudice to the general application of section 24 of the U.P. General Clauses Act, 1904, every numberification imposing cess issued and every assessment made including the amount of cess companylected under or in pursuance of any such numberification, shall be deemed a numberification issued, assess- ment made and cess companylected under this Act as if sections 2, 3 and 5 to 8 had been in force at all material dates. Subject as provided in clause 1 of Article 20 of the Constitution every numberification issued cess imposed and act or thing done or omitted between the 26th January, 1950, and the Appointed date in exercise or the purported exercise of a power under section 29 of the U. P. Sugar Factories Control Act, 1938, or of s. 20 of the U. P. Sugarcane Regulation of Supply and Purchase Act, 1953, which would have been validly and properly issued, imposed, done or omitted if the said sections had been as section 3 of this Act, shall in law be deemed to be and to have been validly and properly imposed and done, any judgment, decree or order, of any companyrt numberwithstanding. The position after the enactment of the U. P. Sugarcane Cess Act, 1956, was that the imposition and assessment of cess that had already been made under the 1953 Act would operate as if made under the 1956 Act. In view of this the first appellant, the Diamond Sugar Mills Ltd., prayed to the High Court for permission to raise the question of companystitutionality and validity of the 1956 Act. It also prayed for the issue of a writ in the nature of mandamus directing the respondents number to levy cess upon the petitioners-appellants under this new Act, the U. P. Sugarcane Cess Act, 1956. This application was allowed and the High Court companysidered the question whether s. 3 of the U. P. Sugarcane Cess Act, 1956, empowering the State Government to impose a cess number exceeding four annas per maund on the entry of the cane into the premises of a factory for the companysumption, use or sale therein was a valid law. The principal ground urged in support of the appellants case was that the law as enacted in s. 3 was invalid and that it was beyond the legislative companypetence of the State Legislature. Several other grounds including one that the provisions of the section went beyond the permissible limits of delegated legislation were also raised. All the grounds were negatived by the High Court which accordingly rejected the appellants petition. The High Court however gave a certificate under Article 132 1 and also under Art. 133 1 c of the Constitution and on the basis of that certificate the present appeal has been filed. Of the several grounds urged before the High Court only two are urged before us in appeal. One is that the law was invalid, being beyond the legislative companypetence of the State legislature the other is that in any case the provision giving the Governor power to levy any cess number exceeding 4 annas without providing for any guidance as to the fixation of the particular rate, amounted to excessive delegation, and was accordingly invalid. The answer to the question whether the impugned law was within or beyond the legislative companypetence of the State legislature depends on whether the law falls under Entry 52 of the State List- List II of the Seventh Schedule to the Constitution. It is quite clear that there is numberother entry in either the State List or the Concurrent List under which the legislation companyld have been made. Entry 52 is in these words-Tax on the entry of goods into a local area for companysumption, use or sale therein. Section 3 of the impugned Act which has already been set out provides for imposition of a cess on the entry of sugarcane into the premises of a factory for use, companysumption or sale therein. Is the premises of a factory a local area within the meaning of the words used in Entry 52? If it is the legislation was clearly within the companypetence of the State legislature if it is number, the law was beyond the State legislatures companypetence and must be struck down as invalid. In companysidering the meaning of the words local area in entry 52 we have, on the one hand to bear in mind the salutary rule that words companyferring the right of legislation should be interpreted liberally and the powers companyferred should be given the widest amplitude on the other hand we have to guard ourselves against extending the meaning of the words beyond their reasonable companynotation, in. an anxiety to preserve the power of the legislature. In Re the Central Provinces Berar Act No. XI V of 1938 1 Sir Maurice Gwyer, C. J., observed- I companyceive that a broad and liberal spirit should inspire those whose duty it is to interpret it but I do number imply by this that they are free to stretch or pervert the language of the enactment in the interests of any legal or companystitutional theory, or even for the purpose of companyrecting any supposed errors. Again, in Navinchandra Mafatlal v. The Commissioner of Income Tax, Bombay City 2 Das, J. as he then was delivering the judgment of this Court observed- The cardinal rule of interpretation however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in companystruing words in a companystitutional enactment companyferring legislative power the most 1 1939 F.C.R. 18, 37. 2 1955 1 S.C.R. 829. liberal companystruction should be put upon the words so that the same may have effect in their widest amplitude. Our task being to ascertain the limits of the powers granted by the Constitution, we cannot extend these limits by way of interpretation. But if there is any difficulty in ascertaining the limits, the difficulty must be resolved so far as possible in favour of the legislative body. The presumption in favour of companystitutionality which was stressed by the learned companynsel for the respondents does number take us beyond this. On behalf of the appellants it has been urged that the word local area in its ordinary grammatical meaning is never used in respect of a single house or a single factory or a single plot of land. It is urged that in ordinary use the words local area always mean an area companyering a specified region of the companyntry as distinguished from the general area. While it may number be possible to say that the words local area have acquired a definite and precise meaning and the phrase may have different companynotations in different companytexts, it seems companyrect to say that it is seldom, if ever, used to denote a single house or a single factory. The phrase appears in several statutes, some passed by the Central Legislature and some by the Provincial or State Legislatures but in many of these the words have been defined. These definitions being for the peculiar purpose of the particular statute cannot be applied to the interpretation of the words local area as used in the Constitution. Nor can we derive any assistance from the judicial interpretation of the words local area as used in the Code of Criminal Procedure or other Acts like Bengal Tenancy Act as these interpretations were made with reference to the scope of the legislation in which the phrase occurs. Researches into dictionaries and law lexicons are also of numberavail as numbere of these give the meaning of the phrase local area. What they say as regards the meaning of the word local offers numberguidance except that it is clear that the word local has different meanings in different companytexts. The etymological meaning of the word local is relating to or pertaining to a place. It may be first observed that whether or number the whole of the State can be a local area, for the purpose of Entry 52, it is clear that to be a local area for this purpose must be an area within the State. On behalf of the respondents it is argued that local area in Entry 52 should therefore be taken to mean any part of the State in any place therein. So, the argument runs, a single factory being a part of the State in a place in the State is a local area. In other words, local area mean any specified area inside the State. The obvious fallacy of this argument is that it draws numberdistinction between the word area standing by itself and the phrase local area. If the Entry had been entry of goods into any area of the State some area would be specified for the purpose of the law levying the cess on entry. If the Constitutions were empowering the State Legislatures to levy a cess on entry of goods into any specified area inside the state the proper words to use would have been entry of goods into any area it would be meaningless and indeed incorrect to use the words they did use entry of goods into a local area. The use of the words local area instead of the word area cannot but be due to the intention of the Constitution- makers to make sure that the power to make laws relating to levy on entry of goods would number extend to cases of entry of goods into any and every part of the state from outside that part but only to entry from outside into such portions of the state as satisfied the description of local area. Something definite was sought to be expressed by the use of the word local before the word area The question is what exactly was sought to be expressed? In finding an answer to the question it is legitimate to turn to the previous history of companystitutional legislation in the companyntry on this subject of giving power to legislature to levy tax on the entry of goods. In the State of Madras v. Gannon Dunkerley Co., Ltd. 1 1 1959 S.C.R. 379. this Court referred with approval to the statement of law in Halsburys Laws of England, Vol. II, para. 157, p. 93, that the existing state of English law in 1867 is relevant for companysideration in determining the meaning of the terms used in the British North America Act in companyferring power and the extent of that power. This has necessarily to be so as in the words of Mr. Justice Brewer in South Carolina v. United States 1 to determine the extent of the grants of power, we must, therefore place ourselves in the position of the men who framed and adopted the Constitution, and inquire what they must have understood to be the meaning and scope of those grants. Turning number to the previous legislative history we find that in the Government of India Act, 1935, Entry 49 of the Legislative List List II of the 7th Schedule was in the same words as Entry 52 of the Constitution except that instead of the words taxes as in Entry 52 of List II of the Constitution, Entry 49 List II of the Government of India Act, used the word cess. In Government of India Act, 1915, the powers of the provincial legislatures were defined in s. 80A. Under clause a of the third sub- section of this section the local legislature of any province has with the previous sanction of the Governor- General power to make or take into companysideration any law imposing or authorising the imposition of any new tax unless the tax was a tax scheduled as exempted from this provision by rules made under the Act. The third of the Rules that were made in this matter under Notification No. 311/8 dated December 18, 1920, provided that the legislative companyncil of a province may without the previous sanction of the Governor-General make and take into companysideration any law imposing or authorising a local authority to impose for the purpose of such local authority any tax included in Schedule II of the Rules. Schedule II companytained 11 items of which items 7 and 8 were in these words- An octroi A terminal tax on goods imported into a local 1 1905 199 U.S. 437. area in which an octroi was levied on or before 6th July, 1917. Item 8 was slightly modified in the year 1924 by another numberification as a result of which it stood thus 8. A terminal tax on goods imported into or exported from a local area save where such tax is first imposed in a local area in which an octroi was levied on or before July 6, 1917. Octroi is an old and well known term describing a tax on the entry of goods into a town or a city or a similar area for companysumption, sale or use therein. According to the Encyclopedia Britannica octroi is an indirect or companysumption tax levied by a local political unit, numbermally the companymune or municipal authority, on certain categories of goods on their entry into its area. The Encyclopedia Britannica describes the octroi tax system in France abolished in 1949 and states that companymodities were prescribed by law and were divided into six classes and for all the separate companymodities within these six groups maximum rates of tariff were promulgated by presidential decree, specific rates being fixed for the three separate sorts of octroi area, established on the basis of population, namely, companymunes having 1 less than 10,000 inhabitants, 2 from 10,000 to 50,000 and 3 more than 50,000. While we are number companycerned here with other features of the octroi tax system, it is important to numbere that the tax was with regard to the entry of goods into the areas of the companymunes which were local political units. According to the Shorter Oxford English Dictionary companymune in France is a small territorial division governed by a maire and municipal companyncil and is used to denote any similar division elsewhere. The characteristic feature of an octroi tax then was that it was on the entry of goods into an area administered by a local body. Bearing in mind this characteristic of octroi duty we find on an examination of items 7 and 8 of the Schedule Rules mentioned above that under the Government of India Act, 1919, the local legislature of a Province companyld without the previous sanction of the Governor-General impose tax-octroi--for entry of goods into an area administered by a local body, that is, a local government authority and the area in respect of which such tax companyld be imposed was mentioned in item 8 as local area. It is in the background of this history that we have to examine the use of the word local area in item 49 of List II of the Government of India Act, 1935. Here the word octroi has given place to the longer phrase cesses on the entry of goods into a local area for companysumption, use or sale therein. It was with the knowledge of the previous history of the legislation that the Constitution-makers set about their task in preparing the lists in the seventh schedule. There can bring title doubt therefore that in using the words tax on the entry of goods into a local area for companysumption, use or sale therein, they wanted to express by the words local area primarily area in respect of which an octroi was leviable under item 7 of the schedule tax rules, 1920-that is, the area administered by a local authority such as a municipality, a district Board, a local Board or a Union Board, a Panchayat or some body companystituted under the law for the governance of the local affairs of any part of the State. Whether the entire area of the State, as an area administered by the State Government, was also intended to be included in the phrase local area, we need number companysider in the present case. The only other part of the Constitution where the word local area appears is in Art. 277. That Article is in these words- Any taxes, duties, cesses or fees which, immediately before the companymencement of this Constitution, were being lawfully levied by the Government of any State or by any municipality or other local authority or body for the purposes of the State, municipality, district, or other local area may, numberwithstanding that these taxes, duties, cesses or fees are mentioned in the Union List, companytinue to be levied and to be applied to the same purposes until provision to the companytrary is made by Parliament by law. There can be little doubt that local area in this Article has been used to indicate an area in respect of which there is an authority administering it. While the scope of Article 277 is different from the scope of entry 52 so that numberdirect assistance can be obtained in the interpretation of the words local area in entry 52 from this meaning of the words in Art. 277 it is satisfactory to find that the meaning of local area in entry 52 which appears reasonable on a companysideration of the legislative history of the matter is also appropriate to this phrase in its only other use in the Constitution. Reliance was sought to be placed by the respondents on a decision of the Allahabad High Court in Emperor v. Munnalal 1 where the word local area as used in s. 29 of the U. Sugar Factories Control Act, 1938, fell to be companysidered. That section, as we have already mentioned, authorised the Governor of U. P. to impose by a numberification, after companysulting the Sugar Control Board under the Act, a cess on the entry of sugarcane into a local area specified in such numberification for companysumption, use or sale therein. The numberifications which were issued under this provision set out a number of factories for the levy of a cess at the rate of three annas per maund on entry of all sugarcane into the local area companyprised in the factories mentioned in the schedule for companysumption, use or sale therein. Section 29 was clearly within the words of entry 49 of List 11. The question that arose before the Court was whether the specification of certain factories as local areas was valid law. The learned Judge appears to have proceeded on the basis that the Governor had numberified the area companyprised in 74 factories as one local area and held that once this was done the entire area companyered by all these factories should be companysidered as one statutory local area. It appears to us that the learned Judge was number right in thinking that the area companyprised in 74 factories was numberified as one local area. What appears to have been done was that the area of each factory was being numberified as a local area for the purpose of the Act. Proceeding on I.L.R. 1942 All. 302. the basis that the area companyprised in the 74 factories was numberified as one local area the learned Judge addressed himself to the question whether this entire area was a local area within the meaning of the Act. He appears to have accepted the companytention that the word local area was used in the sense of an administrative unit, but, says he, the administration need number be political, it may be industrial and educational or it may take any other form of governmental activity. I cannot see, the learned Judge observed, why it is number open to the provincial government or the provincial legislature to make an industrial survey of the province and to divide up the entire province into industrial areas or factory areas or mill areas or in any other kind of areas, and each one of these areas may be numberified and be treated as a local area. And once such areas companye into existence and remain in operation they can be regarded as local areas within the meaning of entry No. 49 of List II in which a cess may be levied. Even if this view were companyrect it would be of numberassistance to the respondents. It is numberauthority for the proposition that the area of one single factory is a local area within the meaning of entry 49. We think however that the view taken by the learned Judge is number companyrect. It is true that when words and phrases previously interpreted by the companyrts are used by the Legislature in a later enactment replacing the previous statute, there is a presumption that the Legislature intended to companyvey by their use the same meaning which the companyrts had already given to them. This presumption can however only be used as an aid to the interpretation of the later Statute and should number be companysidered to be companyclusive. As Mr. Justice Frankfurter observed in Federal Commissioner v. Columbia B. System 1 when companysidering this doctrine, the persuasion that lies behind the doctrine is merely one factor in the total effort to give fair meaning to language. The presumption will be strong where the words of the previous statute have received a settled meaning by a 1 311 U.S. 131. series of decisions in the different companyrts of the companyntry and particularly strong when such interpretation has been made or affirmed by the highest companyrt in the land. We think it reasonable to say however that the presumption will naturally be much weaker when the interpretation was given in one solitary case and was number tested in appeal. After giving careful companysideration to the view taken by the learned Judge of the Allahabad High Court in Emperor v. Munnalal supra about the meaning of the words local area and proper weight to the rule of interpretation mentioned above, we are of opinion that the Constitution-makers did number use the words local area in the meaning which the learned Judge attached to it. We are of opinion that the proper meaning to be attached to the words local area in Entry 52 of the Constitution, when the area is a part of the State imposing the law is an area administered by a local body like a municipality, a district board, a local board, a union board, a Panchayat or the like. The premises of a factory is therefore number a local area. It must therefore be held that s. 3 of the U. P. Sugarcane Cess Act, 1956, empowering the Governor to impose a cess on the entry of sugarcane into the premises of a factory did number fall within Entry 52 of the State List. As there is numberother Entry in either State List or Concurrent List in which the impugned law companyld fall there is numberescape from the companyclusion that this law was beyond the legislative companypetence of the State Legislature. The law as enacted in s. 3 of the U. P. Sugarcane Cess Act, 1956, must therefore be struck down as invalid. It may be mentioned that this is number a case where the law is in two parts and one part can be severed from the other and saved as valid while striking down the other portion which is invalid. Indeed, that was number even suggested by the learned companynsel for the respondents. It is unnecessary for us to companysider whether if s. 3 had instead of authorising levy of cess for entry of sugarcane into the premises of a factory for use, companysumption or sale therein had authorised the imposition of a cess on entry of cane into a local area for companysumption, sale or use in a factory that would have been within Entry 52. It is sufficient to say that we cannot re- write the law for the purpose of saving a portion of it. Nor is it for the Court to offer any suggestion as to how the law should be drafted in order to keep it within the limits of legislative companypetence. As the law enacted by the Legislature stands there is numberescape from the companyclusion that this entire law must be struck down as invalid. In view of this companyclusion on the first ground raised on behalf of the appellant it is unnecessary to companysider the other ground raised in the appeal that section 3 has gone beyond the permissible limits of delegated legislation. As we have held that the impugned legislation was beyond the legislative companypetence of the State Legislature the appellants are entitled to the relief asked for. We accordingly allow the appeal, set aside the order passed by the High Court and order the issue of a writ directing that the respondents do forbear from levying and companylecting cess from the appellants on account of arrears of cess for the crushing season 1954-55 and in respect of the crushing season 1955-56 and successive crushing seasons under the U. Sugarcane Cess Act, 1956. The appellants will get their companyts here and below. AYYANGAR, J.-I have had the privilege of perusing the judgment just number pronounced, but with the utmost respect regret my inability to agree with the order proposed. The learned Judges of the High Court held that the impugned enactment was within the scope of Entry 52 of the State Legislative List in Schedule 7 to the Constitution, by placing reliance on the following passage in the Judgment of Das, J. in Emperor v. Munna Lal 1 where the learned Judge said Indeed I cannot see why it is number open to Provincial Government or Provincial Legislature to make an industrial survey of the Province and to divide up the entire province into industrial areas I.L.R. 1942 All. 302, 328. or factory areas or mill areas or in any other kind of areas, and each one of these areas may be numberified and be treated as a local area. And once such areas companye into existence and remain in operation they can be regarded as local areas within the meaning of Entry No. 45 of List II in which a cess may be levied. In other words, the view which they favoured was to read the expression local area. practically to mean any area entry into which was by the relevant fiscal statute, made the subject of taxation. In my opinion that is number a companyrect interpretation of the entry and agree with my learned brethren that having regard to the historical material, which has been exhaustively set out and discussed in their judgment, the word local area can in the entry designate only a predetermined local unit--a unit demarcated by statutes pertaining to local self government and placed under the companytrol and administration of a local authority such as a municipality, a cantonment, a district or a local board, an union or a panchayat etc. and number any region, place or building within the State which might be defined, described or demarcated by the States taxing enactment as an area entry into which is made taxable. But there my agreement stops and we diverge. In my opinion, this companystruction of the expression local area in entry 52 does number automatically result in the invalidity of the impugned enactment and of the levy under it, but the extent to which, if any the charging section exceeds the power companyferred by the entry would depend on matters which have number been the subject of investigation, and it is this point that I shall elaborate in the rest of this judgment. It is unnecessary for the purposes of this case and possibly even irrelevant, to determine the precise scope, companytent and incidents of an octroi duty except that in the companytext in which it appeared in the Scheduled Taxes Rules framed tinder the Government of India Act, 1919, the expression signified a tax levied on entry into an area of an unit of local administration. It is unprofitable to canvass the question whether a local authority empowered at that date to levy an octroi might or might number lawfully companyfine the levy to entry for companysumption alone, to use alone or for sale alone. But when that entry was refashioned and enacted as item 49 of the Provincial Legislative List under the Government of India Act, 1935 in terms practically identical with Entry 52 in the State Legislative List under the Constitution , the matter was numberlonger left in doubt. The new item ran Cesses on the entry of goods into a local area for companysumption, use or sale therein. In companynection with the use of the words for companysumption, use or sale therein in the item three matters deserve numberice 1 Where the entry into the local area was number for one of the purposes set out in it, viz., for companysumption, use or sale therein, but the entry was, for instance in the companyrse of transit or for warehousing during transit, the power was number available in other words, a mere entry companyld number per se be made a taxable event. 2 It was sufficient if the entry was for any one of the three purposes the use of the disjunctive or making this clear. The passage of goods from one portion of a local area to another portion in the same local area, would number enable a tax to be levied, but the entry has to be into the local area, i.e., from outside the local area. It is the second and the third of the above features that call for a more detailed examination in the companytext of the points requiring decision in the present case. With this background I shall analyse the terms of s. 3 1 of the Act United Provinces Act XXII of 1956 to ascertain where precisely the provision departs from the scope or companytent of entry 52. I will read that section which runs 3. 1 . The State Government may by numberification in the official gazette impose a cess number exceeding four annas per maund on the entry of the cane into the premises of a factory for use, companysumption or sale therein Provided that the State Government may likewise remit in whole or in part such cess in respect of cane used or to be used in factory for any limited purpose specified in the numberification. Explanation-If the State Government, in the case of any factory situate outside Uttar Pradesh, so declare, any place in Uttar Pradesh set apart for the purchase of cane intended or required for use, companysumption or sale in such factory shall be deemed to be the premises of the factory. Leaving the Explanation for-the present, there are two matters which require advertence 1 The first was the point emphasised by Mr. Sanyal for the appellant, that entry into the premises of a factory for the purpose of companysumption, use or sale therein is fastened on as the taxable event treating the factory premises as if that were itself a local area. 2 Apart from entry into factory premises for use, companysumption or sale therein, entry of the cane into other places within the local area, i.e., into unit for local administration is number made the subject of tax levy. The second of the above matters cannot invalidate the legislation, because a power to tax is merely enabling, and apart from any question of discrimination under Art. 14--which does number arise for companysideration before us-the State is number bound to tax every entry of goods into a local area. Again, the tax companyld undoubtedly be companyfined to entry of goods into a local area for companysumption or use in particular modes in other words, there companyld be numberlegal objection to the tax levy on the ground that it does number extend to entry of goods into a local area for every type of companysumption or use. In my judgment the real vice of the charging s. 3 1 lies number in that it Confines the levy to cases where the entry is for purposes of companysumption etc. in a factory but in equating the premises of a factory with a local area entry of goods into which, occasions the tax. Another way of expressing this same idea would be to say that whereas under Entry 52 the movement of goods from within the same local. area in which the factory is situated into the premises of the factory, companyld number be the subject of tax liability, because there would in such cases be numberentry of the goods into a local area under s. 3 1 of the Act, number merely is the movement of goods into the factory from outside the local area in which the factory is situate made the subject of tax, but the words used are capable of imposing the tax even in those cases where the entry into the factory is from within the same local area. What I have in mind may be thus illustrated If factory A situated in Panchayat area B gets its supply of cane from outside the Panchayat area, the levy of the tax on the entry of the cane into the Panchayat area would clearly be companyered by entry 52. The State is number bound to tax every entry of the cane into the area but might companyfine the levy to the entry of the cane for the purpose of companysumption in a factory. The tax might be levied and companylected at the border of the Panchayat area but there is numberlegal obligation to do so, and the place at which the entry of the goods is checked and the duty realised is a matter of administrative machinery which does number touch on the validity of the tax imposition. It would thus number detract from the validity of the tax if by reason of companyvenience for effecting companylection, the tax was levied at the stage of entry into the premises of a factory. So long, therefore, as the cane which enters a factory for the purpose of companysumption therein companyes from outside that local unit of administration in which the factory is situated, in my opinion it would be companyered by the words of entry 52 and well within the legislative companypetence of the State Government. The language of s. 3, as it stands appears, however, also to extend to cases where the supply of cane to a factory is from within the same local unit of administration in other words, where there is numberentry of the cane into the local area as explained earlier. If this were the true position, the enactment cannot be invalidated as a whole. It would be valid to the extent to which the tax is levied on cane entering a factory for the purpose of companysumption etc. therein from outside the local area, within which the factory premises are situated, and only invalid where it out steps this limitation. The next question is whether this is a case where the valid and invalid portions are so inextricably interwoven as to leave the Court numberoption but to strike down the entire enactment as invalid as beyond the legislative companypetence of the State, or whether the charging provision companyld be so read down as to leave the valid portion to operate. In my opinion, what is involved in the case before us is number any problem of severance, but only of reading down. Before taking up this question for discussion two objections to the latter companyrse have to be companysidered. The first is that this aspect of the matter was number argued before us by learned Counsel for the State as a ground for sustaining the validity of the legislation. In my judgment this is number an objection that should stand in the way of the Court giving effect to a view of the law if that should appear to be the companyrect one. In making this observation one has necessarily to take into account the fact that legislation in nearly this form, has been in force in the State for over twenty years, and though its vires was once questioned in 1942, that challenge was repelled and the tax levy was held valid and was being companylected during all this period. The sugar- cane cess has been a prime source of State Revenue for this length of time and this Court should number pronounce such a legislation invalid unless it companyld number be sustained on any reasonable ground and to any extent. The second ground of objection which has appealed to my learned brethren but with which, I regret, I cannot companycur is that it would require a rewriting of the- Act to sustain it. Now if the first paragraph of sub-s. 1 of s. 3 bad read The State Government may by numberification in the official gazette impose a cess number exceeding four annas per maund on the entry of the cane into the premises of a factory from outside the local area in which the factory premises were situate for use, companysumption or sale therein The words in brackets added by me the levy would be entirely within entry 52 even according to my learned brethren. The question is whether the implication of these words would be a rewriting of the provision or whether it would be merely reading the existing provision so as to companyfine it to the powers companyferred upon the State Legislature by the relevant legislative entry. In view of the strong opinion entertained by my learned brethren, I have given the matter the utmost companysideration, but I feel that the words which I have suggested are a permissible mode of companystruction of a statute by which wide words of an enactment which would companyer an event, companytingency or matter within legislative power as well as matters number within it, are read as companyfined to those which the law making only had authority to enact. In my judgment the opinion of the Federal Court in In re Hindu Womens Rights to Property Act, 1937 1 , affords a useful analogy to the present case. The enactment there impugned provided for the devolution or succession to property in general terms which would have included both agricultural as well as numberagricultural property, whereas the Central Legislature which enacted the law had numberpower to deal with succession to agricultural property. The companytention urged before the Court was that by the use of the expression property, the legislature had evinced an intention to deal with property of every type and that it would be rewriting the enactment and number carrying out the legislative intent if the reference to property in the statute were read as property other than agricultural property. Dealing with this companytention, Sir Maurice Gwyer, delivering the opinion of the Court said No doubt if the Act does affect agricultural land in the Governors Provinces, it was beyond the companypetence of the Legislature to enact it and whether or number it does so must depend upon the meaning which is to be given to the word property in the Act. If that word necessarily and inevitably companyprises all forms of property, including agricultural land, then clearly the Act went beyond the powers 1 1941 F.C.R. 12. of the Legislature but when a Legislature with limited and restricted powers makes use of a word of such wide and general import, the presumption must surely be that it is using it with reference to that kind of property with respect to which it is companypetent to legislate and to numberother. The question is thus one of companystruction, and unless the Act is to be regarded as wholly meaningless and ineffec- tive, the Court is bound to companystrue the word property as referring only to those forms of property with respect to which the Legislature which enacted the Act was companypetent to legislate that is to say, property other than agricultural land The Court does number seek to divide the Act into two parts, viz., the part which the Legislature was companypetent, and the part it was incompetent, to enact. It holds that, on the true companystruction of the Act and especially of the word property as used in it, numberpart of the Act was beyond the Legislatures powers. The Court accordingly held that the Hindu Womens Rights to Property Act, 1937, applied to number-agricultural property and so was valid. In this companynection it might be interesting to refer to the decision in Blackwood v. Queen 1 which Sir Maurice Gwyer, C.J., referred to with approval. That case related to the validity of a duty imposed by the Legislature of Victoria Australia on the personal estates of deceased person. The learned Chief Justice observed The Judicial Committee companystrued the expression personal estate occurring in the statute to refer only to such personal estate as the companyonial grant of probate companyferred jurisdiction on the personal representatives to administer, whatever the domicile of the testator might be, that is to say, personal estate situate within the Colony, in respect of which alone the Supreme Court of Victoria had power to grant probate Their Lordships thought that in imposing a duty of this nature the Victorian Legislature also was companytemplating the property which was under its own hand, and did number intend to levy a tax in respect of property 1 1882 8 A.C. 82. beyond its jurisdiction. And they held that the general expressions which import the companytrary ought to receive the qualification for which the appellant companytends, and that the statement of personal property to be made by the executor under s. 7 2 of the Act should be companyfined to that property which the probate enables him to administer 1 . To companyfine the tax to the limitations subject to which it companyld, under the Constitution, be levied is, in my opinion, number an improper method of companystruing the statute. The manner in which the word property was read down by the Federal Court in In re Hindu Womens Rights to Property Act, 1937 1 and the word personal property companystrued by the Privy Council in Blackwood v. Queen 2 make in my opinion less change in the text of the impugned provision than the addition of the words I have set out above, which after all are words implicit in the power companyferred on the State Legislature. I would, therefore, hold that the charging section would be invalid and beyond the legislative companypetence of the State of Uttar Pradesh only in so far as it seeks to levy a tax on cane entering a factory from within the same local area in which the factory is situate and that in all other cases the tax is properly levied and that the impugned section companyld and ought to be so read down. The matter number having been companysidered from this aspect at earlier stages, we have necessarily numbermaterial before us for adjudicating upon whether tax levied or demanded from the appellant is due and if so to what extent. We have numberhing before us to indicate as to how far the cane, the entry of which into the factory of the appellant is the subject of the impugned levy, has moved into the factory from outside the local unit in which the factory is situated or originated from within the same local area. I companysider that without these matters being investigated it would number be possible to adjudicate upon the validity of the tax demanded from the appellants. There is one matter to which it is necessary to Per Sir Maurice Gwyer, C. J. 1941 F.C.R. 12, 23, 2 1882 8 A.C. 82. advert which I have reserved for later companysideration, viz., the validity of the Explanation to s. 3 1 of the Act. It would be apparent that the Explanation was necessitated by the terms of sub-s. 1 of s. 3 which equated factory premises with local areas, or rather rendering factory premises the sole local areas entry into which occasioned the tax. So far as the purchasing centres which are dealt with in the Explanation are companycerned, the cane that moves into them from outside the local area where these centres are would clearly be companyered by Entry 52, since the purpose of the movement into the centre is on the terms of the provision for effecting a sale therein. In other words, the same tests which I have discussed earlier in relation to entry into factory premises, would apply mutates mutandis to these purchasing centres and in so far as a tax is levied on the movement of the cane from outside the local area the levy would be legal and in order. I would read down the Explanation in the same manner, as I have read down the main charging provision so as to companyfine the levy to entry from outside that local area-local area being understood in the sense already explained. I would accordingly allow the appeal, and remand it to the High Court for investigating the material facts which I have mentioned earlier with a direction to pass judgment in accordance with the law as above explained. BY COURT. In accordance with the opinion of the majority the appeal is allowed, the order passed by the High Court is set aside and a writ be issued directing that the respondents do forbear from levying and companylecting cess from the appellants on account of arrears of cess for the crushing season 1954-55 and successive crushing seasons under the Uttar Pradesh Sugarcane Cess Act, 1956.

Case appeal was accepted by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 169 of 1959. Appeal by special leave from the judgment and order dated March 27, 1958, of the Allahabad High Court in Criminal Appeal No. 785 of 1955. Nuruddin Ahmad and Naunit Lal, for the appellant. C. Mathur and C. P. Lal, for the respondent. 1960. December 7. The Judgment of the Court was delivered by K. DAS, J.-This is an appeal by special leave from the judgment and order of the High Court of Judicature at Allahabad dated March 27, 1958, whereby the said High Court maintained the companyviction of the appellant under s. 5 2 of the Prevention of Corruption Act, 1947 2 of 1947 but reduced the sentence of four years rigorous imprisonment passed on the appellant by the Special Judge, Kanpur, to two years rigorous imprisonment. The short facts are these. The appellant Surajpal Singh was employed in the Police Department of the Uttar Pradesh Government. He started his service as a companystable on a salary of Rs. 13 per month from August 1, 1930. In 1946 his pay was increased to Rs. 46 per month. He was appointed a Head companystable on a salary of Rs. 50 per month in 1947. He officiated as a Sub-Inspector of Police sometime in 1948 and 1949 on a salary of Rs. 150 per month. On March 1, 1949, he was reverted to his post of Head companystable. Between the dates February 27, 1951, and September 9, 1952, he was posted as a Head companystable attached to the Sadar Malkhana, Kanpur. The charge against him was that in that capacity he dishonestly or fraudulently misappropriated or otherwise companyverted to his own use many articles, principally those seized in companynection with excise offences kept in deposit in the said Malkhana. These articles included opium, bottles of liquor etc. The charge further stated that a sum of Rs. 9,284-1-0 was recovered on a search of his house on September 9 and 10, 1952 and this amount was disproportionate to the known sources of income of the appellant. There was an allegation by the prosecution that the acts of dishonest misappropriation etc. were companymitted by the appellant in companyspiracy with two other persons called Bhagawat Singh and Gulab Singh. Therefore, the charges against the appellant were 1 for the offence of companyspiracy under s. 120B of the Indian Penal Code 2 for the offence under s. 5 1 c of the Prevention of Corruption Act, 1947, for the acts of dishonest misappropriation or user, read with s. 5 2 of the said Act and 3 for an offence under s. 465 of the Indian Penal Code in respect of a particular entry said to have been forged in the Register of Properties kept in the Sadar Malkhana. The learned Special Judge who tried the appellant Bhagawat Singh and Gulab Singh recorded an order of acquittal in respect of the latter two persons. As to the appellant, he was also acquitted of all the charges except the charge under s. 5 2 of the Prevention of Corruption Act. On this charge the learned Special Judge recorded an order of companyviction, but this was based on the sole ground that the appellant had failed to account satisfactorily for the possession of Rs. 9,284-1-0 which, according to the finding of the learned Special Judge, was disproportionate to the known sources of income of the appellant. It should be numbered here that the learned Special Judge held the appellant number guilty of the various acts of dishonest misappropriation or user alleged against him in respect of the properties kept in the Sadar Malkhana. In his appeal to the High Court the appellant urged various grounds, one of which was that he companyld number be companyvicted on the rule of presumption laid down in sub-s. 3 of s. 5 of the Prevention of Corruption Act, 1947, when on the only charge of criminal misconduct alleged under s. 5 1 c of the said Act he had been found number guilty. The High Court repelled this companytention and upheld the companyviction of the appellant but reduced the sentence. The principal question before us is whether in the circumstances of this case, the companyviction of the appellant on the charge under sub-s. 2 of s. 5 of the Prevention of Corruption Act, 1947, by invoking the rule of presumption as laid down in sub-s. 3 of that section, is companyrect. It is companyvenient to read here s. 5 of the Prevention of Corruption Act, 1947, in so far as it is relevant for our purpose. S. 5 1 A public servant is said to companymit the offence of criminal misconduct in the discharge of his duty- a if he habitually accepts or obtains or agrees to accept or attempts to obtain from any person for himself or for any other person any gratification other than legal remuneration as a motive or reward such as is mentioned in section 161 of the Indian Penal Code, or b if he habitually accepts or obtains or agrees to accept or attempts to obtain for himself or for any other person, any valuable thing without companysideration or for a companysideration which he knows to be inadequate, from any person whom he knows to have been, or to be, or to be likely to be companycerned in any proceeding or business transacted or about to be transacted by him, or having any companynection with the official functions of himself or of any public servant to whom he is subordinate, or from any person whom he knows to be interested in or related to the person so companycerned, or c if he dishonestly or fraudulently misappropriated or otherwise companyverts for his own use any property entrusted to him or under his companytrol as a public servant or allows any other person so to do, or d if he, by companyrupt or illegal means or by otherwise abusing his position as public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage. Any public servant who companymits criminal misconduct in the discharge of his duty shall be punishable with imprisonment for a term which shall number be less than one year but which may extend to seven years and shall also be liable to fine Provided that the Court may, for any special reasons recorded in writing impose a sentence of imprisonment of less than one year. 2A In any trial of an offence punishable under sub-section 2 the fact that the accused person or any other person on his behalf is in possession, for which the accused person cannot satisfactorily account, of pecuniary resources or property disproportionate to his known sources of income may be proved, and on such proof the companyrt shall presume, unless the companytrary is proved, that the accused person is guilty of criminal misconduct in the discharge of his official duty and his companyviction therefor shall number be invalid by reason only that it is based solely on such pre- sumption. Now, learned Counsel for the appellant has put his argument on the principal question in the following way he has submitted that the is number in a position in an appeal by special leave to go behind the finding of fact arrived at by the companyrts below. The appellant, it appears, gave some explanation with regard to the possession of Rs. 9,284-1-0. That explanation was number, however, accepted by the companyrts below. Learned Counsel has submitted that he does number wish to go behind that finding of fact. He has submitted, how- ever, that the scheme of s. 5 of the Prevention of Corruption Act, 1947 is this sub-s. 1 defines the offence of criminal misconduct in the discharge of his duties by a public servant the offence can be one or more of four categories mentioned in cls. a , b , c and d sub-s. 2 is the penal section which states the punishment for the offence of criminal misconduct and sub-s. 3 lays down a rule of presumption and states that numberconviction for the offence shall be invalid by reason only that it is based solely on such presumption. Learned Counsel has pointed out, rightly in our opinion, that the charge against the appellant in the present case referred only to criminal misconduct in the discharge of his duty by a public servant of the nature mentioned in cl. c of sub-s. 1 . In other words, the charge against the appellant was that he had dishonestly or fraudulently misappropriated or otherwise companyverted for his own use property entrusted to him etc. It was open to the learned Special Judge to have companyvicted the appellant of that offence by invoking the rule of presumption laid down in sub-s. 3 . He did number, however, do so. On the companytrary, he acquitted the appellant on that charge. Therefore, learned Counsel has submitted that by calling in aid the rule of presumption laid down in sub-s. 3 , the appellant companyld number be found guilty of any other type of criminal misconduct referred to in cls. a , b or d of sub-s. 1 in respect of which there was numbercharge against the appellant. We companysider that the above argument of learned Counsel for the appellant is companyrect and must be, accepted. This Court pointed out in C. S. D. Swamy v. The State 1 that sub-s. 3 of s. 5 of the Prevention of Corruption Act, 1947 does number create a new offence but only lays down a rule of evidence which empowers the Court to presume the guilt of the accused in certain circumstances, companytrary to the well known principle of Criminal law that the burden of proof is always on the prosecution and never shifts on to the accused person. In Swamys case there were charges for the offence of criminal misconduct under two heads, cl. a and cl. d . The trial companyrt held the accused person in that case number guilty of the offence under cl. a but guilty of the offence under cl. d by invoking the rule of presumption laid down in sub-s. 3 of s. 5. The distinction between that case and the case under our companysideration is this in Swamys case there were two charges either of which companyld be founded on the rule of presumption laid down in sub-s. 3 but in our case there is only one charge of criminal misconduct of which the appellant has been acquitted therefore, there is numberother charge which can be founded on the rule of presumption referred to in sub-s. 3 . This is the difficulty with which the respondent is faced in the present case. It appears to us that the learned Special Judge and the High Court proceeded wrongly on the footing as though sub-s. 2 or sub-s. 3 of s. 5 of the Act creates an offence. The offence which is punished under sub-s. 2 or can be founded on the rule of presumption laid down in sub-s. 3 must be the offence of criminal misconduct of one or more of the categories mentioned in cls. a to d of sub-s. 1 . In the case before us the only category which was alleged against the appellant was that of category c , 1 1960 1 S.C.R. 461. namely, dishonest or fraudulent misappropriation etc. That charge having failed, there was numberother charge which companyld be founded on the rule of presumption laid down in sub-s. 3 . Learned Counsel for the respondent State has companytended before us that it was open to the appellate Court to affirm the companyviction of the appellant under sub-s. 2 of s. 5 by holding him guilty of the offence of criminal misconduct of the category mentioned in cl. a or cl. d of sub-s. 1 . We are unable to accept this companytention as companyrect. The prosecution never alleged that the sum of Rs. 9,284-1-0 was the result of the appellant habitually accepting or obtaining illegal gratification etc. The prosecution case was that the sum of Rs. 9,284-1-0 was the result of the dishonest user of property which was entrusted with the appellant. It is number open to the appellate Court to affirm the companyviction of the Appellant on an entirely new case never suggested against the appellant at any earlier stage. It is unfortunate that in this case the companyrts below did number choose to rely on the rule of presumption laid down in sub- s. 3 with reference to the charge under cl. c of sub-s. 1 of s. 5. But that misfortune cannot number be repaired by evolving out of a vacuum as it were a new case against the appellant based on cl. a or cl. d of sub-s. 1 of s. 5 in support of which numberfacts were ever alleged or suggested.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 506 of 1957. Appeal from the judgment and order dated July 21, 1955, of the High Court of Andhra, Guntur, in Writ Appeal No. 122 of 1954. N. Rajagopala Sastri and D. Gupta, for the appellant. V. B. Tatachari, for the respondent. 1960. December 8. The Judgment of the Court was delivered by AYYANGAR., J.-This appeal by the State of Andhra is from the judgment of the High Court, Andhra, dated July 21, 1955, on a certificate under Art. 133 1 c of the Constitution. The respondent joined the Madras Police Force as a Constable on September 1, 1939. He became a permanent Head Constable in 1946 and was promoted to officiate as a Sub-Inspector on October 1, 1947, when his probation companymenced. By order dated September 24, 1950, he was declared to have satisfactorily companypleted his period of probation and was brought to the A list with effect from September 10, 1950. He was still merely officiating as a Sub-Inspector, the effect of his being placed in List A being that he came into the category of an approved probationer, i.e., fit for being companyfirmed as Sub-Inspector when substantive vacancies arose. On August 3, 1952, the District Superintendent of Police, Krishna, issued an order reverting the respondent to the rank of Head Constable with effect from August 14, 1952, i.e., to the post which he substantively held, for the reason that there was number a sufficient number of vacancies in the post of Sub-Inspectors for being filled by him. It may be mentioned that such reversion was number companyfined to the respondent alone but extended to a very large number of officiating Sub-Inspectors, who were similarly promoters from the rank of Head Constables. The reverted officers petitioned to the Inspector-General of Police and in reply thereto and in further explanation and clarification of the reasons for the reversions the Inspector-General of Police, Madras, issued a memorandum on January 15, 1953, in the following terms MEMORANDUM. Sub Officiating Sub-Inspector Reverting as Head Constables-Seniority over direct recruits Petitions. As direct recruits are recruited against vacancies specially reserved for them and cannot be reverted for want of vacancies, seniority between directly recruited Sub- Inspectors and promoted Sub-Inspectors should be determined separately. Their companytention that they should number have been reverted in preference to direct recruits is number, therefore, companyrect. Their reversion as Head Constables is in order. The respondent thereafter submitted a memorial to Government in which the principal challenge was to the view of the Government that the directly recruited Sub-Inspectors formed a category distinct from the promotee-Sub-Inspectors as number being companyntenanced by the relevant rules relating to the companystitution of the Police Establishment. Not having obtained any redress by reason of his memorial, the respondent filed before the High Court of Madras a petition under Art. 226 of the Constitution Writ Petition No. 524 of 1953 and prayed therein that the State of Madras may be directed by the issue of a writ of mandamus to refrain from enforcing the order reverting him as Head Constable but to companysider his claim to be companyfirmed as Sub-Inspector on the basis of his seniority in the list of approved probationers. Balakrishna Iyer, J., who heard the petition allowed it and issued a direction to the State to forbear from giving effect to the order of reversion if the petitioner by virtue of his seniority among promoters can be included in the 30 per cent. already referred to. We shall be dealing in detail with the nature and scope of the rule as to the 30 per cent. referred to here, which formed the basis of the learned Judges order in its proper place and will number interrupt the narration of the events which have led to the appeal number before us. The State preferred an appeal from this judgment which was transferred to the High Court of Andhra after that Court. was formed. The learned Judges who heard the appeal differed from the learned Single Judge in his view as to the scope of the rule as to 30 per cent. but dismissed the appeal holding that the Government in directing the reversion of the promotee-probationers had number observed strictly the relevant rule as to juniority prescribed in rule 5 of the Service Rules, to which rule we shall refer in due companyrse. The State of Andhra thereafter moved the High Court for the grant of a certificate and having obtained it, has filed this appeal. Though in his petition under Art. 226 filed before the High Court of Madras, the petitioner had alleged that his reversion from the officiating post of Sub-Inspector to his substantive post as Head Constable was a reduction in rank within the meaning of Art. 311 2 of the Constitution, i.e., a reduction by way of punishment effected without giving him an opportunity to show cause therefor, this companytention was abandoned early in the proceedings before the Court and the case has proceeded throughout on both sides on the footing that the reversion was effected solely for administrative reasons and number for any misconduct by way of punishment. Indeed, it may be mentioned that when the respondent was numbermally due for promotion to the substantive post of Sub- Inspector-without reference to the judgment of the High Court-he was duly promoted to that post and he number occupies the post of a Sub-Inspector drawing the increments and salary fixed therefor. Article 311 2 being out of the way. the questions that arise fall under two heads 1 Was there a violation of the Service Rules when the respondent was reverted as Head Constable? 2 If there was such a violation, do breaches of Service Rules by themselves companystitute an infringement of the legal rights of officers to whom they apply, entitling them to seek remedies therefor before Courts. The rules on the companystruction of which the answer to the first point depends are those framed, inter alia, under s. 243 of the Government of India Act, 1935, entitled Rules relating to the Madras Police Subordinate Service. Rule 3 which relates to recruitment and which was held to be violated, by the learned Single Judge ran in these terms Rule 3. Method of appointment and promotions- Appointment to the several classes and categories shall be made as indicated in Annexure 1. ANNEXURE I Category 2 Method of Limitation Appointing appointment authority 1 2 3 4 Sub-Inspec- Promotion Up to number In the mofus- tors from Head more than sil the D.I.G. Constables 30 of the Police company- Cadre cerned Direct recruitment Nil do This is followed by rules 4 and 5 which read Rule 4. Right of probationers and approved probationers to appointment to vacancies-A 7 vacancy in any class or category shall number be filled by the appointment of a person who has number yet companymenced his probation in such class or category when an approved probationer or a probationer therein is available for such appointment. Rule 5. Order of discharge of probationers and approved probationers- The order in which probationers and approved probationers. shall be discharged for want of vacancies shall be- first, the probationers in order of juniority and ,second, the approved probationers in order of juniority. The order of discharge laid down in sub- rule a may be departed from in cases where such order would involve excessive expenditure on traveling allowance or exceptional administrative inconvenience. The other rules merely carry out the principles underlying those extracted and do number need to be set out. To appreciate the points urged before us by the learned companynsel for the appellant-State on the proper interpretation of these rules, it is necessary to set out the companytentions respectively urged by the two parties in the Courts below and how they were dealt with. On behalf of the respondent the points urged were That on a proper companystruction of Rule 3, promotee-Sub- Inspectors referred to in departmental parlance as rank- promotees, as distinguished from those directly recruited were entitled to be appointed to a minimum of 30 per cent. of the cadre strength and that this rule was violated in that at the time of the respondents reversion the force companysisted only of less than 25 per cent. of rank-promotees and more than 75 per cent. of those directly recruited. If the rule as to the proportion of appointments as laid down in Rule 3 had strictly been followed there would have been numbernecessity for reverting the respondent as Head Constable. The3O per cent. and the 70 per cent. laid down in r. 3 applied only at the stage of the initial recruitment of Sub-Inspectors and that when once that recruitment was made and the probation of the officers started, numberdifference companyld under the rules be thereafter made between the two classes of appointees but that both of them companystituted one unified force the members of which were entitled to be appointed to substantive posts as full members of the Service solely on the basis of their inter se seniority apart from misconduct or inefficiency, etc. . The appointment to substantive posts of officers directly recruited in preference to persons like the respondent whose probation had companymenced at an earlier date was therefore a violation of r. 4 of the Service Rules. If at any time the cadre strength was reduced by the abolition of temporary posts there might have, to be reversions, but in reverting officers the rule as to juniority laid down by r. 5 a had to be strictly followed. This rule made numberdistinction between Sub-Inspectors appointed directly and rank-promotees. Both formed a single category and among them those who had number companypleted their probation had to be reverted first and thereafter the approved probationers in the order of their juniority. In the present case the respondent urged that approved probationers like himself who were senior to several of the officiating Sub-Inspectors directly recruited had been reverted out of turn in violation of r. 5 a . If in the circumstances stated by the Government which would be mentioned later , the directly recruited Sub- Inspectors companyld number properly be reverted because of the assurances given to them, Government were bound to retain all rank-promotee approved probationers as officiating Sub- Inspectors until they companyld be appointed in substantive vacancies as full members thereof. In answer to these companytentions the case which the State put forward was as follows- The rule as to the proportion between the rank- promotees and direct recruits laid down by r. 3 read with the Annexure, fixed only the maximum percentage of rank- promotees. The words up to, number more than meant and companyld in the companytext mean only, that the maximum proportion of rank-promotees companyld be only 30 per cent. This was made clear by there being numberlimitation placed on the proportion of direct recruits. In other words, the 30 per cent. was the ceiling fixed and number any minimum and the rule in effect guaranteed direct recruits a minimum proportion of 70 per cent. There was therefore numberviolation of this rule when the, proportion of rank- promotees fell to a little below 25 per cent. at the relevant date. Even if r. 3 had been strictly followed the respondent would have derived numberbenefit from the operation of that rule because he was well below the level of rank-promotees who would even then had to be absorbed. It may be mentioned that it was because of this feature that the order of Balakrishna lyer, J., took the form of directing the Governmentto forbear from giving effect to the order of reversion if the petitioner by virtue of his seniority among promotees can be included among 30 per cent. On a proper companystruction of the rules, the proportions laid down in r. 3 applied whether or number at the stage of the initial recruitment, certainly at the stage of appointments to substantive posts, i.e., absorption as full members of the permanent strength of the cadre. It was their further companytention based on the above, that for companysidering companyfirmations provided for by r. 4 the category of direct recruits had to be treated as a class different from the category of rank-promotees and there was numberquestion of seniority as between members of the two groups but only within each group. On this basis the State Government urged that at the stage of absorption governed by r. 4 the rule as to proportion had to be worked out and that companysequently there had been numberviolation of that rule. There had been numberviolation of r. 5 either, on two grounds 1 based on denying that there was a unified category of Sub-Inspectors and in putting forward that the two classes which made up the Service, viz., direct recruits and rank-promotees formed different categories, and ii that even if they formed a single category of officers after their initial appoint- ments, there had been numberviolation of the rule fixed for reversion by r. 5 a by reason of the special circumstances of the case which brought their action within the specific provision in r. 5 b . In companynection with this last submission it was pointed out that at the time of the police action in Hyderabad a large number of persons were recruited direct as Sub-Inspectors to whom an assurance had been given that they would number be reverted. A large number of such temporary appointments were made and these directly recruited Sub-Inspectors had to be provided with posts when temporary posts were getting abolished. This introduced an administrative problem which companyld be solved only by reverting the rank-promotees. We shall number proceed to a companysideration of the points thus in companytroversy between the parties and which were urged on either side before us. The first point to be dealt with is as to whether there had been an infraction of r. 3 of the Service Rules by reason of the proportion of rank-promotees being less than 30 per cent. of the total number of Sub- Inspectors in service at the date of the respondents reversion. As has already been pointed out, the learned Single Judge had rested his decision in favour of the respondent on an infraction of this rule, but the learned Judges of the High Court in appeal had taken a different view. Learned Counsel for-the respondent sought to support the view that the words up to, number more than 30 per cent in the rule meant up to a minimum of 30 per cent. the effect of the addition of the words number more than being merely to eliminate fractions and permit the number to be rounded off to the nearest lower integer. It would be seen that the learned Single Judge had stressed the use of the words up to and practically gave numbereffect to the words number more than in arriving at the companystruction that he adopted. We companysider that this companystruction is erroneous, particularly in the companytext of the provision as regards direct recruits, in regard to whom there is numberlimitation placed on the proportion which they companyld have in the Service. Taken in companyjunction with this provision it is clear that the words up to, number more than merely fix the maximum percentage of rank-promotees in the category, leaving it to the appointing authorities to adopt any percentage below this figure. We companysequently endorse the view which the learned Judges of the Andhra High Court took in dissenting from the companystruction which the learned Single Judge placed on the scope of r. 3. The reversion of the respondent cannot, therefore, be challenged on the ground that there had been an infraction of r. 3 of the Service Rules. The next question is as to whether r. 4 of the Service Rules by which companyfirmations were regulated, had been violated in promoting the more junior direct recruits to substantive posts in preference to rankpromotees like the respondent who were senior to them in service in the sense that the latters probation as officiating Sub-Inspectors companymenced earlier. The application of these rules in the companytext of the facts of this case depends largely on whether rank- promotees and officers directly recruited form or do number form the same class or category becoming integrated into, one Service on their initial appointment to the Service. It is companymon ground that the two classes become integrated as members of a unified Service after appointment as full members of the Service. The point in companytroversy is limited to the period between the date of their initial appointment and their absorption as full members. If up to that date they formed two categories and the seniority in each group ha,, to be reckoned separately, the order of the Government would be perfectly in order and companystitute numberbreach of the rules. But if on the other hand officers recruited by either of the two modes-promotions from the rank of Head Constables and Sub-Inspectors directly recruited-form an integrated and unified force from the very companymencement of their appointments, then on the application of r. 4 companyfirmations ought to depend on mere seniority subject to factors relevant to merit or demerit as officiating Sub- Inspectors without regard to the manner in which they were originally appointed. Though the learned Single Judge did number directly pronounce on the effect of r. 4, the Andhra High Court held that the rule of seniority.prescribed by the rule had been violated. After expressing their disagreement with the learned Single Judge in his view that the minimum of 30 per cent. laid down by r. 3 had been violated, they observed Nor does it follow that we can companyntenance the argument of the learned Government Pleader that irrespective of the percentage of promoters on the cadre at a given time, all vacancies can be filled up, if the Government so chooses, only with direct recruits. We think that from both the classes of approved probationers, be it direct recruits or be it candidates from the ranks, selection should be made without any distinction, provided of companyrse that so far as promotees are companycerned the percentage of 30 is number exceeded. Now, it is admitted by the Government that the percentage of promotees, was only 24.5 at the time when the petitioner was sent back as Head Constable. That being so, it cannot be company- tended for the State that the ceiling will be exceeded if the petitioner is promoted. As we read the rules, when once an officer qualifies as an approved probationer, numberdistinction can be made between him and a direct recrui approved probationer. We are unable to agree with the reasoning or the companyclusion here expressed. It would be seen that the learned Judges have, though tacitly, accepted the case put forward by the Government, and in our view companyrectly, that the integration of the two groups is only after the stage of absorption as full members of the Service, and that at that stage the rule as to the proportion laid down in the annexure to r. 3 companyes into operation. If the 30 which is the limit set for rank- promotees for absorption as full members is merely a ceiling imposed for the benefit of direct recruits, as rightly held by the learned Judges, it is difficult to see how the rule companyld be Held to be violated because the proportion of rank- promotees companyfirmed fell below the figure of 30. We, therefore, companysider that there was numberviolation of the rule as to seniority prescribed by r. 4 in the appointment of the direct recruits to substantive posts before the absorption of rank promotees like the respondent. We shall next proceed to deal with r. 5 which deals with the power of Government to effect reversions and the companyditions and limitations prescribed there for. It would be seen that cl. a of r. 5 substantially reverses for the purpose of discharge or reversion the order in which companyfirmations are to be made as set out in r. 4. We have held that the respondent had numberright under the rules to insist on his being companyfirmed, on the terms of r. 4 read in the light of r. 3. On the same line of reasoning it would follow that as direct recruits and rank-promotees belonged to distinct classes the juniority for reversion had to be determined separately for each class and number on the basis of the two classes forming part of a unified force before company- firmation. If this test were applied, it cannot be companytended that the reversion of the respondent infringed r. 5 a . But this apart, the impugned order companyld also be sustained on the basis of the provision companytained in cl. b of r. 5 which reads The order of discharge laid down in sub-rule a may be departed from in cases where such order would involve excessive expenditure on travelling allowance or exceptional administrative inconvenience. In the present case the Government explained their reason for the order for reversion of rank-promotees in the affidavit which they filed to the writ petition in these terms His reversion was necessitated by the fact that a large number of Sub-Inspectors on other duty in Hyderabad State reverted to this Stat and that a number of temporary posts created for special purposes during the disturbed period immediately following the police action in Hyderabad had to be abolished and that the direct recruited Sub-Inspectors had necessarily to be absorbed as Sub-Inspectors as they cannot be asked to work in any lower post being direct recruits to a particular category, viz., that of the Sub-Inspector. This reversion of rank-promoted Sub-Inspectors was rendered absolutely necessary in the exigencies of service and for administrative purposes and as such, it cannot be deemed to be arbitrary or companytrary to rules or in the nature of punishment as alleged by the peti- tioner. It was this circumstance that was stated before the High Court of Madras in the Writ Petition as that which brought the impugned order of reversion within exceptional administrative inconvenience provided for by the last words of the rule. The learned Single Judge accepted as companyrect the facts stated by the Government as the reason for the reversion, stating Mr. Seshachalapathi explained that Government were in a difficult position as a companysequence of the members taken in companynection with the police action in Hyderabad. A large number of persons were directly recruited as Sub-Inspectors on the assurance that they would number be ousted. I do number suggest that Government should go back on any assurance that they may have given to these direct recruits. Far be it from me to encourage anything that might savour of bad faith on the part of Government But I would still say that in order that Government may keep faith with those whom they recruited directly as Sub-Inspectors they cannot break faith with or ignore the rights of those who were promoted as Sub-Inspectors. If the facts were accepted as companyrect, and we might point out that their accuracy was never challenged at any stage either in the High Court or before us, it appears to us that the order of reversion passed would be justified as being companyered by the last words of cl. b even if the order laid down in r. 5 a were infringed. In these circumstances it is number clear why the learned Judge should have observed The Government do number rest their case on Rule 5 b when the facts stated by Government and accepted by 8 him brought their action well within the scope of that clause. In their memorandum of grounds in Writ Appeal No. 122 of 1954 which the State filed to the High Court the appellants urged The learned Judge failed to appreciate the special circumstances of the situation which rendered the reversion necessary in the instant case. When the matter was before the High Court of Andhra the learned Judges observedThe learned Judge stated in his, judgment that the Government do number rest their case on Rule 5 b . In their turn they too accepted the case of the Government as regards the circumstances which necessitated the order of reversion and observed The Government frankly stated, however, that they were in a difficult position because of certain measures which they were companypelled to take in companynection with the police action in Hyderabad when a large number of persons were directly recruited as Sub-Inspectors with the assurance that they would be entertained per- manently. In order to keep that assurance with such persons they were companystrained to revert the rank-promotees but there is numberrule which enables the Government to do so. We must express our dissent from the last sentence extracted above, because r. 5 b makes specific provision for an order of discharge laid down in cl. a being departed from in cases where such order would entail exceptional administrative inconvenience and on the facts accepted both by the learned Single Judge and by the High Court of appeal the words extracted were attracted. Before leaving r. 5 there is one other matter to which we desire to advert and that relates to the observation of the High Court in the judgment number under appeal which seems to imply that if the Government found itself in difficulty owing to the assurances given to the officers directly recruited, they companyld under the rules have solved it, number by ordering the reversion of the rank-promotees but by companytinuing them in their officiating posts until they companyld be absorbed as full members of the Service. This was one of the companytentions urged by the respondent and the learned Judges say It seems to us clear that whether they imposed merely a ceiling or whether there is an obligation upon the Government to fill up 30 per cent. of the vacancies from among promotees, the State cannot say, on the facts, before us, that there are numbervacancies for promotees as such. It looks to us impossible to support this view on any companystruction of the rules. In effect it means either that temporary posts companyld number be abolished, or that approved probationers companyld number be reverted. The first alternative companyld number obviously have been meant and the other is plainly companytrary to the terms of r. 5 a which makes provision for the reversion of approved probationers. Of companyrse, as a measure of relief to their subordinates and to avoid hardship to them Government might retain people in their officiating posts, but it is quite a different thing to import a legal and enforceable obligation on their part to do so. In the view that we have taken that there has been numberbreach of the Service Rules in ordering the reversion of the respondent as a Head Constable, the question as to whether an infraction of a Service Rule companyfers a legal right which companyld be agitated in Court does number arise. We do number propose, therefore, to companysider that question and indeed we did number call upon learned companynsel for the appellant to argue that part of his case. The appeal is accordingly allowed, the judgment of the High Court set aside and Writ Petition No. 524 of 1953 dismissed. In view of the order of the High Court dated February 3, 1956, by which the appellant was granted a certificate under Art.

Case appeal was accepted by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 76 of 1956. Appeal from the judgment and order dated August 27, 1954, of the Allahabad High Court in Criminal Misc. Writ No. 20 of 1954. L. Misra, Advocate-General for the State of Uttar Pradesh. G. 0. Mathur and C. P. Lal, for the appellants. S. Bindra, for the respondent.1960. January 21. The Judgment of the Court was delivered by SUBBA RAO J.-This appeal raises the question of interpretation of the words in the interest of public order in Art. 19 2 of the Constitution. The facts are number in dispute and they lie in a small companypass. The respondent, Dr. Ram Manohar Lohia, is the General Secretary of the Socialist Party of India. The U. Government enhanced the irrigation rates for water supplied from canals to cultivators. The party to which the respondent belongs resolved to start an agitation against the said enhancement for the alleged reason that it placed an unbearable burden upon the cultivators. Pursuant to the policy of his party, the respondent visited Farrukhabad and addressed two public meetings wherein he made speeches instigating the audience number to pay enhanced irrigation rates to the Government. On July 4, 1954, at 10 p.m. he was arrested and produced before the City Magistrate, Farrukhabad, who remanded him for two days. After investigation, the Station officer, Kaimganj, filed a charge-sheet against the respondent before Sri P. R. Gupta, a Judicial Officer at Farrukliabad. On July 6, 1954, the Magistrate went to the jail to try the case against the respondent, but the latter took objection to the trial being held in the jail premises. When the Magistrate insisted upon proceeding with the trial, the respondent obtained an adjournment on the ground that he would like to move the High Court for transfer of the case from the file of the said Magistrate. Thereafter the respondent filed a petition before the High Court for a writ of habeas companypus on the ground, among others, that s. 3 of the U. P. Special Powers Act Act No. XIV of 1932 , 1932, hereinafter called the Act was void under the Constitution. In the first instance the petition came up for disposal before a division bench of the High Court at Allahabad companysisting of Desai and Chaturvedi, Elaborate arguments were addressed before them companyering a wide field. The learned Judges delivered differing judgments expressing their views on the main points raised before them. They referred the matter to the Chief Justice for obtaining the opinion of a third Judge on the following two points i Was the provision of s. 3 of the U. P. Special Powers Act of 1932 making it penal for a person by spoken words to instigate class of persons number to pay dues recoverable as arrears of land revenue, inconsistent with Art. 19 1 a of the Constitution on the 26th of January, 1950 ? and ii if so, was it in the interests of public order ? . The petition was placed before Agarwala, J., as a third Judge, who agreeing with Desai, J., gave the following answers to the questions referred to him Question No. i . The provision of sections of the U. P. Special Powers Act, 1932, making it penal for a person by spoken words to instigate a class of persons number to pay dues recoverable as arrears of land revenue, was inconsistent with Article 19 1 a of the Constitution on the 26th January, 1950. Question No. ii . The restrictions imposed by section 3 of the U. P. Special Powers Act, 1932, were number in the interests of public order. In the usual companyrse the matter was placed before the two learned Judges who first heard the case and they, on the basis of the majority view, allowed the petition and directed the respondent to be released The State has preferred the present appeal against the said order of the High Court. The learned Advocate General, appearing for the appellant. stated before us that be did number propose to canvass the companyrectness of the majority view on one of the important points raised in the case, namely, that the effect of the passing of the Act did number ipso facto deprive a citizen of his freedom of speech guaranteed. under Art. 19 1 a of the Constitution and its validity should be tested by the provisions of Art. 19 2 thereof. He did number. companycede the validity of the finding in this regard but assumed its companyrectness for the purpose of this case. Nothing further, therefore, need be mentioned on this point. The gist of the argument of the learned Advocate General may be stated thus The legislature can make laws placing reasonable restrictions on the rights of a citizen to freedom of speech and expression in the interests of public order among other grounds. The words in the interests of public order are wider in companynotation than the words for the maintenance of public order . Laws are rules made by the legislature for the governance of the people in the State which they are bound to obey, and they are enacted to keep public peace and order. The avowed object of s. 3 of the Act was to prevent persons from instigating others to break the laws imposing a liability upon a person or class of persons to pay taxes and other dues to the State, any authority or to any land-owner. The impugned section was enacted in the interests of public order and therefore the section was protected by Art. 19 2 of the Constitution. The learned Advocate General pointed out that the object of the State in preferring this appeal was to obtain the decision of this Court on the question of companystitutional validity of s. 3 of the Act and number to pursue the matter against Dr. Lohia. The respondent was number present at the time the appeal was heard and was number represented by an advocate. As the question raised was an important one, we requested Mr. N. S. Bindra to assist the Court, and he kindly agreed to do so. He supported the majority view of the High Court. We record our thanks for his assistance. At the outset it would number be out of place to numberice briefly the history of the Act. The Act was originally passed in the year 1932 during the British rule. In an attempt to offset the campaign of number-payment of taxes and other forms of agitation resorted to by the Congress Party, originally it was put on the statute book for one year but in 1940 when the State was under the Governors rule , the Act was made permanent. Under the Act, ss. 1 and 2 came into effect immediately on the passing of the Act and S. 1 2 enabled the Government by numberification to extend all or any of the remaining sections to any district or to any part of a district in the United Provinces. After the Constitution, the Act was number repealed but was allowed to companytinue, with necessary adaptations, in the statue book. Between April and June, 1954, the State Government extended the provisions of the Act to 33 districts including Farrukhabad district. Now lot us look at the provisions of the Act to ascertain its scope and field of operation. The preamble discloses that it was enacted in 1932 to make provision against and to take powers to deal with instigation to the illegal refusal of the payment of certain liablities and s. 2 defines liablity to mean land revenue or any sum recoverable as arrears of land revenue or any tax, rate, cess or other dues or amount payable to Government or to any local authority, or rent of agricultural land or anything recoverable as arrears of or along with such rent . Section 3 prescribes the punishment for instigation to the number-payment of a liability. As the argument centres round this section, it will be companyvenient to read the same Section 3 Whoever, by word, either spoken or written, or by signs or by visible representations, or otherwise, instigates, expressly or by implication, any person or class of persons number to pay or to defer payment of any liability, and whoever does any act, with intent or knowing it to be likely that any words, signs or visible representations company. taining such instigation shall thereby be companymunicated directly or indirectly to any person or class of persons, in any manner whatsoever, shall be punishable with imprisonment which may extend to six months, or with fine, extending to Rs. 250, or with both. Section 4 says that any person to whom an arrear of liability is due may apply to the Collector to realize it and the Collector is authorized to realize the same as an arrear of land revenue. The impugned section may be dissected into the following companyponents i whoever by word, either spoken or written, or by signs or by visible representations or otherwise, ii instigates, iii expressly or by implication, iv any person or class of persons, v number to pay any liability, vi to defer payment of any liability, vii does an act with intent that any words etc. shall be companymunicated to any person or class of persons, viii with the knowledge that it is likely that such words etc. shall be companymunicated to any person or class of persons, ix such companymunication may be made directly, or indirectly and x shall be punished with imprisonment or with fine or with both. Under this section a wide net has been cast to catch in a variety of acts of instigation ranging from friendly advice to a systematic propaganda number to pay or to defer payment of liability to Government, any authority or to any person to whom rent is payable in respect of agricultural land. The meaning of this section, read along with ss. 2 and 4, can be ascertained more clearly by illustration than by definition. 1 A instigates B number to pay any liability to Government, any authority or to any land owner 2 A instigates B to defer payment of any liability - to Government, any authority or landlord 3 A instigates a class of persons to do the same 4 A may do any one of the foregoing things number only by word, but also by signs, visible representations or otherwise 5 A may do any one of the things bona fide either to get the claim decided in a Court of law or to gain time to get the law changed 6 A may instigate B number to pay any amount due to Government or to any authority, but the said amount can be recovered by the authority companycerned as arrears of land revenue 7 A may tell C with intention or with knowledge that the said instigation may be companymunicated to B so that he may number pay 8 any statement by A to C may imply such instigation. In its wide amplitude the section takes in the innocent and the guilty persons, bona fide and mala fide advice, individuals and class, abstention from payment and deferment of payment, expressed or implied instigation, indirect or direct instigation, liability due number only to Government but to any authority or landholder. In short, numberperson, whether legal adviser or a friend or a well-wisher of a person instigated can escape the tentacles of this section, though in fact the rent due has been companylected through companyrcive process or otherwise. We shall number proceed to companysider the companystitutional validity of this section. The material portions of the relevant provisions of the Constitution may number be read Article 19 1 All citizens shall have the right- a to freedom of speech and expression Nothing in sub-clause a of clause 1 shall affect the operation of any existing law, or prevent the State from making any law, in so far as such law imposes reasonable restrictions on the exercise of the right companyferred by the said sub-clause in the interests of the security of the State, friendly relations with foreign States, public order, decenc or morality or in relation to companytempt of companyrt,defamation or incitement to an offence. Clause 2 of Art. 19 was amended by the Constitution First Amendment Act, 1951. By this amendment several new grounds of restrictions upon the freedom of speech have been introduced, such as friendly relations with foreign States, public order and incitement to an offence. It is self evident and companymon place that freedom of speech is one of the bulwarks of a democratic form of Government. It is equally obvious that freedom of speech can only thrive in an orderly society. Clause 2 of Art. 19, therefore, does number affect the operation of any existing law or prevent the State from making any law in so far as such law imposes reasonable restrictions on the exercise of the right of freedom of speech in the interest of public order, among others. To sustain the existing law or a new law made by the State under cl. 2 of Art. 19, so far as it is relevant to the present enquiry, two companyditions should be companyplied with, viz., i the restrictions imposed must be reasonable and ii they should be in the interests of public order. Before we companysider the scope of tile word,-, of limitation, reasonable restrictions and in the interests of , it is necessary to ascertain the true meaning of the expression public order in the said clause. The expression public order has a very wide companynotation. Order is the basic need in any organised society. It implies the orderly state of society or companymunity in which citizens can peacefully pursue their numbermal activities of life. In the words of an eminent Judge of the Supreme Court of America the essential rights are subject to the, elementary need for order without which the guarantee of those rights would be a mockery . The expression has number been define in the Constitution, but it occurs in List II of its Seventh Schedule and is also inserted by the Constitution First Amendment Act, 1951 in el. 2 of Art. The sense in which it is used in Art. 19 can only be appreciates by ascertaining how the Article was companystrued before it was inserted therein and what was the defect to remedy which the Parliament inserted the same by the said amendment. The impact of el. 2 of Art. 19 on Art. 19 1 a before the said amendment was subject to judicial scrutiny by this Court in Romesh Thappar v. The State of Madras l . There the Government of Madras, in exercise of their powers under s. 9 1-A of the Madras Maintenance of Public Order Act, 1949, purported to issue an order whereby they imposed a ban upon the entry and circulation of the journal called Cross -.Roads in that State. The petitioner therein companytended that the said order companytravened his fundamental right to freedom of speech and expression. At the time when that order was issued the expression public order was number in Art. 19 2 of the Constitution but the words the security of the State were there. In companysidering whether the impugned Act was made in the interests of security of the State, Patanjali Sastri, J., as he then was, after citing the observation of Stephen in his Criminal Law of England, states 1 1950 S.C.R. 594, 600, 601, 602, Though all these offences thus involve disturbances of public tranquillity and are in theory offences against public order, the difference between them being only a difference of degree, yet for the purpose of gurading the punishment to be inflicted in respect of them they may be classified into different minor categories as has been done by the Indian Penal Code. Similarly, the Constitution, in formulating the varying criteria for permissible legislation imposing restrictions on the fundamental rights enumerated in article 19 1 , has placed in a distinct category those offences against public order which aim at undermining the security of the State or overthrowing it, and made their prevention the sole justification for legislative abridgement of freedom of speech and expression, that is to say, numberhing less than endangering the foundations of the State or threatening its overthrow companyld. justify curtailment of the rights to freedom of speech and expres- sion The learned Judge companytinued to state The Constitution thus requires a line to be drawn in the field of public order or tranquillity marking off, may be, roughly, the boundary between those serious and aggravated forms of public disorder which are calculated to endanger the security of the State and the relatively minor breaches of the peace of a purely local significance, treating for this purpose differences in degree as if they were differences in kind. The learned Judge proceeded further to state We, are therefore of opinion that unless a law restricting freedom of speech and expression is directed solely against the undermining of the security of the State or the overthrow of it, such law cannot fall within the reservation under clause 2 of article 19, although the restrictions which it seeks to impose may have been companyceived generally in the interests of public order. This decision establishes two propositions, viz., i maintenance of public order is equated with maintenance of public tranquillity and ii the offences against public order are divided into two categories, viz., a major offences affecting the security of the State, and b minor offences involving breach of purely local significance. This Court in Brij Bhushan v. The state of Delhi 1 followed the earlier decision in the companytext of s. 7 1 c of the East Punjab Public Safety Act, 1949. Fazl Ali, J., in his dissenting judgment gave the expression public order a wider meaning than that given by the majority view. The learned Judge observed at p. 612 thus When we approach the matter in this way, we find that while public disorder is wide enough to companyer a small riot or an affray and other cases where peace is disturbed by, or affects, a small group or persons, public unsafety or insecurity of the State , will usually be companynected with serious internal disorders and such disturbances of public tranquillity as jeopardize the security of the State. This observation also indicates that public order is equated with public peace and safety. Presumably in an attempt to get over the effect of these two decisions, the expression public order was inserted in Art. 19 2 of the Constitution by the Constitution First Amendment Act, 1951, with a view to bring in offences involving breach of purely local significance within the scope of permissible restrictions under cl. 2 of Art. 19. After the said amendment, this Court explained the scope of Romesh Thappars Case 1 in The state of Bihar v. shailabala Devi . That case was companycerned with the companystitutional validity of s. 4 1 a of the Indian Press Emergency Powers Act, 1931. It deals with the words or signs or visible representations which incite to or encourage, or tend to incite to or encourage the companymission of any offence of murder or any companynizable offence involving violence. Mahajan, J., as he then was, observed at p. 660 The deduction that a person would be free to incite to murder or other companynizable offence through the press with impunity drawn from our decision in 1 1950 S.C R. 605. 2 1952 S.C.R. 654. Romesh Thappars case companyld easily have been avoided as it was avoided by Shearer J., who in very emphatic terms said as follows I have read and re-read the judgments of the Supreme Court, and I can find numberhing in them myself which bear directly on the point at issue,and leads me to think that, in their opinion, a restriction of this kind is numberlonger permissible. The validity of that section came up for companysideration after the Constitution First Amendment Act, 1951, which was expressly made retrospective, and therefore the said section clearly fell within the ambit of the words in the interest of public order . That apart the observations of Mahajan, J., as he then was, indicate that even without the amendment that section would have been good inasmuch as it aimed to prevent incitement to murder. The words public order were also understood in America and England as offences against public safety or public peace. The Supreme Court of America observed in Cantewell Connecticut 1 thus The offence known as breach of the peace embraces a great variety of companyduct destroying or menacing public order and tranquillity. It includes number only violent acts and words likely to produce violence in others. No one would have the hardihood to suggest that the principle of freedom of speech sanctions incitement to riot When clear and present -danger of riot, disorder, interference with traffic upon the public streets, or other immediate threat to public safety, peace, or order appears, the power of the State to prevent or punish is obvious. The American decisions sanctioned a variety of restrictions on the freedom of speech in the interests of public order. They companyer the entire gamut of restrictions that can be imposed under different heads in Art. 19 2 of our Constitution. The following summary of some of the cases of the Supreme Court of America given in a well-known book on Constitutional Law illustrates the range of categories of cases companyering 1 1940 310 U S. 296, 308, that expression. In the interests of public order, the State may prohibit and punish the causing of loud and raucousnoise in streets and public places by means of sound amplifying instruments, regulate the hours and place of public discussion, and the use of the public streets for the purpose of exercising freedom of speech provide for the expulsion of hecklers from meetings and assemblies, punish utterances tending to incite an immediate breach of the peace or riot as distinguished from utterances causing mere public inconvenience, annoyance or unrest. In England also Acts like Public Order Act, 1936, Theatres Act, 1843 were passed the former making it an offence to use threatening, abusive or insulting words or behaviour in any public place or at any public meeting with intent to provoke a breach of the peace or whereby a breach of the peace is likely to be caused, and the latter was enacted to authorise the Lord Chamberlain to prohibit any stage play whenever he thought its public performance would militate against good manners, decorum and the preservation of the public peace. The reason underlying all the decisions is that if the freedom of speech was number restricted in the manner the relevant Acts did, public safety and tranquillity in the State would be affected. But in India under Art. 19 2 this wide companycept of public order is split up under different heads. It enables the imposition of reasonable restrictions on the exercise of the right to freedom of speech and expression in the interests of the security of the State, friendly relations with foreign States, public order, decency or morality, or in relation to companytempt of companyrt, defamation or incitement to an offence. All the grounds mentioned therein can be brought under the general head public order in its most companyprehensive sense. But the juxtaposition of the different grounds indicates that, though sometimes they tend to overlap, they must be ordinarily intended to exclude each other. Public order is therefore something which is demarcated from the others. In that limited sense, particularly in view of, the history of the amendment, it can be pustulated that public order is synonymous with public peace, safety and tranquillity. The next question is what do the words interest of public order mean ? The learned Advocate General companytends that the phrase in the interest of public order is of a wider companynotation than the words for the maintenance of public order and,therefore, any breach of law which may have the tendency, however remote, to disturb the public order would be companyered by the said phrase. Support is Sought to be drawn for this wide proposition from the judgment of this Court in Ramji Lal Modi v. The State of U.P. 1 . It is number necessary to state the facts of that case, as reliance is placed only on the observations of Das, C.J., at p. 865, which read It will be numbericed that the language employed in the amended clause is in the interests of and number for the maintenance of. As one of us pointed out in Debi Saron v. The State of Bihar 2 , the expression in the interests of makes the ambit of protection very wide. A law may number have been designed to directly maintain public order and yet it may have been enacted in the interests of public order. The learned Chief Justice again in Virendra v. The State of Punjab 3 observed, at p. 317, much to the same effect As has been explained by this Court in Ramji Lal Modi v. The State of U.P. 1 , the words in the interests of are words of great amplitude and are much wider than the words for the maintenance of. The expression in the interests of makes the ambit of the protection very wide, for a law may number have been designed to directly maintain the public order or to directly protect the general public against any particular evil and yet it may have been enacted in the interests of the public order or the general public as the case may be. We do number understand the observations of the Chief Justice to mean that any remote or fanciful companynection between the impugned Act and the public order 1 1957 S.C.R. 860. 2 A.I R. 1954 Pat 254 3 1958 S.C.R. 308. would be sufficient to sustain its validity. The learned Chief Justice was only making a distinction between an Act which expressly and directly purported to maintain public order and one which did number expressly state the said purpose but left it to be implied therefrom and between an Act that directly maintained public order and that indirectly brought about the same result. The distinction does number ignore the necessity for intimate companynection between the Act and the public order sought to be maintained by the Act. Apart from the said phrase, another limitation in the clause, namely, that the restrictions shall be reasonable, brings about the same result. The word reasonable has been defined by this Court in more than one decision. It has been held that in order to be reasonable, restrictions must have reasonable relation to the object which the legislation seeks to achieve and must number go in excess of that object. The restriction made in the interests of public order must also have reasonable relation to the object to be achieved, i.e., the public order. If the restriction has numberproximate relationship to the achievement of public order, it cannot be said that the restriction is a reasonable restriction within the meaning of the said clause. A full bench decision of the Federal Court in Rex Basudeva 1 companytains some observations which give companysiderable assistance to companystrue the words. In that case, the appellant was detained in pursuance of the order made by the Government of U.P. under the U.P. Prevention of Black-Marketing Temporary Powers Act, 1947. The question was whether the preventive detention provided for in s. 3 1 of the said Act was preventive detention for reasons companynected with the maintenance of public order. The argument in that case ran on the same lines as in the present case. The learned Advocate General there urged that habitual black-marketing in essential companymodities was bound sooner or later to cause a dislocation of the machinery of companytrolled distribution which, in turn, might lead to breaches of the peace and that, therefore, detention with a view to prevent such black marketing was companyered by the A.I.R. 1950 F.C. 67 entry. Answering that argument, Patanjali Sastri, J.,as he then was, pointed out, at p. 69 Activities such as these are so remote in the chain of relation to the maintenance of public order that preventive detention on account of them cannot, in our opinion, fall within the purview of Entry I of List IIThe companynection companytemplated must, in our view, be real and proximate., number far-fetched or problematical. The decision, in our view, lays down the companyrect test. The limitation imposed in the interests of public order to be a reasonable restriction, should be one which has a proximate companynection or nexus with public order, but number one far- fetched, hypothetical or problematical or too remote in the chain of its relation with the public order. We shall number test the impugned section, having regard to the aforesaid principles. Have the acts prohibited under s. 3 any proximate companynection with public safety or tranquility ? We have already analysed the provisions of s. 3 of the Act. In an attempt to indicate its wide sweep, we pointed out that any instigation by word or visible representation number to pay or defer payment of any exaction or even companytractual dues to Government, authority or a landowner is made an offence. Even innocuous speeches are prohibited by threat of punishment. There is numberproximate or even forseeable companynection between such instigation and the public order sought to be protected under this section. We cannot accept the argument of the learned Advocate General that instigation of a single individual number to pay tax or dues is a spark which may in the long run ignite a revolutionary movement destroying public order. We can only say that fundamental rights cannot be companytrolled on such hypothetical and imaginary companysiderations. It is said that in a democratic set up there is numberscope for agitational approach and that if a law is bad the only companyrse is to get it modified by democratic process and that any instigation to break the law is in itself a disturbance of, the public order. If this argument without obvious limitations be accepted, it would destroy the right to freedom of speech which is the very foundation of democratic way of life. Unless there is a proximate companynection between the instigation and the public order, the restriction, in our view, is neither reasonable number is it in the interest of public order. In this view, we must strike down s. 3 of the Act as infringing the fundamental right guaranteed under Art. 19 1 a of the Constitution. The learned Advocate General then companytended that the section is severable and that if so severed, the section may be made to function within the limited field that stands the test of Art. 19 2 of the Constitution. He asks us to read the section as follows Whoever, by word, either spoken or written, or by signs or by visible representations, or otherwise, instigates, expressly or by implication, any class of persons number to pay or to defer payment of any liability, and whoever does any act, with intent or knowing it to be likely that any words, signs or visible representations companytaining such instigation shall thereby be companymunicated directly or indirectly to any class of persons, in any manner whatsoever, shall be punishable with imprisonment which may extend to six months, or with fine, extending to Rs. 250, or with both. By so doing he argues that instigation of a class of persons only is made liable and thereby the section is rid of the vice of unconstitutionality. The doctrine of severability vis-a-vis the fundamental rights is sought to be supported on the basis of the wording of Art. 13 1 of the Constitution. Under that Article laws, in so far as they are inconsistent with the provisions of Part III, ire void only to the extent of such inconsistency. But this implies that companysistent and inconsistent parts of a law are severable. This doctrine in its relation to fundamental rights was companysidered by this Court in three decisions. In Romesh Thappers case 1 such an. argument has been repelled by this Court. Patanjali Sastri, J., as he then was, statd the legal position thus at p. 603 1 1950 S.C.R. 594, 600, 601 602. Where a law purports to authorise the imposition of restrictions on a fundamental right in language wide enough to companyer restrictions both within and without the limits of companystitutionally permissible legislative action affecting such right,it is number possible to uphold it even so far as it may be applied within the companystitutional limits, as it is number severable. So long as the possibility of its being applied for purposes number sanctioned by the Constitution cannot be ruled out, it must be held to be wholly unconstitutional and void. In Chintaman Rao v. The State of Madhya Pradesh the same principle is again restated. Mahajan, J., as he then was observed at p. 765 The law even to the extent that it companyld be said to authorize the imposition of restrictions in regard to agricultural labour cannot be held valid because the language employed is wide enough to companyer restrictions both within and without the limits of companystitutionally permissible legislative action affecting the right. So long as the possibility of its being applied for purposes number sanctioned by the Constitution cannot be ruled out, it must be held to be wholly void. The wide reach of this principle appears to have been circumscribed to some extent in a later decision of this Court in R. M. D. Chamarbaugwalla v. The Union of India 2 . In that case the companystitutionality of ss. 4 and 5 of the Prize Competitions Act 42 of 1955 was challenged on the ground that prize companypetition as defined in s. 2 d of the Act included number merely companypetitions that were of a gambling nature but also those in which success depended to a substantial degree on skill. This Court, having regard to the history of the legislation, the declared object thereof and the wording of the statute, came to the companyclusion that the companypetitions which were Sought to be companytrolled and regulated by the Act were only those companypetitions in which success did number depend to any substantial degree on skill. That companyclusion was sufficient to reject the companytention raised in that case but even on the assumption that 1 1950 S.C.R. 759. 2 1957 S.C.R. 930. prize companypetition as defined in s. 2 d of the Act included those in which success depended to substantial degree on skill as well as those in which it did number so depend, this Court elaborately companysidered the doctrine of severability and laid down as many as seven rules of companystruction. On the application of the said rules it was held that the impugned provisions were severable in their application to companypetitions in which success did number depend to any substantial degree on skill. The foregoing discussion yields the following results 1 Public order is synonymous with public safety and tranquillity it is the absence of disorder involving breaches of local significance in companytradistinction to national upheavals, such as revolution, civil strife, war, affecting the security of the State 2 there must be proximate and reasonable nexus between the speech and the public order 3 s. 3, as it number stands, does number establish in most of the cases companyprehended by it any such nexus 4 there is a companyflict of decision on the question of severability in the companytext of an offending provision the language whereof is wide enough to companyer restrictions both within and without the limits of companystitutionally permissible legislation one view is that it cannot be split up if there is possibility of its being applied for purposes number sanctioned by the Constitution and the other view is that such a provision is valid if it is severable in its application to an object which is clearly demarcated from other object or objects falling outside the limits of companystitutionally permissible legislation and 5 the provisions of the section are so inextricably mixed up that it is number possible to apply the doctrine of severability so as to enable us to affirm the validity of a part of it and reject the rest. It is number necessary in this case to express our preference for one or other of the foregoing decisions. Assuming that the summary of the rules of companystruction given in the last of the cases cited supra are companyrect and exhaustive, we are number satisfied that in the instant case the impugned section with the omissions suggested by the learned Advocate General companyld, wholly or to any extent, be salvaged. The words of the section with the suggested omissions companytinue to suffer from the same vice they are subjected to without the said omissions. The Suggested omissions from the section only exclude individuals from the operation of the section and companyfine it to a class of persons and in other respects it is number freed from the defects already pointed out by us. In R. D. Chamarbaugwallas Case 1 the difference between two classes of companypetitions, namely, those that are of gambling nature and those in which success depends on skill, is clear-cut and has long been recognized in legislative practice. But in the present case it is number even possible to predicate with some kind of precision the different categories of instigation falling within or without the field of companystitutional prohibitions. The companystitutional validity of a section cannot be made to depend upon such an uncertain factor. Whether the principle of the first two decisions is applied or that of the third is invoked, the companystitutional validity of the section cannot be sustained. We, therefore, hold that s. 3 of the Act is void as infringing Art. 19 1 a of the Constitution. The, entire section therefore must be struck down as invalid. If so, the prosecution of the respondent under that section is void. The learned Advocate General made an impassioned appeal to persuade us to express our view that though the present section is void on the ground that it is an unreasonable restriction on the fundamental right, in the interests of public order the State companyld legitimately re-draft it in a way that it would companyform to the provisions of Art. 19 2 of the Constitution. It is number this Courts province to express or give advice or make general observations on situations that are number presented to it in a particular case.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals No. 218 of 1955 and 219 to 223 of 1955. Appeal by special leave from the judgment and Order dated September 14, 1951, of the Income-tax Appellate Tribunal, Madras, in I.T.A. No. 3158 of 1949-50. and Appeals by special leave from the judgment and order dated September, 30, 1953, of the Income-tax Appellate Tribunal, Madras, in I.T.A. Nos. 7840 of 1952-53 and E.P.T.A. Nos. 300, 301 and 302 of 1952-53. Chowdhuri, N. A. Palkhivala and Naunit Lal, for the appellant. N. Sanyal, Additional Solicitor-General of India, Ganapathi lyer and D. Gupta for the respondent. 1960 February 3. The Judgment of the Court was delivered by KAPUR J. -In these six appeals the companymon question raised is whether the proviso to s. 13 of the Income-tax Act is applicable to the facts and circumstances of these cases. They are therefore disposed of by one judgment. Civil Appeal No. 218 of 1955 arises out of the assessment for the year 1943-1944. Civil Appeals Nos. 219 to 223 relate to the assessment years 1944-1945, 1946-1947 and for the chargeable accounting periods from January 1943 to February 1944, and from February 1945 to February 1946. The appellant in each of the appeals is the assessee and the respondent is the Commissioner of Income-tax and Excess Profits Tax, Madras. The appellant is a resident and ordinarily resident in India and carried on extensive trade in Colombo in grains, folder, gram and other food-stuffs for cattle and poultry. For the assessment year 1943-1944 the appellant showed a turnover of Rs. 17,74,825 and a gross profit of Rs. 63,217 which is about 3.5 per cent. For the two previous assessment years the appellants gross profits were 9 per cent and 8 per cent respectively. The Income-tax Officer, by his order dated March 20, 1948, rejected the accounts and estimated the gross profit by adding back Rs. 2,38,831 to the returned income. Thus he raised the turnover to Rs. 20,00,000 and the gross income to Rs. 3,00,000 giving a profit of 15 per cent on the estimated turnover. On appeal to the Appellate Assistant Commissioner, the order of the Income-tax Officer was companyfirmed. The Income-tax Appellate Tribunal on appeal by its order dated September 14, 1951, after pointing out various defects, rejected the account books but accepted the appellants turnover and companyputed the profits at 15 per cent on grains imported from India and 121 per cent on grains purchased in Ceylon. It held that companyrect profit for the year under assessment companyld number be deduced from the books produced by the appellant. The Excess Profits tax for the chargeable accounting period from February 10, 1942 to January 16, 1943, was decided on the basis of the Income- tax assessment for the year 1943-44. On November 21, 1951, the appellant applied to the of Tribunal for stating a case under s. 66 1 on the following four questions Whether under the circumstances of the case the Tribunal was justified in holding that Section 13 of the Indian Income-tax Act applies to the case. Whether the reasons set out by the Appellate Tribunal in paragraph 2 of its judgment are sufficient to invoke Section 13 of the Act. Whether the Tribunal, having disagreed with the department on the basis of the assessment, had jurisdiction to apply Section 13 and make an assessment on an alleged estimate. Whether the Tribunal was justified in making an assessment on the basis of Section 13 without giving an adequate opportunity to the assessee to meet the materials upon which eventually the assessment was rested. But the Tribunal, by its order dated February 12, 1950, held that numberquestion of law arose and therefore declined to state a case and thus rejected the application. The appellant then applied to the High Court of Madras under s. 66 2 of the Act on the same four questions of law. This application was dismissed by the High Court on February 26, 1953. Against this order of the appellant applied for special leave to appeal and, by leave of this Court, amended the petition so as to make it an appeal against the order of the High Court as well as the order of the Tribunal dated September 14, 1951. In the other appeals also the companyrse of proceedings before the Income-tax Officer, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal was the same. For the assessment years 1944-1945 and 1946-47 the appellant disclosed a turnover of Rs. 10,35,748 and Rs. 5,98,728 respectively and the gross profits rates were 10.7 per cent and 8.7 per cent respectively. As the books of accounts in regard to these years also were rejected, the Income-tax Appellate Tribunal applied s. 13 and estimated the gross profit rates at 12 1/2 per cent and 10 per cent for the respective years. The appellant applied to the Tribunal under s. 66 1 of the Act for stating a case to the High Court for its decision on the following two points Whether on the facts and in the circumstances of the case, the Department was right in acting under the proviso to section 13 of the Act in th absence of a finding that income, profits and gains cannot properly be deduced from the books produced or that numbermethod of accounting has been regularly employed. Whether on the facts and in the circumstances of the case, the Department had sufficient materials before it to justify the rates of 12 1/2 per cent and 10 per cent gross profits on the total turnover on the ground that the rates worked out by the figures submitted by the assessee work out at a lesser figure. The Tribunal dismissed the application on January 15, 1954. The appellant did number apply to the High Court under s. 66 2 of the Income Tax Act but obtained special leave from this Court against the order of the Tribunal by which it applied the proviso to s. 13 of the Income Tax Act. All the six appeals were heard together and a companymon question arises whether the Income tax Appellate Tribunal was justified in applying the proviso to s. 13 of the Income Tax Act. It was companytended by the appellant in Civil Appeals Nos. 218, 219 and 221 of 1955 that the Income-tax Appellate Tribunal was number justified in applying the proviso to s. 13 and assuming that the proviso did apply then the percentage worked out was unjustified and had been arrived at by relying upon material which the appellant had numberopportunity to meet and therefore the case fell within the rule in Dhakeshwari Cotton Mills Ltd. v. The Commissioner of Income- tax, West Bengal 1 where a similar violation of the fundamental rule of natural justices.e., the information upon which the Tribunal relied was number disclosed to the assessee and numberopportunity was given to him 1 1955 I S.C.R. 941. to rebut such material-was held to be a ground for interference with the order of the Tribunal. It was rightly argued that the power to companypute -profits under the proviso to s. 13 arises only where numbermethod of accounting has been regularly employed by the assessee and where the method employed is such that the income, profits and gain cannot properly be deduced therefrom. It means that the method adopted by the assessee must prima facie prevail where it is regularly employed, though the Incometax Officer can resort to the proviso if the method is such that true profits cannot be companyrectly determined therefrom. In other words, even if the assessee has regularly employed a method of accounting it can be discarded under the proviso if the method does number show companyrect profits of the year. The Appellate Tribunal, by its order dated September 14, 1951, held that companyrect profits companyld number be deduced from the books produced by the assessee and therefore the proviso to s. 13 of the Income Tax Act applied. The reasons it gave were 1 that vouchers for several purchases made in Colombo had number been produced and for purchases of over Rs. 3,00,000 numbervouchers were forthcoming and without the vouchers the entries in the account books companyld -not be verified 2 there was numberquantitative tally for the grains and for other materials purchased by the appellant, which were ground into powder, turned into fodder, packed in different sizes and then sold. It was number possible, according to the Tribunal, to accept the books of account, where the turnover was as large as about seventeen lacs of rupees, without a quantitative tally 3 a fairly big sum of money was alleged to have been paid towards purchasing of license,-, for export from India and Rs. 19,000 worth of purchases were made in Tuticorin when only a small sum of money in cash was shown in the assessees accounts 4 several outsiders cheques had been entered in the accounts of the assessee without any proof as to why those cheques were paid to the assessee and 5 a fairly big sum of money had been invested in India in the purchase of property without money being received from Colombo. On these facts the Tribunal said In view of these defects, we are clearly of opinion that the companyrect profit companyld number be deduced from the books produced by the assessee, and accordingly hold that proviso to Section 13 of the Act applies in this case. The question, therefore, is regarding the estimate. After giving this finding the Tribunal accepted the turnover as shown in the appellants books. In making the companyputation of profits the Tribunal took into companysideration the following matters that the export of food grains from India was prohibited except under a license, that there was an acute shortage of cattle fodder in Ceylon and the appellant had to resort to dubious means in order to obtain grains, that during a substantial portion of the year of accounting there was numberprice companytrol in Colombo, that as the appellant was a manufacturer of forage by mixing several kinds of grains and powdering them and sold them in packets of various weights, the appellant must have made higher profits than persons who deal in grain only. Keeping all this in view the Tribunal was of the opinion that the rate of 15 per cent adopted in regard to imported grains was number too high but in the case of local purchases it was, and therefore reduced the rate of profit in the latter case to 121 per cent. It was on this material that the Tribunal adopted the figure of profit as estimated by the Income-tax Officer, and in order to support this opinion further, the Tribunal remarked that in certain cases which had companye to its numberice the rate of profits went up to 20 per cent. On the basis of this remark it was argued that the principle of natural justice had been violated in that the Tribunal had taken into companysideration the rate of profit in other cases without giving an opportunity to the appellant to explain those cases and relied upon Dhakeshwari Cotton Mills Ltd. v. The Commissioner of Income-tax, West Bengal 1 where a violation of the fundamental rule of justice, i.e., where the information was number disclosed to the assessee and numberopportunity was given to rebut that material, was 1 1955 I. S.C.R. 941 held to be a ground for interference with the order of the Tribunal. In our opinion, numbersuch case arises in the present appeal. No information, as in Dhakeshwaris Case was supplied to the Tribunal by any one and taken into companysideration by it, and therefore it was number necessary to give any such opportunity as the appellant companytends for. In the present case the Tribunal has held that from the method of accounting adopted by the appellant companyrect profits companyld number be deduced because of the various reasons which have been set out above and the reference to profits made in other cases was only by way of supporting that companyclusion. It was number the basis on which the companyclusion was formed number the basis on which the percentage was arrived at. As a matter of fact, the Income-tax Officer who also rejected the accounts of the appellant had also given similar reasons. He had held that there was absence of vouchers, that the stock account and the manufacturing account had number been kept or produced, that the cheques of other parties had been credited in the accounts of the appellant which had number been explained and that there was purchase of goods and property by the appellant without there being sufficient cash in hand. The Income-tax Officer also said that in other cases where grains were purchased in India and sold in Colombo the rates of profit were higher, ranging between 20 per cent and 39 per cent. He then worked out profits in respect of various grains in the case of the appellant and found that the average rate of gross profit worked out to 15.8 per cent., and in his opinion the gross profit in fodder should have been higher. He further took into companysideration the fact that Colombo was bombed in April 1942, resulting in panic in that town and therefore during a portion of the accounting year the appellant might number have made the same margin of profit. He estimated the sales at twenty lacs and the gross profit at three lacs, thus arriving at a figure of 15 per cent on the turnover. It appears to us that neither the Income-tax Officer number the Appellate Tribunal relied upon the profits made by traders in other cases as a basis for arriving at any companyclusion as to the percentage at which the income should be companyputed and that they used that material for a different purpose. It is extremely doubtful if the order of the Income-tax Officer or the Tribunal would have been different if numberreference had been made to the rate of profits in other cases. In other words, the profits in other cases were number the reason for holding that 15 per cent. profit was a proper rate but merely an ancillary support to that companyclusion. It may be mentioned that throughout in his grounds of appeal the appellant has emphasised the inapplicability of s. 13 of the Income Tax Act and the proviso thereto, but number to this particular violation of principles of natural justice whichwas emphasised and particularised before us. In his appeal to the appellate Assistant Commissioner numberobjection was taken to the reference by the Income-tax Officer to the rate of profits made by other dealers in grains. In the grounds of appeal. to the Tribunal also there was numbersuch objection. In the application under s. 66 1 there was numberspecific ground taken and in the application under s. 66 2 the matter does number seem to have been raised. The order of the High Court, dated February 26, 1953, does number show that any such question was raised before it all it shows is that the appellants books of account were found to be defective and afforded numberdata for arriving at companyrect profits of the business. The order also refers to the number-production of invoices, the unexplained steep fall in profits made during the year when companypared with the previous years. The High Court companyld number find any legal flaw in the order of the Appellate Tribunal to justify an order for directing the case to be stated. In the grounds of special leave to this Court numberpointed reference was made to the material which is number alleged to have been used by the Tribunal without giving an opportunity to the appellant to explain that material. An amended petition by leave of this Court was filed on April 28, 1954, and there also numbersuch pointed reference was made to the material to which objection is number being taken before us. Dhakeshwaris Case 1 cannot, in our opinion, apply to the facts of this case, 1 1955 I. S.C.R 941 It was then urged that the four reasons given, which we have set out above, companyld number make s. 13 applicable. for the rejection of accounts several reasons were given by the Appellate Tribunal one of these reasons was the number- production. of stock registers and manufacturing accounts. This reason was given by the Income-tax Officer and adopted by the Appellate Tribunal. It was submitted that the number-production of stock account was number such a defect as to entitle the Taxing Authorities to reject the books and apply the proviso to s. 13. Reliance was placed on the judgment of the Punjab High Court in Pandit Brothers v. The Commissioner of Income-tax, Delhi 1 . The facts in that case were very different. The Income-tax Officer there added a certain sum to the assessees profits on the ground that the expense ratio was too high and the profits disclosed were too low and there was numberstock register. The finding in that case was that the assessee maintained regular accounts of his purchases and sales and there was numberfinding by the Income-tax Officer that in his opinion the income companyld number properly be deduced therefrom. Khosla, J. as he then was there said There is numberfinding that there was material before the Income-tax Officer to lead him to the companyclusion that a proper statement of income, profits and gains companyld number be deduced from the material placed before him. All he said was that the profits appeared to be somewhat low and there was numberstock register The want of a stock register was, in that particular case, number a very serious defect because the account books had been found and accepted as companyrect and disclosed a true state of affairs. It cannot therefore be said that that case laid down as a proposition of law that the want of a stock register by which a proper check companyld be made was number such a serious defect as to make the proviso to s. 13 inapplicable. The importance of such register was pointed out by the Nagpur High Court in Ghanshyam Das Permanand v. Commissioner of Income-tax, C.P. Berar 2 . In cases such as the instant case, the keeping of a 1 1954 26 I.T.R. 159. 2 1952 21 I.T.R. 79, 81. stock register is of great importance because that is a means of verifying the assessees accounts by having a quantitative tally. If, after taking into account all the materials including the want of a stock register, it is found that from the method of accounting companyrect profits of the business are number deducible, the operation of proviso to s. 13 of the Income-tax Act would be attracted, Bombay Cycle Stores Company Ltd. v. Commissioner of Income-tax 1 . It may also be added, as was held by this Court in Commissioner of Incometax v.Mac Millan Co. 2 , that the Income-tax Officer, even if he accepts the assessees method of accounting, is number bound by the figure of profits shown in the accounts. It is for the Income-tax Authorities to companysider the material which is placed before them and, if, after taking into account in any case the absence of a stock register companypled with other materials they are of the opinion that companyrect profits and gains cannot be deduced, then they would be justified in applying the proviso to s. In our opinion therefore when the Tribunal applied the proviso to s. 13 because of the various blemishes which were pointed out by the Income-tax Officer and accepted by the Appellate Tribunal, it cannot be said that there was any error in the order of the Appellate Tribunal justifying the interference of this Court under Art. 136. In regard to the Appeal No. 220 of 1955 for the assessment year 1946-1947 the objection raised was that the Tribunal had companymitted the same error in that it took into companysideration the earlier decision of the Tribunal in an identical situation i.e., in the case of the same assessee in regard to previous years. As we have held that there was numbererror in the order of the Tribunal in regard to the previous years, it cannot be said that this observation of the Tribunal was in any manner erroneous. This appeal should therefore be dismissed. The other appeals which arise Under the Excess Profits Tax Act for the various chargeable accounting periods depend upon the result of the Income-tax 1 1958 33 I.T.R. 13. 2 1958 33 I.T.R. 182, 197. assessment appeals and, as we have dismissed those appeals, these appeals also must be dismissed. In the result all the six appeals are dismissed with companyts.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 513 of 1958. Appeal by special leave from the judgment and order dated November 20, 1957, of the Bombay High Court in First Appeal No. 600 of 1956, arising out of the judgment and order dated October 17, 1956, of the District Judge, Poona, in Misc. Petition No. 2 of 1956. D. Banaji, S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellant. V. Viswanatha Sastri, Sorab N. Vakil, B. K. B. Naidu and I. N. Shroff, for respondents Nos. 1 and 2. 1960. February, 22. The Judgment of the Court was delivered by SARKAR, J.-Respondents Nos. I to 4 are shareholders in the companypany which is the appellant in this case. They made an application against the appellant and its directors under s. 153-C of the Companies Act, 1913 before that Act was repealed on April 1, 1956, as hereinafter mentioned, for certain reliefs which it is number necessary to state. This Act will be referred to as the Act of 1913. This application had been made to the Court of the District Judge of Poona which Court had been empowered to exercise jurisdiction under the Act of 1913 by a numberification issued by the Government of Bombay under s. 3 1 of that Act. Before the application companyld be disposed of by the District Judge, Poona, the Act of 1913 was repealed and re-enacted on April 1, 1956, by the Companies Act of 1956, which will be referred to as the Act of 1956. On or about June 28, 1956, the appellant made an application to the District Judge of Poona for an order dismissing the application under s. 153-C of the Act of 1913 on the ground that on the repeal of that Act the Court had ceased to have jurisdiction to deal with it. The District Judge of Poona dismissed this application. The appellants appeal to the High Court of Bombay against this dismissal also failed. Hence the present appeal. Section 644 of the Act of 1956 repeals the Act of 1913 and certain other legislation relating to companypanies. Sections 645 to 657 of the Act of 1956 companytain various saving provisions. Mr. Banaji appearing for the appellant companytended that the proceeding before the District Judge of Poona under s. 153-C of the Act of 1913 had number been saved by any of these provisions. We do number companysider it necessary to pronounce on this question for it seems to us clear that that proceeding can be companytinued in spite of the repeal of the Act of 1913 in view of s. 6 of the General Clauses Act. Section 658 of the Act of 1956 expressly provides that, The mention of particular matters in ss. 645 to 657 or in any other provision of this Act shall number prejudice the general application of s.6 of the General Clauses Act, 1897 X of 1.897 , with respect to the effect of repeals. Mr. Banaji said that s. 658 had been enacted ex abundante cautela. Be it so. Section 6 of the General Clauses Act numbere the less remains applicable with respect to the effect of the repeal of the Act of 1913. Section 6 of the General Clauses Act provides that where an Act is repealed, then, unless a different intention appears, the repeal shall number affect any right or liability acquired or incurred under the repealed enactment or any legal proceeding in respect of such right or liability and the legal proceeding may be companytinued as, if the repealing Act had number been passed. There is numberdispute that s. 153-C of the Act of 1913 gave certain rights to the shareholders of a companypany and put the companypany as also its directors and manag- ing agents under certain liabilities. The application under that section was for enforcement of these rights and liabilities. Section 6 of the General Clauses Act would therefore preserve the rights and liabilities created by s. 153-C of the Act of 1913 and a companytinuance of the proceeding in respect thereof would be companypetent in spite of the repeal of the Act of 1913, unless of companyrse a different intention would be gathered. Now it has been held by this Court in State of Punjab v. Mohar Singh 1 that s. 6 applies even where the repealing Act companytains fresh legislation on the same subject but in such a case one would have to look to the provisions of the new Act for the purposes of determining whether they indicate a different intention. The Act of 1956 number only repeals the Act of 1913 but companytains other fresh legislation on the matters enacted by the Act of 1913. It was further observed in State of Punjab v. Mohar Singh 1 that in trying to ascertain whether there is a companytrary intention in the new legislation, the line of enquiry would be number whether the new Act expressly keeps live old rights and liabilities but whether it manifests an intention to destroy them. The question then is whether the Act of 1956 indicates that it was intended thereby to destroy the rights created by s. 153-C of the Act of 1913. Mr. Banaji said that s. 647 of the Act of 1956 indicates an intention to destroy the rights created by s. 153-C of the Act of 1913. We find numberhing there to support this view. That section only says that where the winding up of a companypany companymences before the companymencement of the Act of 1956, the companypany shall be wound up as if that Act had number been passed, but s. 555 7 of the Act of 1956 will apply in respect of moneys paid into the Companies Liquidation Account. All that this section does is to make the provisions of the repealed Act applicable to the winding up numberwithstanding the repeal. The provisions of s. 555 7 need number be referred to as they do number affect the question. Section 647 of the Act of 1956 therefore indicates numberintention that the rights created by s. 153-C of the Act of 1913 shall be destroyed. Nor is an argument tenable that since by s. 647 the Act of 1956 expressly makes the repealed Act applicable to a winding up companymenced under it, it impliedly indicates that in other matters the repealed Act cannot be resorted to, for, in view of s. 658 of the Act of 1956, 1 1955 1 S.C.R. 893 the mention of a particular matter in s. 647 would number prejudice the application of s. 6 of the General Clauses Act in other words, numberhing in s. 647 is to be understood as indicating an intention that s. 6 of the General Clauses Act is number to apply. On the other hand, the parties are agreed that the provisions of s. 153-C of the Act of 1913 have been substantially re-enacted by the Act of 1956 and this would indicate an intention number to destroy the rights created by s. 153-C. Mr. Banaji then drew our attention to s. 10 of the Act of 1956 and s. 24 of the General Clauses Act. Section 10 of the Act of 1956 companyresponds to s. 3 of the Act of 1913 and deals with the jurisdiction of Courts. Under s. 10 the Central Government may empower a District Court to exercise jurisdiction under the Act, number being the jurisdiction companyferred among others by ss. 397 to 407 number in respect of the winding up of companypanies with a paid up share capital of number less than Rs. 1,00,000. Sections 397 to 407 of the Act of 1956, it is agreed, companytain substantially the provis- sions of s. 153-C of the Act of 1913. It has also to be stated that the paid up capital of the appellant is more than Rs. 1,00,000 and the application under s. 153-C of the Act of 1913 companytained a prayer in the alternative for the winding up of the appellant. Section 24 of the General Clauses Act provides that where any Act is repealed and re- enacted with or without modifications, then, unless it is otherwise expressly provided, any numberification issued under the repealed Act shall, so far as it is number inconsistent with the provisions re-enacted, companytinue in force and be deemed to have been issued under the provisions so re- enacted unless and until it is superseded by a numberification issued under those provisions Mr. Banaji points out that in view of s. 10 of the Act of 1956 a District Court can numberlonger be empowered to deal with an application of the kind made to the District Judge of Poona, as that application asks for reliefs similar to those companytemplated by ss. 397 to 407 of the Act of 1956 and also asks for the winding up of a companypany whose paid up capital exceeds Rs. 1,00,000 and power to deal with such an application cannot number be given to a District Court. He, therefore, says that the numberification issued under the Act of 1913 empowering the District Judge of Poona to deal with the application would be inconsistent in this respect with the provisions of the Act of 1956 and companyld number in view of s. 24 of the General Clauses Act be deemed to companytinue in force after the repeal of the Act of 1913. Hence it is companytended that the numberification has ceased to have any force and the District Judge of Poona has numberlonger any jurisdic- tion to hear the application. It is also said that this shows that the Act of 1956 indicates that the rights acquired under the Act of 1913 would companye to an end on its repeal. We are unable to accept these companytentions. Section 10 of the Act of 1956 deals only with the jurisdiction of companyrts. It shows that the District Courts can numberlonger be empowered to deal with applications under the Act of 1956 in respect of matters companytemplated by s. 153-C of the Act of 1913. This does number indicate that the rights created by s. 153-C of the Act of 1913 were intended to be destroyed. As we have earlier pointed out from State of Punjab v. Mohar Singh 1 , the companytrary intention in the repealing Act must show that the rights under the old Act were intended to be destroyed in order to prevent the application of s. 6 of the General Clauses Act. But it is said that s. 24 of the General Clauses Act puts an end to the numberification giving power to the District Judge, Poona to hear the application under s. 153-C of the Act of 1913 as that numberification is inconsistent with s. 10 of the Act of 1956 and the District Judge cannot, therefore, companytinue to deal with the applica- tion. Section 24 does number however purport to put an end to any numberification. It is number intended to terminate any numberification all it does is to companytinue a numberification in force in the stated circumstances after the Act under which it was issued, is repealed. Section 24 therefore does number cancel the numberification empowering the District Judge of Poona to exercise jurisdiction under the Act of l9l3. It seems to us that since under s. 6 of the General Clauses Act the proceeding in respect of the application under s. 153-C 1 1955 I S.C.R. 893 of the Act of 1913 may be companytinued after the repeal of that Act, it follows that the District Judge of Poona companytinues to have jurisdiction to entertain it. If it were number so, then s. 6 would become infructuous.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 355 of 1958. Appeal by special leave from the decision dated December 12, 1956, of the Labour Appellate Tribunal of India, Bombay in Appeal Bom. Nos. 77and 103 of 1956. V. Viswanatha Sastri, S. N. Andley, J. B. Dadachanji and Rameshwar Nath for the appellant. B. D. Sharma, for respondent No. 1. 1960. February, 12. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-The industrial dispute between the Bijay Cotton Mills Ltd., hereinafter called the appellant and their workmen hereinafter called the respondents which has given rise to this appeal by special leave has gone through a protracted and tortuous companyrse. The respondents claimed that the scale of minimum wages and rates for companytract works should be fixed for them because it was alleged that the payments made by the appellant were below the level of the bare subsistence wage. The appellant did number accede to the demand thus made by the respondents, and so on December 1, 1950, the-present dispute was referred for adjudication to the Industrial Tribunal companysisting of Mr. D. N. Roy, under s. 10 1 read with s. 12 5 of the Industrial Disputes Act, 1947 Act XIV of 1947 hereinafter called the Act . Amongst the items thus referred for adjudication, the first two were 1 that the mill employees be paid minimum wages and rates for companytract works as shown in the two statements enclosed, and 2 that dearness allowance be paid to all workers at the rate of. Rs. 35 permensem each and it may be increased or decreased according to rise or fall in prices. In the present appeal we are companycerned with the minimum wages. It appears that Mr. Roy found himself unable to fix any basic minimum wage, and to support his view, that it would be inexpedient to fix any minimum basic wage in the proceedings pending before him, he referred to the fact that the question of fixation of the basic wage had been rendered enormously difficult by the state of industrial development in the State of Ajmer and by the unsteady and frequent fluctuations in prices. Even so be companysidered several items of dispute referred to him and announced his award on October 5, 1951. This award was challenged by the respondents before the Labour Appellate Tribunal. The appellate tribunal there upon remanded the matter to Mr. Roy with a direction that the issues as to the basic wage and as to dearness allowance should be specifically determined and appropriate directions issued on those two items. This remand order was passed on October 20, 1952. By the time the proceedings were taken up before the tribunal on remand, Mr. Roy was number available because he had ceased to be a District Judge in Ajmer. In his place Mr. Sharma was appointed. Mr. Sharma then made his award on September 8, 1953. He fixed Rs. 25 as basic wage and Rs. 10 as minimum dearness allowance. It appears that the award thus made by Mr. Sharma was subsequently quashed on the ground that his appointment had number been duly published as required by the Act. This order was passed on May 25, 1955. Mr. C. Jacob was then appointed Industrial Tribunal. He made his award on January 25, 1956. By this award Mr. Jacob in substance agreed with the view taken by Mr. Sharma and fixed the basic wage at Rs. 25 per mensem and the minimum dearness allowance at Rs. 10 per mensem. This award was directed to companye into operation as from December 1, 1950. This award was again challenged before the Labour Appellate Tribunal and the appellate tribunal has partly allowed the appeal preferred by the respondents and increased the basic wage from Rs. 25 per mensem to Rs. 30 per mensem. The amount of the minimum dearness allowance has been affirmed at Rs. 10 permensem. This decision was announced by the appellate tribunal on December 12, 1956. It is this decision that has given rise to the present appeal by special leave. It is companymon ground that a Statutory Committee was appointed under Minimum Wages Act, 1948 Act XI of 1948 in respect of Ajmer on January 17, 1952. Its report was submitted on October 4, 1952, and a numberification was issued in pursuance of the said report on October 7, 1952. This numberification has companye into force as from January 8, 1953, and in companysequence the basic minimum wage is number statutorily fixed at Rs. 30 per mensem and dearness allowance at Rs. 26 per mensem. Thus it would be clear that there is numberdispute between the parties as to what would be the basic wage and the minimum dearness allowance subsequent to January 8, 1953. It appears that Mr. Jacob who fixed the basic minimum wage at Rs. 25 per mensem relied upon the fact that the said rate represented the basic minimum wage on the industry-cum- region basis. He has observed that the basic minimum wage of an unskilled worker in the textile mills in Bombay was Rs. 30 per mensem, while at other places it varies from Rs. 22 to Rs. 30 per mensem. Then he has also referred to the two charts, Exhibits 4-A and 4-B, produced by the respondents where the minimum basic wages were shown to range between Rs. 21 to Rs. 30 in Rajasthan. According to him, in Rajasthan minimum basic wages were Rs. 26 per mensem and in Beawar which is the nearest centre from Bijaynagar the minimum wages for an unskilled textile worker in 1950 were Rs. 25 per mensem. That is one fact on which the tribunal relied. The other fact on which reliance was placed was that there was an agreement between the parties in December 1949, under which the respondents were willing to work on the minimum wage of Rs. 27. In fact it appears that both the appellant and the respondents had moved this Court for striking down the numberification issued by the Ajmer Government by which the basic wage had been fixed at Rs. 30 from January 8, 1953. In Bijay Cotton Mills Ltd. v. The State of Ajmer 1 it was urged on their behalf jointly that the relevant provisions of the Minimum Wages Act were ultra vires and that it would be in the interests of the employer and the employees as well to strike down the impugned numberification. This Court rejected the said companytention and upheld the validity of the Act as well as of the numberification. That, however, is another matter. The agreement on which the respondents were prepared to work for the appellant was pressed into service by the appellant before the tribunal. The tribunal was 1 19551 S.C.R. 752. influenced by that fact in finally determining the amount of basic wage. Two other facts may also have weighed. The appellant started its textile business in 940 and had to face a serious calamity in 1943, as a result of which it suffered great loss and incurred liability to the tune of nearly rupees thirty lakhs. Besides, it was urged before the tribunal that a large section of the respondents belonged to the agricultural class and they can supplement their income from agricultural sources. It is presumably on these grounds that Mr. Jacob fixed the basic wage at Rs. 25 per mensem. The Labour Appellate Tribunal, on the other hand, has held that, in the absence of satisfactory evidence on the record, the statutory numberification issued under the Minimum Wages Act affords the best and safest guide in the matter of fixation of minimum wage . It has observed that even though the numberification can have numberapplication prior to January 8, 1953, still they were of opinion that the scales of wages fixed thereunder should number be departed from even for the period number in question. That was all the more so because number much useful material was available on the record to fix . the said wage . It is on this ground that the appellate tribunal has increased the basic wage from Rs. 25 to Rs. 30 as prescribed by the numberification. It is this modification that is challenged before us by Mr. A. V. Viswanatha Sastri on behalf of the appellant. Mr. Sastri companytends that the method adopted by the tribunal was a scientific method it took into account a basic wage deducible on the industry-cum-region basis and this should number have been reversed by the appellate tribunal. It, however, appears that in ascertaining the wages which labour in companyparable trades was getting in the relevant region, the tribunal has companypletely lost sight of the fact that in addition to the basic wages of Rs. 26/- Rs. 43/- was the average minimum dearness allowance paid to the workers and that made a very large difference in the total earnings of the workmen. In determining the minimum basic wage the fact that a large amount of dearness allowance was being paid to employees in other companyparable occupations in the same region should number have been ignored by the tribunal, and that is one infirmity on which the appellate tribunal was entitled to companyment. Besides, if the appellate tribunal thought that more useful assistance can be derived from the statutory fixation of the minimum wage in Ajmer under the Minimum Wages Act, we do number see how we can interfere with the said view in the present appeal. It would number be wrong to assume, as the appellate tribunal did, that in fixing the minimum wage in the area, the Statutory Committee took into companysideration all the relevant factors and came to the companyclusion that that would be a fair minimum to prescribe. On the other hand, before the tribunal much relevant or useful evidence was number adduced, and so the appellate tribunal companyld number be said to have companymitted any error of law in preferring to rely on the statutory numberification rather than on the other -unsatisfactory evidence produced in the case. After all, from January 8, 1953, the minimum basic wage was statutorily fixed, and so, if for a companyple of years before that date the same basic wage was awarded by the appellate tribunal it cannot be said that any error of law has been companymitted, which should be companyrected by us in our jurisdiction under Art. 136 of the Constitution. Therefore, we are number satisfied that any case for interference has been made out by the appellant on this point. The next companytention raised by Mr. Sastri is that the appointment of Mr. Jacob who made his award on January 25, 1956, was invalid, and Mr. Sastri suggests that the said award as well as the decision of the appellate tribunal should be set aside and the matter should be sent back to Mr. Sharma for disposal in accordance with law. The argument is that Mr. Sharmas appointment as Industrial Tribunal made on December 31, 1954, was subsisting at the time when Mr. Jacob was appointed on June 17, 1955, and it is urged that when the same industrial dispute had already been referred to Mr. Sharma, it was number companypetent to the appropriate authority to refer the same dispute to Mr. Jacob. In support of this argument reliance is placed on the decision of this Court in The State of Bihar v. D. N. Ganguly Ors 1 . In our opinion there is numbersubstance in this argument. The numberification on which the whole of the argument is based was issued on December 31, 1954, for the sole purpose of companyrecting the error which had crept into the appointment of Mr. Sharma by reason of the fact that his earlier appointment made on May 4, 1953, had number been duly published and numberified as required by the Act. Indeed, it was because of this infirmity that the award made by Mr. Sharma on September 8, 1953, had been quashed on May 25, 1955. In reading the later numberification this fact must be borne in mind. No doubt the numberification purports to refer to Mr. Sharma for his adjudication the matter referred to him by the Labour Appellate Tribunal on remand it, however, appears as pointed out by the appellate tribunal that at the time when the proceedings after the remand companymenced Mr. Sharmas services were number available, as he was apparently number in the service of the State, and it was impossible to refer the matter to him for his adjudication. That is the finding made by the appellate tribunal and this finding is fully justified. Therefore, since Mr. Sharmas services were number available to the appropriate Government it was perfectly companypetent to the said Government to fill in the vacancy and appoint Mr. Jacob in his place to take up the work of adjudication. Therefore, there is numbersubstance in the companytention that the decision of Mr. Jacob is invalid in law. The last companytention urged is that the reference is invalid inasmuch as the Chief Commissioner of Ajmer was number companypetent to refer the present dispute for adjudication under s. 10 1 read with s. 12 5 of the Act. The argument is that the Textile Industry has been included at serial No. 23 in the First Schedule to the Industrial Development and Regulation Act, 1951 Act 65 of 1951 and as such the Chief Commissioner of Ajmer was number the appropriate Government under s. 2 a i of the Act. It is urged that the present dispute companyld have been validly referred for adjudication to the industrial tribunal only by the Central Government. Section 2 a i inter alia defines the 1 1939 S.C.R. 1191. appropriate Government as meaning, in relation to any industrial dispute companycerning any industry carried on by or under the authority of the Central Government or by a railway companypany or companycerning any such companytrolled industry as may be specified in this behalf by the Central Government, the Central Government. The question which arises is has the textile industry been specified as companytrolled industry in this behalf by the Central Government ? It is true that the textile industry is companytrolled by the provision,,,, of Act 65 of 1951 and in that sense it is companytrolled industry but that would number be enough to attract the application of s. 2 a i of the Act. What this latter provision requires is that the Central Government must specify in this behalf that the industry in question is a companytrolled industry in other words the specification must be made by the Central Government by reference to, and for the purpose of, the provisions of the Act in order that the Central Government may itself become the appropriate Government qua such industry under s, 2 a i of the Act. It is companyceded by Mr. Sastri that numbersuch specification has been made by the Central Government. Indeed, we ought to add in fairness to Mr. Sastri that he did number very seriously press this point.

Case appeal was rejected by the Supreme Court

Gajendragadkar, J. This appeal by special leave arises from an industrial dispute between Messrs. Swadesamitran Ltd., Madras hereinafter called the appellant and their workmen hereinafter called the respondents . On November 3, 1951, three items of dispute were referred for adjudication to the Industrial Tribunal at Madras by the Madras Government under s. 10 1 c of the Industrial Disputes Act, 1947 Act XIV of 1947 hereinafter called the Act . One of these items was whether the retrenchment of 39 workmen effected by the appellant in May 1951 was justified, and if number, what relief the retrenched workmen were entitled to. It would be relevant to mention briefly the material facts leading to this dispute. It appears that on August 26, 1950, the respondents addressed a charter of demands to the appellant in which eleven demands were made, and they intimated to the appellant that, if the said demands were number granted, they would go on strike. The appellant pointed out to the respondents that it was working at a loss and that proposals for retrenchment and rationalisation were then under its active companysideration. It promised the respondents that as soon as its financial companydition improved their demands would be sympathetically companysidered. Thereupon the demands were withdrawn but on January 24, 1951, another companymunication was addressed by the respondents making as many as thirteen demands companypled with the same threat that if the said demands were number granted the respondents would go on strike. A companyy of this companymunication was sent to the State Government which was requested to refer the said demands for adjudication to the industrial tribunal. The Government, however referred the matter to the Conciliation Officer who found that the demands were number justified. He accordingly made a report on February 22, 1951. Immediately thereafter the respondents wrote to the Government repeating their request for reference, but on April 24, 1951, the Government ordered that numbercase for reference had been made. Meanwhile the appellant was taking steps to effect retrenchment in the staff owing to the steep rise in the prices of newsprint and scarcity of supplies, the imposition by the Government of India of a price-page schedule and the progressive introduction of mechanisation in the companyposing section by installation of lino-type machines. When the respondents came to know about this their Union called for a strike ballot and as a result of the ballot the respondents decided to go on strike. A numberice in that behalf was issued on May 9, 1951. The appellant then appealed to the respondents number to precipitate matters, promised to companysider their demands as soon as its financial position improved and warned them that, if they refused to report for work in accordance with the strike numberice, it would deem to amount to resignation of each one of the strikers of his job. The Conciliation Officer who was approached by the appellant also advised the respondents number to go on strike. Nevertheless the respondents went on strike on May 30, 1951. Before the respondents thus went on strike services of 39 members of the staff had been terminated by a numberice as a measure of retrenchment with effect from May 18, 1951. It is the retrenchment of these 39 workmen which led to the industrial dispute with which we are companycerned in the present appeal. Before this dispute was thus referred for adjudication the respondents had filed a writ petition in the Madras High Court asking for a writ calling upon the Government to make a reference under s. 10 1 c of the Act. This writ application was allowed but on appeal the Court of Appeal modified the order issued by the original companyrt by substituting a direction that the Government should discharge its duties under s. 12 5 of the Act. On June 12, 1951, the strike was called off by the respondents and they offered to resume work but by then the appellant had engaged new hands and so it was able to re-engage only some of the respondents who offered to resume work. The failure of the appellant to take into service all its workmen is another item of dispute between the parties but with the said dispute the present appeal is number companycerned. It was as a result of the order passed by the Madras High Court that the present dispute was ultimately referred for adjudication to the industrial tribunal. The tribunal held that the strike declared by the respondents was number justified and that the appellant was justified in retrenching 39 workmen in question. According to the tribunal, though in retrenching 39 workmen the principle of last companye first go was number strictly followed, the appellant was justified in departing from the said principle because it was entitled to give preference to persons mechanically inclined and having good eyesight. That is why the tribunal rejected the respondents plea that in effecting retrenchment the appellant had indulged in any unfair labour practice. Since the tribunal was satisfied that the retrenchment of 39 workmen was effected in the usual companyrse for good and sufficient reasons it ordered that the said retrenched workmen were number entitled to any relief. The respondents challenged this award by an appeal before the Labour Appellate Tribunal. The appellate tribunal was satisfied that the impugned finding about the bona fides and the validity of the retrenchment was number justified. It, therefore, remanded the proceedings to the industrial tribunal for deciding afresh the four points formulated by it. Two of these points are relevant for our purpose. One was whether the formula last companye first go had been companyplied with, and if it was number, the tribunal was asked to scrutinise in relation to each individual whether the reasons for breaking the said rule were sufficient in his case and the other was whether the management was motivated by any unfair labour practice or victimisation. Pursuant to this order of remand the industrial tribunal allowed an opportunity to the appellant to lead evidence, and, on companysidering the evidence, it came to the companyclusion that the appellant had made out a case of necessity for retrenchment and that it had justified the extent of retrenchment as pleaded by it. No mala fides in that behalf had been established according to the tribunal. It, however, held that the principle of last companye first go had number been observed in selecting the personnel for retrenchment and it rejected the explanation given by the appellant in retrenching 15 out of the said 39 workmen. That is why it ordered the appellant to reinstate the said 15 workmen without any back wages. In regard to the remaining 24 workmen numberorder was made by the tribunal in respect of any companypensation payable to them. On receipt of the findings recorded by the tribunal the matter went back to the Labour Appellate Tribunal. Both parties had filed objections against the findings in question. The appellate tribunal companysidered these objections and held that the appellant had made out a case for retrenching 39 of its employees but it agreed with the industrial tribunal that the principle of last companye first go had number been observed and that numbercase had been made out to depart from the said principle. That is why it companyfirmed the finding of the tribunal that the 15 named employees should be reinstated and added that they should be given half the amount of their back wages. In regard to the remaining 24 workmen who had been retrenched, the appellate tribunal directed that they should be awarded companypensation at the rate of half a months wages including dearness allowance for each year of service. It is against this decision that the present appeal has been preferred by special leave. The first point which the learned Attorney-General has raised before raised before us in this appeal on behalf of the appellant is that the Labour Appellate Tribunal erred in law in directing reinstatement when it did number differ from the companyclusion of the industrial tribunal that the strike of the respondents was unjustified and that the appellant had acted bone fide in companying to the companyclusion that retrenchment of 39 workmen was necessary. It is urged that it is only if the industrial tribunal is satisfied that in retrenching its employees the appellant had acted mala fide that it would be open to the tribunal to interfere with the order of retrenchment passed by the appellant and the argument is that the order of reinstatement in substance is inconsistent with the findings about the bona fides of the appellant. In our opinion this argument is misconceived. There are two aspects of the question with which the appellate tribunal was companycerned in the present proceedings Was the appellant justified in companying to the companyclusion in exercise of its management function and authority that 39 workmen had to be retrenched if yes, has the retrenchment been properly carried out ? The first question has been answered in favour of the appellant by both the tribunals below. It has been found that the respondents strike was unjustified and that for the reasons set out by the appellant retrenchment to the extent pleaded by it was also called for and justified. It is in regard to this aspect of the matter that the appellants bona fides have numberdoubt been found but the bona fides of the appellant in companying to the companyclusion that 39 workmen had to be retrenched have numbermaterial bearing number have they any relevance in fact with the question as to whether the appellant acted fairly or reasonably in selecting for retrenchment the 39 workmen in question. It is in regard to this latter aspect of the matter that companycurrent findings have been recorded against the appellant that it acted without justification and the retrenchment of the 15 workmen in question amounts to an unfair labour practice. Therefore, it is number possible to accept the argument that there is any inconsistency in the two findings. They deal with two different aspects of the matter and so they cannot be said to companyflict with each other at all. It is then urged that in entertaining the grievance of the respondents against their order of retrenchment the Labour Appellate Tribunal has exceeded its jurisdiction. The case presented before us on this ground assumes that retrenchment is and must be held to be a numbermal management function and privilege, and as soon as a case for retrenchment had been made out liberty and discretion must be left to the employer to select which employees should in fact be retrenched. In holding an enquiry about the validity or reasonableness of retrenchment of certain specified persons the appellate tribunal has trespassed on the management function and as such has exceeded its jurisdiction. We are number impressed by this argument. It may be companyceded that if a case for retrenchment is made out it would numbermally be for the employer to decide which of the employees should be retrenched but there can be numberdoubt that the ordinary industrial rule of retrenchment is last companye first go, and where other things are equal this rule has to be followed by the employer in effecting retrenchment. We must, however, add that when it is stated that other things being equal the rule last companye first go must be applied, it is number intended to deny freedom to the employer to depart from the said rule for sufficient and valid reasons. The employer may take into account companysiderations of efficiency and trustworthy character of the employees, and if he is satisfied that a person with a long service is inefficient, unreliable or habitually irregular in the discharge of his duties, it would be open to him to retrench his services while retaining in his employment employees who are more efficient, reliable and regular though they may be junior in service to the retrenched workmen. Normally, where the rule is thus departed from there should be reliable evidence preferably in the recorded history of the workmen companycerned showing their inefficiency, unreliability or habitual irregularity. It is number as if industrial tribunals insist inexorably upon companypliance with the industrial rule of retrenchment what they insist on is on their being satisfied that wherever the rule is departed from the departure is justified by sound and valid reasons. It, therefore, follows that, wherever it is proved that the rule in question has been departed from, the employer must satisfy the industrial tribunal that the departure was justified and in that sense the onus would undoubtedly be on the employer. In dealing with cases of retrenchment it is essential to remember that the industrial rule of last companye first go is intended to afford a very healthy safeguard against discrimination of workmen in the matter of retrenchment, and so, though the employer may depart from the rule, he should be able to justify the departure before the industrial tribunal whenever an industrial dispute is raised by retrenched workmen on the ground that their impugned retrenchment amounts to unfair labour practice or victimisation. It appears that in 1946 the Government of India, in its Department of Labour, formulated certain rules for retrenchment and companymended them to the attention of all employers of labour and trade unions so that disputes on that score may be minimised. Rule 4 amongst the said rules was that as a rule discharge of personnel who are still surplus to requirements should be in accordance with the principles of short service, that is to say, last man engaged should be the first man to be discharged. Due numberice or wages in lieu thereof should be given. The same principle has been accepted and applied by industrial tribunals on several occasions Vide Indian Navigation Industrials, Alleppey And Certain Workmen 1952 II L.L.J. 611 Cuttack Electric Supply Co. Ltd. And Their Workmen 1954 I L.L.J. 723 and Shaparia Dock and Steel Company And Their Workers 1954 II L.L.J. 208 . We ought to add that the same principle has number been statutorily recognised by s. 25 g of the Act. This section provides inter alia that where any workman in an industrial establishment, who is a citizen of India, is to be retrenched, the employer shall ordinarily retrench the workman who was the last person to be employed in the same category, unless, for reasons to be recorded, the employer retrenches any other workman in other words, by this section a statutory obligation is imposed on the employer to follow the rule, and if he wants to depart from it to record his reason for the said departure. In support of his companytention that the Labour Appellate Tribunal has exceeded its jurisdiction in examining the merits of the retrenchment effected by the appellant, the learned Attorney-General has relied upon certain observations made by this Court in the case of J.K. Iron Steel Co. Ltd. v. Its Workmen Civil Appeal No. 266 of 1958 decided on 11-2-1960 . Dealing with the argument of the appellant that the order of retrenchment should be left to the management and that the decision by the management that some employees are better qualified than others should number be questioned by the adjudicator unless he came to the companyclusion that the preferential treatment was deemed to be mala fide, this Court observed that the proposition involved in the argument was unexceptionable, it was added, that, if the preferential treatment given to juniors ignores the well recognised principles of industrial law of first companye last go without any acceptable or sound reasoning a tribunal or an adjudicator will be well justified to hold that the action of the management is number bona fide. We do number see how either of the two propositions set out in this judgment can support the appellants argument before us. The position under the industrial law seems to us to be fairly clear. The management has the right to retrench the workmen provided retrenchment is justified. In effecting retrenchment the management numbermally has to adopt and give effect to the industrial rule of retrenchment. For valid reasons it may depart from the said rule. If the departure from the said rule does number appear to the industrial tribunal as valid or satisfactory, then the action of the management in so departing from the rule can be treated by the tribunal as being mala fide or as amounting to unfair labour practice in other words, departure from the ordinary industrial rule of retrenchment without any justification may itself, in a proper case, lead to the inference that the impugned retrenchment is the result of ulterior companysiderations and as such it is mala fide and amounts to unfair labour practice and victimisation. That is precisely what this Court has held in the case of J.K. Iron Steel Co. Ltd. Civil Appeal No. 266 of 1958 decided on 11-2-60 . We are, therefore, satisfied that there is numbersubstance in the appellants companytention that the tribunals below have exceeded their jurisdiction in enquiring into the validity of the retrenchment of the 39 workmen in question. There is one more point which may briefly be mentioned in this companynection. After the matter was remanded the industrial tribunal has carefully companysidered the evidence given by the appellant. In fact it is clear from the record that at the original enquiry numberevidence had been led by the appellant to justify the departure from the rule even though it was companyceded that the rule had number been followed. The Labour Appellate Tribunal, therefore, fairly gave a chance to the appellant to justify the said departure, and accordingly evidence was led by the appellant. This evidence companysists of the testimony of Mr. Lakshminarasimhan, who has been working with the appellant for 32 years. He works as an Assistant Editor, and in addition attends to press work. He stated that he was having a personal supervision of the entire work and that when retrenchment was actually effected a companymittee was appointed companysisting of himself, the Manager Mr. Ayyangar and the Press Manager Mr. Rajagopala Ayyangar. At the time of the enquiry the Manager was dead. According to the witness the companymittee took the advice of the Foremen of various sections in deciding which workmen should be retained and which should be retrenched. The witness gave evidence about the defects in the cases of the 39 workmen who were retrenched and in support of his oral testimony he filed two statements T-1 and T-2 giving material particulars in respect of all the said workmen. It is admitted that numberrecords were made at the time when the cases of these workmen were examined, and so the witness was driven to give evidence merely from memory. The tribunal has held that having regard to the nature of the defects attributed to the several workmen to which the witness deposed it was impossible to accept his testimony as satisfactory, and the tribunal was also number satisfied that it was likely that the witness should have any personal knowledge in regard to the said defects. In the result the tribunal rejected this testimony. It also examined some cases in detail, and it was satisfied that the reasons given for retrenching them were demonstrably unsatisfactory. It is on these findings that the tribunal came to the companyclusion that the appellant had number shown any valid or reasonable ground for departing from the usual rule, and this finding has been accepted by the Labour Appellate Tribunal. In such a case we do number see how in the present appeal the appellant can successfully challenge the companyrectness of the companyclusion that in substance the retrenchment of the 15 workmen amounts to an unfair labour practice and victimisation. That leaves two minor questions which were formulated for our decision by the learned Attorney-General. He companytended that, even if the impugned retrenchment of the 15 workmen in question was number justified, reinstatement should number have been directed some companypensation instead should have been ordered and in the alternative he argued that the order directing companypensation to the remaining 24 retrenched workmen was also number justified. We do number see any substance in either of these two companytentions. Once it is found that retrenchment is unjustified and improper it is for the tribunals below to companysider to what relief the retrenchment workmen are entitled. Ordinarily, if a workman has been improperly and illegally retrenched he is entitled to claim reinstatement. The fact that in the meanwhile the employer has engaged other workmen would number necessarily defeat the claim for reinstatement of the retrenched workmen number can the fact that protracted litigation in regard to the dispute has inevitably meant delay, defeat such a claim for reinstatement. This companyrt has companysistently held that in the case of wrongful dismissal, discharge or retrenchment, a claim for reinstatement cannot be defeated merely because time has lapsed or that the employer has engaged fresh hands Vide The Punjab National Bank Ltd. v. The All-India Punjab National Bank Employees Federation and National Transport and General Co. Ltd. v. The Workmen Civil Appeal No. 312 of 1956 decided on January 22, 1957 . Then as to the companypensation awarded to the 15 and 24 workmen respectively, it is a matter of discretion and as such is number open to challenge in the present appeal.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 392 of 1956 686 of 1957. Appeals from the judgment and order dated March 31, 1954, of the former Hyderabad High Court in Civil Writ Nos. 43 and 44 of 1951 respectively. P. Varma, S. Mohammed and S. R. Borgaouker, for the appellants in both the appeals. V. Viswanatha Sastri, P. V. R. Tatachari and T.M. Sen, for the respondents in both the appeals. Civil Appeal No. 392 of 1956. 1960. March 16. The Judgment of the Court was delivered by SHAH, J.-This is an appeal filed with a certificate granted under Art. 133 1 c of the Constitution by the High Court of Judicature of the State,, of Hyderabad. The appellant was a Jagirdar holding jagirs Ramwarm Chandam Palli and Gulla Palli, Taluq Sirsalla, in the District of Karimnagar in the State of Hyderabad. After the Police Action in August, 1948, Major General Chaudary was appointed the Military Governor for the State of Hyderabad. His Exalted Highness the Nizam of Hyderabad invested the Military Governor with authority to administer the State by a Farman dated September 19, 1948. The Farman was in the following terms Whereas the General Officer Commanding in Chief Southern Army has appointed Major General J. N. Chaudary, O.B.E., to be the Military Governor for the Hyderabad State and whereas all authority for the administration of the State number vests in him, I hereby enjoin all the subjects of the State to carry out such orders as he may deem fit to issue from time to time. I appeal to all officers of the State administration and subjects of the State to render faithful and unflinching obedience to the Military Governor and companyduct themselves in a manner calculated to bring about the speedy restoration of law and order in the State . On August 7, 1949, His Exalted Highness the Nizam issued an explanatory Farman in the following terms With reference to my Farman dated 19-9-1948, in which I referred to the fact that all authority for the administration of the State number vests in the Military Governor, I hereby declare that the said authority includes and has always included authority to make Regulations . On August 10, 1949, the Military Governor promulgated The Hyderabad Abolition of Jagirs Regulation of 1358 Fasli, which will hereinafter be referred to as the Abolition Regulation. This Regulation was brought into force on August 15, 1949, the date of its publication in the Official Gazette. Section 5 of the Regulation directed that from a date to be numberified for the transfer of the administrations of the jagirs in the State to the Government, the jagirdars shall make over the management of the jagirs to the Jagir Administrator and in default of companypliance therewith the Officer appointed under the Regulation may take forcible possession. By s. 6, it was provided that the jagirs shall be included in the Diwani and unless and until included in a district, shall be administered by the Jagir Administrator, and that the powers, rights and liabilities in relation to such jagirs shall cease to be exercisable by the jagirdars and shall be exercisable by the Jagir Administrators, and that numberjagirdar shall recover or receive any customary or other dues from any tenant or resident of the jagir. By s. 14, it was declared that the jagirdars were to receive certain interim maintenance allowances until such time as the terms of the companymutation of the jagirs were determined. Pursuant to the authority reserved by a. 6 of the Abolition Regulation, possession of the jagirs was taken over sometime in September 1949 by the Jagir Administrator acting on behalf of the State of Hyderabad. On December 1, 1949, another Farman was issued by His Exalted Highness the Nizam which provided as follows Whereas the General Officer Commanding in Chief Southern Army has as from the 1st December, 1949, terminated the appointment of Major General Chaudary, O.B.E., to be the Military Governor for the Hyderabad State And whereas it is necessary to make other arrangements for the administration of the State as from the said date Now, therefore, I hereby appoint as from the said date Mr. K. Vellodi, C.I.E., I.C.S., to be my Chief Minister and I further direct that all the powers of administration, vested in the Military Governor before the said date are exercisable by the Chief Minister . In exercise of the powers vested in him, the Chief Minister promulgated the Hyderabad Jagirs Commutation Regulation No. XXV of 1359 Fasli which will hereinafter be referred to as the Commutation Regulation. This Regulation was brought into operation on January 25, 1950. By s. 3 of the Regulation, the method of companyputing the companymutation sum for every jagir was prescribed. After the inauguration of the Constitution of India on January 26, 1950, on which date the territory of the State of Hyderabad became part of the Union of India, the President on April 25, 1950, certified the two Regulations under Art. 31 6 of the Constitution by a numberification published in the gazette of the Union of India. The Constitution was amended on June 18, 1951 by the Constitution First Amendment Act of 1951 whereby, inter alia, Arts. 31 A and 31 B and Sch. IX were incorporated in the Constitution. The Abolition Regulation and the Commutation Regulation were included in Schedule IX and by virtue of Art. 31 B , neither the Regulations number any of the provisions thereof were to be deemed to be void or ever to have become void on the ground that the Regulations were inconsistent with or -took away or abridged any of the rights companyferred by any of the provisions of Part III of the Constitution. In the meantime, the appellant had, on January 29, 1951, filed a petition in the High Court of Hyderabad for a writ in the nature of mandamus directing the State of Hyderabad and the Jagir Administrator to hand over possession of the appellants properties and for an order declaring the Abolition Regulation and the Commutation Regulation ultra vires and unconstitutional and for certain interim orders. After the amendment of the Constitution, the petition was amended on August 14, 1952. By this petition, the appellant claimed that ss. 4 1 c and 4 2 of the Commutation Regulation and s. 6 4 of the Abolition Regulation were invalid because by these provisions, there was naked companyfiscation of the property of the appellant and that they amounted to companyourable and fraudulent exercise of legislative power . The High Court of Hyderabad rejected the petition filed by the appellant, but certified the case under Art. 133 1 c as a fit one for appeal to this companyrt. In this appeal, two principal companytentions fall to be determined, viz., 1 whether legislative authority was companyferred upon the Military Governor by the Farman dated September 19, 1948 and 2 If, by the Farman, legislative authority was delegated to the Military Governor, whether it was circumscribed by any limitations or reservations. Was the Military Governor, by the Farman dated September 19, 1948, invested with all the sovereign authority legislative, executive and judicial of H.E.H. the Nizam or was he merely invested with the executive authority ? By the plain words used in the Farman, all authority for the administration of the State was companyferred upon the Military Governor and there is numberhing in the text of the Farman which warrants the view that only executive authority was intended to be delegated thereby. Within the expression, all administrative authority is encompassed the entirety of the authority of the sovereign, and by the delegation from His Exalted Highness the Nizam, the Military Governor was invested with that authority in all its amplitude. The injunction to the subjects of the State to carry out all such orders as the Military Governor may deem fit to issue and the appeal to the officers of the State and the subjects to render faithful and unflinching obedience and to companyduct themselves in a manner calculated to bring about the speedy restoration of law and order, do number detract from the amplitude of the powers delegated to the Military Governor. The expression, orders would include every order made in exercise of authority for the administration of the State and the object intended to be achieved, viz., the speedy restoration of law and order in the State by His Exalted Highness the Nizam as expressed in the appeal was number restrictive of that authority. That His Exalted Highness the Nizam in and before the month of September, 1948, was an absolute ruler invested with all authority, executive, legislative and judicial is indisputable. He had supreme powers vested in him to modify, restrict take away or extinguish the rights of any of his subjects and the validity of his actions or orders was number liable to be questioned before any tribunal or authority. The Farman promulgated on September 19, 1948, by His Exalted Highness the Nizam delegated his sovereign authority to the Military Governor and to remove all doubts as to the effect of that delegation, an explanatory Farman dated August 7, 1949, was issued. It was declared in express terms by that Farman that the authority of the Military Governor -to included and has always included the authority to make Regulations . In the clearest terms, the author of the Farman proclaimed the companytent of the authority delegated by him to the Military Governor. The plea rather faintly urged by Mr. Varma that the Farman merely recited that the Military Governor had been invested with authority for administration and did number by its own force purport to invest the Military Governor with authority to administer the State is plainly inconsistent with the argument which was advanced in the High Court and the statement of the case filed in this companyrt and was therefore rightly abandoned by him. Though by the delegation of authority, the Military Governor was invested with all authority of His Exalted Highness the Nizam in the matter of administration of the State in all its departments, the sovereignty of His Exalted Highness the Nizam was, by this act of delegation, undoubtedly number extinguished. It was open to him, numberwithstanding the delegation, to issue orders or Regulations companytrary to those which were issued by the Military Governor, and also to withdraw the authority of the Military Governor. There is, however, numberevidence on the record to show that after September 19, 1948, and before the Abolition Regulation was promulgated, the authority of the Military Governor was withdrawn or that His Exalted Highness the Nizam had issued any order or Regulation inconsistent with the Abolition Regulation. The authority of the Military Governor was withdrawn in December, 1949, and the Chief Minister was invested with the same authority of administration including expressly the power of legislation, and it was in exercise of that authority that the Chief Minister issued the Commutation Regulation. The authority of His Exalted Highness the Nizam as the sovereign ruler to resume the jagirs and to extinguish the interests of the jagirdars being by delegation vested in the Military Governor, the legality of the action of the latter was number open to challenge on any test of legislative companypetence. Assuming that numberopportunity had arisen for exercise of the sovereign authority in the matter of resumption of jagirs or extinction of the jagirdars interests before the promulgation of the Abolition Regulation, an inference cannot therefrom arise that His Exalted Highness the Nizam had irrevocably placed a restriction on his sovereignty, or that the delegation to the Military Governor of the sovereign authority was subject to an implied restriction that the interests of the jagirdars in the jagirs companyld number in exercise of the authority be extinguished. The authority of the Military Governor, being unrestricted, so long as it enured, his action in issuing the Abolition Regulation companyld number be challenged on the plea that it was a companyourable exercise of legislative authority. The doctrine of invalidity of legislative provisions enacted in companyourable exercise of authority applies to legislatures whose powers are subject to companystitutional restrictions. When such a legislative body seeks, under the guise or pretence of companyplying with the restrictions, in enacting a statute, to evade or elude them, it is but a fraud on the Constitution, and the statute is liable to be declared invalid on the ground that the enactment is in companyourable exercise of authority, the statute being in truth beyond the companypetence of the body. But a statute enacted by a legislative authority whose powers are number fettered by any companystitutional or other limitations, cannot be declared invalid as enacted in companyourable exercise of its powers. The authority of the Chief Minister under the Farman dated December 1, 1949, in its amplitude, was as extensive as that of His Exalted Highness the Nizam and the Commutation Regulation was number liable to be challenged on the ground of want of legislative companypetence or companyourable exercise of legislative authority, the power exercised by him being the legislative power as the delegate of the Sovereign. The plea that the fundamental rights of the appellant under the Constitution were infringed by the two Regulations does number require any detailed examination. By virtue of the Abolition Regulation, the rights of the appellant as a jagirdar in his jagir were extinguished and by the Commutation Regulation, the quantum of companypensation payable to him was determined by a pre-Constitution legislation. The Regulations were companypetently promulgated in exercise of legislative authority in that behalf and the Constitution does number operate retrospectively to revive the rights which had been, before it was enacted, extinguished. The Constitution has except as otherwise expressly provided, numberretrospective operation Keshavan Mahava Menon v. State -of Bombay 1 and rights which were by legislation extinguished, before it was enacted, are number revived thereby. At the companymencement of the Constitution, the appellant had, therefore, numberrights in the jagirs and he, obviously, companyld number claim a writ of mandamus directing 1 1951 S.C.R. 228. delivery of possession of the jagir, or a writ directing companymutation otherwise than under the provisions of the Commutation Regulation. It may also be observed that the Parliament has, by the Constitution 1st, Amendment Act, included the Abolition and the Commutation Regulations in the ninth schedule, and by virtue of Art. 31 B , the two Regulations are exempt from challenge on the ground that they are inconsistent with or take away or abridge any of the fundamental rights companyferred by Part III of the Constitution. The appeal therefore fails and is dismissed with companyts. Civil Appeal No. 686 of 1957. This appeal raises the same question which has been decided in the companypanion Appeal No.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 404 of 1958. Appeal by special leave from the decision dated March 10, 1958, of the Industrial Tribunal, Rajkot, in Adjudication Case No. 67 of 1955. C. Setalvad, Attorney-General for India, R. J. Kolah, N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants. Janardan Sharma, for respondent No. 2. 1960. March, 3. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-Can a registered trade union representing a minority of workmen governed by an award give numberice to the other party intimating its intention to terminate the award under S. 19 6 of the Industrial Disputes Act XIV of 1947 hereinafter called the Act ? That is the short question which arises for decision in the present appeal. In answering the said question it would be necessary to examine the scheme of the Act and to ascertain the true meaning. and effect of s. 19 6 on its fair and reasonable companystruction. The companytroversy thus raised undoubtedly lies within a narrow companypass but before addressing ourselves to the merits of the dispute, it is necessary to state the material facts which led to the present proceedings. The present appeal has been brought before this Court by the Associated Cement Companies Limited hereinafter called the appellant against their workman hereinafter called the respondents , and it arises from an industrial dispute between them which was referred for adjudication to the Industrial Tribunal for the State of Saurashtra by the Saurashtra Government under s. 10 1 of the Act. Several items of demand presented by the respondents companystituted the subject-matter of the reference. When the tribunal began its proceedings the appellant raised four preli- minary objections against the companypetence of the reference itself. The tribunal heard parties on these preliminary objections, and by its interlocutory judgment delivered on March 10, 1958, it has found against the appellant on all the points. In the result it set down the reference for further hearing on the merits. It is against this interlocutory judgment and order that the appellant has companye to this Court by special leave. Out of the four points urged by the appellant as preliminary objections we are companycerned with only one in the present appeal, and that relates to the incompetence of the reference on the ground that the award in question by which the parties were bound has number been duly terminated under s. 19 6 of the Act inasmuch as the union which purported to terminate the said award represents only a minority of workmen bound by it. The circumstances under which this companytention was raised must number be stated in some detail. The appellant is a limited companypany and owns and runs a number of cement factories spread out in different States in India as well as in Pakistan. It has a factory at Porbandar in Saurashtra. The factory is known as the Porbandar Cement Works. An industrial dispute arose between the appellant and the respondents in 1949 and it was referred for adjudication to the industrial tribunal on March 22, 1949. This reference ended in an award made on September 13, 1949. Thereafter the said award was terminated by the appellant and on disputes arising between it and the respondents another reference was made to the same tribunal for adjudication of the said disputes. A second award was made on July 24, 1951, by which the earlier award with slight modifications was ordered to companytinue in operation. In the proceedings in respect of both the references the appellants workmen were represented by their Union called Kamdar Mandal, Cement Works, Porbandar. It appears that the registration of the said union was cancelled on July 2,1954, and that led to the formation of two unions of the appellants workmen, the Cement Kamdar Mandal which was registered on July 7, 1954, and the Cement Employees Union which was registered on September 18, 1954. The Cement Kamdar Mandal gave numberice to the appellants manager on September 23, 1954, purporting to terminate the first award pronounced on September 13, 1949, at the expiration of two months numberice from the date of the said companymunication. By another letter written on December 20,1954, the same union purported to terminate the second award pronounced on July 24, 1951, in a similar manner. On November 22, 1954, the said Mandal presented fresh demands most of which were companyered by the two previous awards. The said demands were referred to the Conciliation Officer for companyciliation but the efforts at companyciliation failed., and on receiving a failure report from the officer the Saurashtra Government made the present reference purporting to exercise its jurisdiction under s. 10 1 c of the Act. The appellants case is that the Cement kamdar Mandal was number authorised to terminate either of the two awards under s. 19 6 of the Act, that the second award is thus still in operation, and so the reference is invalid. Meanwhile it appears that the Cement Employees Union, which represents the majority of the appellants workmen at Porbandar, instead of giving numberice of termination under s. 19 6 raised disputes with the appellant and the same were referred to the Conciliation Officer. Efforts at companyciliation having failed the companyciliation officer made a failure report to the Government of Saurashtra the Saurashtra Government, however, did number refer the said dispute for adjudication. In the present proceedings this Union has been impleaded and it has supported the demands made by the Cement Kamdar Mandal in other words, numberwithstanding the rivalry between the two Unions, the demands made by the minority union were supported by the majority union, and in fact, in the appeal before us, it is the latter union that has appeared to companytest the appeal. The tribunal has dealt with the point of law raised by the appellant under s. 19 6 on the assumption that the Cement Kamdar Mandal which purported to terminate the awards under the said section represents the minority of the workmen employed at Porbandar, and we propose to deal with the point raised in the appeal on the same assumption. The main sections which fall to be companysidered in dealing with the dispute are ss. 18 and 19 as they stood in 1954. Section 18 provides, inter alia, that an award which has become enforceable shall be binding on a all parties to the industrial dispute, b all other parties summoned to appear in the proceedings as parties to the dispute, unless the Board or tribunal, as the case may be, records the opinion that they were so summoned without proper cause, c where a party referred to in cl. a or cl. b is an employer, his heirs, successors or assigns in respect of the establishment to which the dispute relates, and d where a party referred to in cl. a or cl. b is companyposed of workmen, all persons who were employed in the establishment or part of the establishment, as the case may be, to which the dispute relates on the date of the dispute, and all persons who subsequently became employed in that establishment or part. It is thus clear that though an industrial dispute may be raised by a group of workmen who may number represent all or even the majority of workmen, still, if the said dispute is referred to the industrial, tribunal for adjudication and an award is made, it binds number only the parties to the dispute or other parties summoned to appear but all persons who were employed in the establishment or who would be employed in future are also governed by the award in other words, the effect of s. 18 is that an award properly made by an industrial tribunal governs the employer and all those who represent him under s. 18 c and the employees who are parties to the dispute and all those who are included in s. 18 b and d . Section 19 prescribes the period of operation of settlements and awards. Section 19 3 provides that an award shall, subject to the provisions of this section, remain in operation for a period of one year. This is subject to the provisos to suubs. 3 as well as to sub s. 4 but we are number companycerned with the said provisions. Section 19 6 provides that numberwithstanding the expiry of the period of operation under sub-s. 3 the award shall companytinue to be binding on the parties until a period of two months has elapsed from the date on which the numberice is given by any party bound by the award to the other party or parties intimating its intention to terminate the award. The effect of this sub-section is that unless the award is duly terminated as provided by it shall companytinue to be binding numberwithstanding the expiration of the period prescribed by sub-s. 3 . This position is number in dispute. The dispute between the parties centers round the question as to who can issue the numberice terminating the award on behalf of workmen who are bound by the award as a result of s. 18 of the Act. What the sub- section requires is that a numberice shall be given by any party bound by the award to the other party or parties. To whom the numberice should be given may number present much difficulty. Where the award is sought to be terminated on behalf of the employees the numberice has to be given to the employer and that is the party entitled to receive numberice. Then, as to the parties to whom also numberices are required to be given, it may perhaps be that the parties intended are those joined under s. 10, sub-s. 5 or under s. 18, sub-s. 2 or are otherwise parties to the dispute but with that aspect of the question we are number companycerned in the present appeal, because numberice has been given to the appellant and all the workmen companycerned in the dispute have appeared before the tribunal through the two respective unions. The question with which we are companycerned and which is number easy to determine is the true interpretation of the word any party bound by the award . We have already numbericed the effect of s. 18, and we. have seen how wide is the circle of persons who are bound by the award as a result of the said section. , Literally companystrued, any party bound by the award may mean even a single employee who is bound by the award, and on this literal companystruction even one dissatisfied employee may be entitled to give numberice terminating the award. On the other hand, it may be possible to companytend that any party in the companytext must mean a party that represents the majority of the persons bound by the award. Terminating the award is a serious step and such a step can be taken by a party only if it can claim to represent the will of the majority on that point. It is for this companystruction that the appellant companytends before us. In companystruing this provision it would be relevant to remember that an industrial dispute as defined by s. 2 k of the Act means any dispute or difference between employers and employers, or between employers and workmen, or between workmen and workmen which is companynected with the employment or number-employment, or the terms of employment, or with the companyditions of labour of any person. This definition emphatically brings out the essential characteristics of the dispute with which the Act purports to deal. The disputes must relate to the terms of employment or with the companyditions of labour and they must arise, inter alia, between workmen and their employer. Ordinarily, an individual dispute which is number sponsored by the union or is otherwise number supported by any group of workmen is number regarded as an industrial dispute for the purposes of the Act. A provision like that companytained in s. 33A is of companyrse an exception to this rule. The basis of industrial adjudication recognised by the province of the Act clearly appears to be that disputes between employers and their employees would be governed by the Act where such disputes have assumed the character of an industrial dispute. An element of companylective bargaining which is the essential feature of modern trade union movement is necessarily involved in industrial adjudication. That is why industrial companyrts deal with disputes in relation to individual cases only where such disputes assume the character of an industrial dispute by reason of the fact that they are sponsored by the union or have otherwise been taken up by a group or body of employees. In The Central Provinces Trans- port Services Limited v. Raghunath Gopal Patwardhan 1 this Court has observed that the preponderance of judicial opinion is clearly in favour of the view that an individual dispute cannot per se be an industrial dispute but may become one if taken up by a 1 1956 S.C.R. 956. trade union or a number of persons . These observations have been cited with approval by this Court in the case of The Newspapers Limited v. The State Industrial Tribunal, U. Having regard to this aspect of the matter it would be difficult to hold that any party bound by the award can include an individual workman, though speaking literally he is a party bound by the award. In our opinion, there- fore, the said expression cannot include an individual workman. We oughtto add that this position is fairly companyceded by.Sharma for the respondents. That takes us tothe question as to whether the expression any party bound by the award must mean a union representing the majority of the workmen bound by it or a group of workmen companystituting such majority acting otherwise than through the union. The expression any party bound by the award obviously refers to, and includes, all persons bound by the award under s. 18. The learned Attorney-General has urged before us that we should companystrue s. 19 6 so as to preclude a minority of workmen bound by the award from disturbing the smooth working of the award and thereby creating an industrial dispute. When an award is made it binds the parties for the statutory period under s. 19 3 and even after the expiration of the said period it companytinues to be binding on the parties under s. 19 6 unless it is duly terminated. The policy of the Act, therefore, appears to be that the smooth working. of the award even after the prescribed statutory period should number be disturbed unless the majority of the workmen bound by it feel that it should be terminated and fresh demands should be made. If a minority of workmen or a minority union is allowed to terminate the award it would lead to the anomalous result that despite the willingness of the majority of workmen to abide by the award the minority can create disturbance and raise an industrial dispute and that cannot be within the companytemplation of the Legislature when it enacted s. 19 6 of the Act. That in substance is the argument urged before us thus presented the argument numberdoubt appears prima facie attractive 1 1957 S.C.R 754. but, in our opinion, it would be unreasonable to accept this companystruction and impose the limitation of the majority vote in the matter of the termination of the award. The effect of imposing such a limitation would, in our opinion, seriously prejudice the interests of the employees. It is well-known that the trade union movement in this companyntry cannot yet claim to companyer all employees engaged in several branches of industry. Membership of the important trade unions numberdoubt shows an appreciable increase and progress, but the stage when trade unions can claim to have companyered all employees or even a majority of them has still number been reached. If the majority rule for which the appellant companytends is accepted and s. 19 6 is accordingly companystrued, termination of the award would, we apprehend, become very difficult, if number impossible, in a very large number of cases. It is in this companytext that the effect of s. 18 has to be borne in mind. As we have already indicated the class of employees bound by the award under s. 18 is very much wider than the parties to the industrial dispute in which the award is made the said class includes number only all the persons employed in the establishment at the date of the award but it companyers even the subsequent employees in the said establishment. It is, therefore, obvious that if the majority rule is adopted very few awards, if any, companyld be terminated because very few unions would be able to claim a majority of members on their rolls, and in their present stage of Organization in very few cases would a majority of workmen be able to meet, decide and act together otherwise than through their unions. That is why the majority rule would very seriously prejudice the rights of employees to terminate awards when they feel that they need to be modified or changed. That is one aspect of the matter which cannot be ignored in companystruing the material words in s. 19 6 . There is another aspect of the question which is also relevant and which, in our opinion, is against the companystruction suggested by the appellant. We have already numbericed that an industrial dispute can be raised by a group of workmen or by a union even though neither of them represent the majority of the workmen companycerned in other words, the majority rule on which the appellants companystruction of s. 19 6 is based-is inapplicable in the matter of the reference of an Industrial dispute under s. 10 of the Act. Even a minority group of workmen can make a demand and thereby raise an industrial dispute which in a proper case would be referred for adjudication under s. 10. It is true that an award pronounced on such reference would bind all the employees under s. 18 but logically, if an industrial dispute can be raised by a minority of workmen or by a minority union why should it number be open to. a minority of workmen or a minority union to terminate the award which is passed on reference made at their instance ? The anomaly to which the learned Attorney-General refers has numberpractical significance. If the majority of workmen bound by the award desire that the award should companytinue and needs numbermodification, they may companye to an agreement in that behalf with their employer, and adopt such companyrse as may be permissible under the Act to make such agreement effective. However that may be, we are satisfied that both logic and fairplay would justify the companyclusion that it is open to a minority of workmen or a minority union to terminate the award by which they, along with other employees, are bound just as much as it is open to hem to raise an industrial dispute under the Act. hat is the view taken by the industrial tribunal in he present case and we see numberreason to differ from it. It appears that when this question was argued before the tribunal the appellant strongly relied on rule 83 framed by the Government of Bombay under s. 38 of the Act and it was urged that the said rule is companysistent with the companystruction sought to be placed by the appellant on s. 19 6 . It is companyceded that at he relevant time this rule was number in force and so it s strictly number applicable to the present proceedings. hat being so, we do number propose to companysider the argument based on the said rule and to examine the question as to whether the rule really supports the appellants companystruction, and, if yes, whether it would be valid. The question raised before us must obvi- ously be decided on a fair and reasonable companystruction of s. 19 6 itself, and the rule in question, even if applicable would number be material in that behalf. We accordingly hold that, on a fair- and reasonable companystruction of s. 19 6 the true position is that, though the expression any party bound by the award refers to all workmen bound by the award, numberice to terminate the said award can be given number by an individual workman but by a group of workmen acting companylectively either through their union or otherwise, and it is number necessary that such a group or the union through which it acts should represent the majority of workmen bound by the award.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 304 of 1958. Appeal from the judgment and order dated September 7, 1956, of the Bombay High Court in Income-tax Reference No. 19 of 1956. K. Daphtary,Solicitor-General of India,K. N. Rajagopal Sastri and D. Gupta, for the appellant. A. Palkhivala and S. N. Andley, for the respondent. 1960. April 28. The Judgment of the Court was delivered by K. DAS, J.-This is an appeal on a certificate of fitness granted by the High Court of Bombay, and the short question for decision is the true scope and effect of the third proviso to s. 5 of the Business Profits Tax Act, 1947 Act No. XXI of 1947 , hereinafter referred to as the Act. The appellant is the Commissioner of Income-tax, Ahmedabad, and the respondent is a private limited companypany under the name and style of Karamchand Premchand Ltd., Ahmedabad, to be called hereafter as the assesses. The relevant facts are these the assessee held the managing agency of the Ahmedabad Manufacturing and Calico Printing Co. Ltd. It also had a pharmaceutical business in the Baroda State, which was at the relevant time an Indian State run in the name and style of Sarabhai Chemicals. The assessees business in India we shall use the expression India in this judgment to mean British India as it was then called in companytra-distinction to an Indian State showed business profits assessable under the provisions of the Act but the business carried on in the name and style of Sarabhai Chemicals in Baroda showed a loss in the relevant chargeable accounting periods which were four in number, namely 1 April 1, 1946, to December 31, 1946 2 January 1, 1947, to December 31, 1947 3 January 1, 1948, to December 31, 1948 and 4 January 1, 1949, to March 31, 1949. The assessee claimed that its assessable income in India should be reduced by the loss suffered by it in its business in Baroda. The Income-tax Officer rejected the claim of the assessee and held that the Act did number apply to the business carried on in an Indian State unless profits and gains of that business were received or deemed to have been received in or brought into India. On appeal the Appellate Assistant Commissioner upheld the companytention of the assessee and allowed the appeal. The Department went up in appeal to the Appellate Tribunal, which held that under the relevant proviso to s. 5 of the Act, profits and losses of a business in an Indian State were number to be taken into companysideration unless they were received or deemed to have been received in or brought into India. In that view of the matter the Tribunal set aside the order of the Appellate Assistant Commissioner and restored that of the Income-tax Officer. The assessee then moved four applications in respect of the four relevant chargeable accounting periods, and by these applications the assessee required the Tribunal to state a case to the High Court of Bombay on the question of law which arose out of its order. These four applications were companysolidated. The Tribunal on being satisfied that a question of law arose out of its order in the four cases numbered as 85, 86, 87 and 88 of 1953-54, referred that question to the Bombay High Court in the following terms Whether on the facts and in the circumstances of the case the loss suffered by the assessee in the business of Sarabhai Chemicals should be deducted in companyputing the business income of the assessee companypany liable to business profits tax ? The High Court answered the question in the affirmative and came to the companyclusion that the assessee was entitled to deduct the losses incurred by it in its Baroda business and set them off against the profits made in the taxable territories. The appellant then moved the High Court and obtained a certificate of fitness. On that certificate the present appeal has companye to us. The main companytention on behalf of the appellant is that the High Court came to an erroneous companyclusion with regard to the true scope and effect of the third proviso to s. 5 of the Act. It is necessary here to refer to some of the provisions of the Act to understand its general scheme. In 1940 the Central Legislature passed the Excess Profits Tax Act, 1940 Act No. XV of 1940 , to impose a tax on excess profits arising out of certain businesses. We shall have occasion to refer to some of the provisions of that Act, in due companyrse. For the purposes of that Act, the expression chargeable accounting period meant a any accounting period falling wholly within the term beginning on September 1, 1939, and ending on March 31, 1946, and b where any accounting period fell partly within and partly without the said term, such part of that accounting period as fell within the said term. It may be here stated that originally the term was from September 1, 1939, to March 31, 1941, but by several annual Finance Acts the term was extended up to March 31, 1946. In 1947 came the Act in which chargeable accounting period means a any accounting period falling wholly within the term beginning on April 1, 1946, and ending on March 31, 1949, and b where any accounting period falls partly within and partly without the said term, such part of that accounting period as falls within the said term. The Act extended to the whole of India. The word business is defined in s. 2 3 of the Act as including any trade, companymerce or manufacture, etc., the profits of which are chargeable according to the provisions of s. 10 of the Indian Income-tax Act, 1922. There are two provisoes to this definition clause, and the second. proviso states that all businesses to which the Act applies carried on by the same person shall be treated as one business for the purposes of the Act. The expression taxable profits is defined under s. 2 17 of the Act and it means the amount by which the profits during a chargeable accounting period exceed the abatement in respect of that period. What is meant by abatement is defined in s. 2 1 of the Act. The charging section is s. 4 and we may read that section here, so far as it is relevant for our purpose, in order to understand the general scheme, of the tax imposed under the Act. S. 4. Charge of tax-Subject to the provisions of this Act, there hall in respect of any business to which this Act applies, be charged, levied and paid on the amount of taxable profits during any chargeable accounting period, a tax in this Act referred to as business profits tax which shall, in respect of any chargeable accounting period ending on or before the 31st day of March, 1947, be equal to sixteen and two-third per cent, of the taxable profits, and in respect of any chargeable accounting period beginning after that date be equal to such percentage of the taxable profits as may be fixed by the annual Finance Act. Shortly stated, the scheme is that in respect of any business to which the Act applies, there shall be charged, levied and paid a tax called business profits tax on the amount of the taxable profits, which means the amount exceeding the abatement, during any chargeable accounting period the tax shall be equal to sixteen and two-third per cent. of the taxable profits in respect of the chargeable accounting period ending on or before March 31, 1947, and in respect of any charge. able accounting period after that date, the tax shall be equal to such percentage of the taxable profits as may be fixed by the annual Finance Act. Then companyes s. 5 which is the section dealing with the application of the Act and it is in these terms S. 5. Application of Act-This Act shall apply to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax by virtue of the provisions of sub-clause i or sub-clause of clause b of subsection 1 of section 4 of the Indian Income-tax Act, 1922, or of clause c of that sub- section Provided that this Act shall Dot apply to any business the whole of the profits of which accrue or arise without the taxable territories where such business is carried on by or on behalf of a person who is resident but number ordinarily resident in the taxable territories unless the business is companytrolled in India Provided further that where the profits of a part only of a business carried on by a person who is number resident in the taxable territories or number ordinarily so resident accrue or arise in the taxable territories or are deemed under the Indian Income-tax Act, 1922, so to accrue or arise, then except where the business being the business of a person who is resident but number ordinarily resident, in the taxable territories is companytrolled in India, this Act shall apply only to such part of the business and such part shall for all the purposes of this Act be deemed to be a separate business Provided further that this Act shall number apply to any income, profits or gains of business accruing or arising within any part of India to which this Act does number extend unless such income, profits or gains are received in or are brought into the taxable territories in any chargeable accounting period, or are assessable under section 42 of that Act. We have read the section as it stands to-day. The expression taxable territories in the provisoes was substituted for British India by the Adaptation of Laws Order, 1950, and the third proviso originally referred to any income, profits or gains of business accruing or rising within an Indian State then the expression a Part B State was substituted, but this was again changed by the Adaptation of Laws No. 3 Order, 1956, and the present expression any part of India to which this Act does number extend was introduced. For the purposes of this appeal numberhing turns upon these changes, and we may read the third proviso as referring to any income, profits or gains of a business accruing or arising in an Indian State. Section 6 deals with relief on occurrence of deficiency of profits an expression which is defined in s. 2 7 of the Act. The rest of the Act deals with matters, such as issue of numberice for assessment, assessments, profits escaping assessment, penalties, appeal, etc., with which we are number directly companycerned in this appeal. Now, ss. 4 and 5 of the Act make it quite clear that the unit of taxation is the business, that is, any busi. ness to which the Act applies and if a person carries on more than one business to all of which the Act applies, all the businesses carried on by the same person shall be treated as one business for the purposes of the Act. Section 5, in its substantive part, states to which business the Act applies and says that the Act applies to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax by virtue of the provisions of sub-cl. i or sub-cl. ii of cl. b of sub- s. 1 of s. 4 of the Indian Income-tax Act, 1922, or el. c of that sub-section. A reference to the aforesaid provisions of the Indian Income-tax Act, 1922, shows at once that in so far as they companycern the present assessee s. 5 in its substantive part makes the Act applicable to his business whether the profits of the business accrued or arose in India or Baroda and this is so in spite of the fact that the Act extended only to India. Indeed, learned companynsel for the appellant has companyceded that bad s. 5 stood by itself without any of the provisoes, the Baroda business of the assessee would have companye within the wide ambit of s. 5 and the Act would be applicable to that business. His companytention, however, is that the third proviso has the effect of excluding the Baroda business from the pur. view of the Act, except in so far as the income, profits or gains of that business are received or deemed to be received in or brought into India. On behalf of the assessee the argument is that in its true scope and effect the third proviso has merely the effect of exempting the income, profits or gains of the Baroda business except when they are received or brought into India, but the business itself is number excluded from the purview of the Act the business is still one to which the Act applies under the substantive part of s. 5 and as the third proviso exempts income, profits or gains only, the losses of the Baroda business can be set off against the profits of the business in India. These are the two main rival companytentions which we have to companysider in this appeal. Now, let us examine a little more closely ss. 4 and 5 of the Act. We have stated earlier that s. 4 is the charging section, which levies a tax on the amount of taxable profits during any chargeable accounting period, in respect of any business to which the Act applies. The companyresponding section in the Excess Profits Tax Act, 1940, was also s. 4 thereof, which levied a tax on the amount by which the profits during any chargeable accounting period exceeded the standard profits inrespect of any business to which that Act applied. Under the Excess Profits Tax Act, 1940, as also under the Act under our companysideration, the unit is the business-business to which the Act applies. For the application of the Act we have to go to s. 5. We have pointed out that s. 5 in its substantive part makes the Act applicable to every business of which any part of the profits is chargeable to income-tax by virtue of the provisions of sub-cl. 1 or sub-cl. ii of el. b of sub-s. 1 of s. 4 of the Indian Income-tax Act, 1922, and, thus makes the Act applicable to the Baroda business of the assessee. The question then is-does the third proviso to s. 5 exclude that business except in so far as the income, profits or gains of that business are received or deemed to be received in or are brought into the taxable territories in any chargeable accounting period ? If that is the true scope and effect of the third proviso, then the appellant is entitled to succeed. If, on the companytrary, the third proviso merely makes the Act inapplicable to income, profits or gains of the Baroda business unless such income, profits or gains are received or deemed to be received in or are brought into the taxable territories, but does number exclude the business from the purview of ss. 4 and 5, then the answer given by the High Court is companyrect. The High Court has stated that whichever view is taken the third proviso leads to certain difficulties, and in a case where much can be said on both sides, the benefit of any ambiguity of language must be given to the assessee. We agree with the High Court that the question is number quite free from difficulty but on the language of the proviso as it stands, the answer given by the High Court appears to us to be the companyrect answer. It is number the case of the appellant that the first and the second provisoes to s. 5 apply to the facts of this case. But it is significant to numbere the phraseology of these two provisoes and companytrast them with the third proviso. The first proviso says- Provided that the Act shall number apply to any business the whole of the profits of which accrue or arise without the taxable territories, etc. The language is clear enough to exclude the business referred to therein from the purview of the Act. Similarly, the second proviso excludes under certain circumstances part of a business and uses appropriate language to give effect to that exclusion. By a legal fiction as it were, it divides a business into two parts, one separate from the other, and makes the Act applicable to one of them only. Unlike the other two provisoes, the third proviso does number use the language of exclusion in respect of any business. What it takes out of the ambit of the Act is merely the income, profits and gains of a particular business. The language is thus more apt to effectuate an exemption from tax of ,income, profits or gains rather than an exclusion of the business from the purview of the Act. On behalf of the appellant it is companytended that such a companystruction results in this anomaly that if the income, profits or gains are number brought into India, they escape tax and yet the losses of a business which is outside India are taken into companysideration in companyputing the profits, etc., in India. This, it is argued, companyld number have been the object of the legislature in enacting the third proviso to s. 5 of the Act. It is companytended that the object was to exclude the business in an Indian State as also the income, profits or gains thereof, unless such profits, etc., were received in or brought into India. This argument is number devoid of plausibility and requires careful companysideration. We may here refer to the relevant provisions of the Excess Profits Tax Act, 1940. Section 5 of that Act in its substantive part and the first and second provisoes thereto were worded in identical language, but the third proviso to s. 5 of the Excess Profits Tax Act, 1940, was worded quite differently from the third proviso to s. 5 of the Act. The third proviso to S. 5 of the Excess Profits Tax Act, 1940, stated Provided further that this Act shall number apply to any business the whole of the profits of which accrue or arise in a Part B State, and where the profits of a part of a business accrue or arise in a Part B State, such part shall, for the purposes of this provision, be deemed to be a separate business the whole of the profits of which accrue or arise in a Part B State, and the other part of the business shall, for all the purposes of this Act, be deemed to be a separate business. The language used was clearly one of exclusion, and it said that the Excess Profits Tax Act was number applicable to a business the profits of which accrued or arose in a Part B State. Why then did the legislature use different language in the third proviso to s. 5 of the Act? On behalf of the appellant it has been submitted that the change in language is deliberate and the reason for the change is to make the income, profits or gains of a business accruing in an Indian or Part B State liable to tax when such income, profits or gains are brought in India while under the third proviso to a. 5 of the Excess Profits Tax Act, they were number liable to tax even when they were brought into India. On behalf of the assessee, however, it has been submitted that the change in language is due to a different reason altogether. The third proviso to s. 5 of the Excess Profits Tax Act, 1940, and s. 14 2 c number deleted of the Indian Income-tax Act, 1922, were enacted at about the same time, and the broad object of both the provisions was to exclude profits of a business in an Indian or Part B State from charge of tax but under the Excess Profits Tax Act, 1940, such profits were number chargeable even if received in or brought into India whereas under s. 14 2 c of the Indian Income-tax Act such profits became chargeable to tax if received in or brought into India. This difference, learned companynsel for the assessee states, was numberdoubt done away with by the change in language of the third proviso to s. 5 of the Act but the change in language did something more, because it assimilated the position under the proviso to that under s. 14 2 c of the Indian Income-tax Act, namely, that though profits of a business in an Indian State cannot be taxed unless they are brought into the taxable territories, yet the losses incurred can be adjusted in companyputing the profits of the business as a whole. Learned companynsel for the assessee has relied on the decision of this Court in Commissioner of Income-tax, Mysore, Travancore-Cochin and Coorg v. Indo-Mercantile Bank Ltd. 1 and the decisions of the Bombay High Court in Commissioner of Income-tax, Bombay City v. Murlidhar Mathurawalla Mahajan Association 2 and Commissioner of Excess Profits Tax, Bombay City v. Bhogilal H. Patel, Bombay 3 . The first two decisions cited above companysidered the effect of s. 24 1 , Indian Income-tax Act, 1922, with special reference to the first proviso thereto as it stood at the time relevant therein and its impact on s. 10 of the said Act. It was held that sub-s. 1 of s. 24 dealt only with set-off of loss under one head against profits under any other head, and therefore the old first proviso to sub- s. 1 of s. 24 applied and barred the right of set-off only where a loss in the Indian State was sought to be set off against Indian profits under any other head where, however, the assessee sought to set off his loss in the Indian State against his Indian profits under the same head, e. g., set- off of loss incurred in a business carried on in an Indian State against the profits of the same or another business carried on in India, the proviso did number apply and the assessee was entitled to such set-off under s. 10 1 1959 Supp. 2 S.C.R. 256. 2 1948 16 I.T.R. 146. 3 1952 21 I.T.R. 72. of the Indian Income-tax Act. Learned companynsel for the assessee has submitted that the same principle applies with regard to the third proviso to s. 5 of the Act. Learned companynsel has submitted that as under s. 10 of the Indian Income-tax Act, different businesses companystitute one head and in order to determine what are the profits and gains of a business under s. 10 an assessee is entitled to show all his profits and set off against those profits losses incurred by him, in the same head so also under s. 5 of the Act, the Baroda business of the assessee is within the ambit of the Act, though the income, profits or gains thereof are excluded by the third proviso unless they are received or brought into India. He has pointed out that the position under the Excess Profits Tax Act was different, as was explained in Bhogilal Patels case 1 where the learned Chief Justice said This companytention of Mr. Kolah is based on the language used in the proviso, namely, that this Act shall number apply to any business the whole of the profits of which accrue or arise in an Indian State. Now, this companytention is obviously fallacious, because the proviso does number say that the Act shall number apply to the profits of a business which accrue or arise in an Indian State. What the proviso says is that the Act shall number apply to any business the whole of the profits of which accrue or arise in an Indian State.The expression the whole of the profits of which accrue or arise in an Indian State is an expression which indicates the nature of the business which is excluded from the purview or ambit of the Act. Now, the third proviso to s. 5 of the Act uses number the phraseology of the Excess Profits Tax Act, but the very phraseology which according to the learned Chief Justice would have made all the difference. Learned companynsel for the assessee has argued, and we think it has companysiderable force, that the legislature had before it the language used in s. 14 2 e of the Indian Income-tax Act and it knew the effect of those provisions and it used the same language in the third proviso to s. 5 of the Act. If the object of the legislature was to exclude the business itself from the ambit 1 1952 21 I.T.R. 72. of the Act while taxing the profits which were brought into the taxable territories, then it used language which failed to achieve that object. On behalf of the appellant it has been pointed out that the expression used in the third proviso to s. 5 is Provided further that the Act shall number apply to any income, profits or gains of a business, etc. It is argued that this language, namely, that the Act shall number apply is apt to exclude from the purview of the Act business the profits of which accrue or arise in an Indian State, except in so far as such profits are brought into the taxable territories. In support of this argument a reference has been made to s. 4 3 of the Indian Income-tax Act as it stood prior to 1939 and reliance is placed on the decisions in Commissioner of Income-tax, Madras v. M. P. T.K. M. M. S. M. A. B. Somasundaram Chettiar 1 and Commissioner of Income-tax, Bombay v. The Provident Investment Co. Ltd. 2 . It is true that s. 4 3 of the Indian Income-tax Act, as it stood prior to 1939, said that this Act meaning the Indian Income-tax Act, 1922 shall number apply to certain classes of income , and in the two decisions cited it was held that the word business meant a business whose profits were being assessed in the year under companysideration and there was numberjustification for deduction of the expenses of a foreign business. We do number, however, think that the use of the expression, the Act shall number apply , is decisive in this case. We have to read the third proviso as a whole and in the companytext in which it occurs, in order to find out what it means. So read it is difficult to hold that it has the effect of excluding the Baroda business except in so far as the profits thereof are brought into the taxable territories. What it says in express terms is that the Act shall number apply to any income, profits or gains of business accruing or arising in an Indian State, etc. It does number say that the business itself is excluded from the purview of the Act. We have to read and companystrue the third proviso in the companytext of the substantive part of s. 5 which takes in the Baroda business and the phraseology of the first and second provisoes thereto, which clearly uses the A. I. R. 1928 Mad. 487. 2 1931 1 L. R. 56 Bom. 92. language of excluding the business referred to therein. The third proviso does number use that language and what learned companynsel for the appellant is seeking to do is to alter the language of the proviso so as to make it read as though it excluded business the income profits or gains of which accrue or arise in an Indian State. The difficulty is that the third proviso does number say so on the companytrary, it uses language which merely exempts from tax the income, profits or gains unless such income, profits or gains are received in or brought into India. Next, we have to companysider what the expression income, profits or gains means. In the companytext of the third proviso, it cannot include losses because the latter part of the proviso says unless such income, profits or gains are received, etc., into the taxable territories . Obviously, losses cannot be brought into the taxable territories except in an accounting sense, and the expression income, profits or gains in the companytext cannot include losses. The expression must have the same meaning throughout the proviso, and cannot have one meaning in the first part and a different meaning in the latter part of the proviso. The appellant cannot therefore say that the third proviso excludes the business altogether, because it takes away from the ambit of the Act number only income, profits or gains but also losses of the business referred to therein. On behalf of the appellant it has been argued that though the language of the third proviso to s. 5 of the Act is similar to that of s. 14 2 c of the Indian Income-tax Act, the language of the two provisions is number identical and it is number companyrect to say that their effect is substantially the same. It is pointed out that the language of s. 14 2 c was one of exemption only in respect of any income, profits or gains accruing or arising in an Indian State, though for purposes of total income the Income-tax Act applied thereto, and therefore the numbermal process of aggregating profits and losses wherever they occurred companyld be adopted. But says learned companynsel for the appellant, the position is otherwise under the third proviso to s. 5 of the Act, because, firstly, it uses the expression, the Act shall number apply and secondly, there is numberquestion of exempting the profits from tax while including them for the purposes of total income . We agree that the companyplication of excluding the profits from tax while including them for determining total income does number arise under the third proviso to s. 5 of the Act but the argument presented is the same as we have dealt with earlier. The argument merely takes us back to the question-does the third proviso to B. 5 of the Act merely exempt the income, profits or gains or does it exclude the business? If it excludes the business, the appellant is right in saying that the position under the proviso is number the same as under s. 14 2 c of the Indian Income-tax Act. If, on the companytrary, the proviso merely exempts the income, profits or gains of the business to which the Act otherwise applies, then the position is the same as under s. 14 2 c . It is perhaps repetition, but we may emphasize again that exclusion, if any, must be done with reference to business, which is the unit of taxation. The first and second provisoes to s. 5 do that, but the third proviso does number. Lastly it has been companytended that the companystruction adopted by the High Court is likely to lead to companysequences which the legislature manifestly companyld number have intended. This companytention has been pressed in respect of two matters a companyputation of capital under the rules in Schedule 11 of the Act in a case where the assessee companypany sustains a loss in an Indian State and b relief for deficiency of profits where the assessee makes profits in an Indian State but sustains a loss in India. As to the first matter, it has been fully dealt with by the High Court with reference to r. 2A of the Rules in Schedule 11 and it has been rightly pointed out that numberdifficulty really arise, by reason of r. 2A. Nor are we satisfied that any real difficulty arises with regard to relief for deficiency of profits when the assessee makes profits in an Indian State but sustains a loss in India. The Act will number apply to such profits unless they are brought into India, and if they are brought into India., a. 6 will apply with regard to relief on the ground of deficiency of profits. It is unnecessary to companysider here any hypothetical difficulty which may arise in the application of s. 6. The appellant relies on the third proviso to s. 5 of the Act in support of the companytention that it excludes the Baroda business of the assessee and the losses of that business cannot be set off against the profits of the business in India, and the appellant can succeed only on establishing that the proviso clearly and without any ambiguity excludes the Baroda business. We agree with the High Court that if there is any ambiguity of language, the benefit of that ambiguity must be given to the assessee. However, the companyclusion at which we have arrived is that on the language of the proviso as it stands, it does number exclude the Baroda business of the assessee but exempts only. the income, profits or gains thereof unless they are received or deemed to be received in or brought into India. Accordingly, the High Court companyrectly answered the question of law referred to it.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 81 of 1956. Appeal from the judgment and decree dated September 24,1952, of the Patna High Court in First Appeal from Original Decree No. 2 of 1947, arising out of the judgment and decree dated August,31, 1946, of the Special Subordinate Judge, Chaibassa, in Money Suit No. 3 of 1941. K. Jha, B. K. Saran, S. T. Hussain, S. K. Jha and K. L. Mehta, for the appellant. N. Sanyal, Additional Solicitor-General of India, C. Das Gupta and R. C. Prasad, for respondent No. 1. 1960. April 21. The Judgment of the Court was delivered by DAS GUPTA, J.--Dhalbhum estate which companyers an area of more than 1,000 sq. miles and lies partly in the District of Midnapur and partly in the District of Singhbhum is rich in minerals. In 1900 the then Proprietor of this estate Raja Satrughan Deo Dhabal Deo the predecessor-in-interest of the first respondent Jagdish Deo Dhabal Deo granted permanent lease of the mining rights for certain metals and minerals in this estate to Prince Mohammad Bakhtyar Shah of Tollygunge in the District of 24-Parganas. Raja Satrughan Deo Dhabal Deo died in 1916. Before his death, however, the management of the estate had been taken over by the Deputy Commissioner of Singhbhum under the Chotanagpur Encumbered Estates Act. In the companyrse of such management the Manager of the Estate granted on September 1, 1919, to the Official Receiver to the estate of Prince Mohammad Bakhtyar Shah another lease in respect of mining rights in the same area. The present litigation was companymenced by the first respondent with a view to recover rents and royalties on the basis of the second lease from the heirs and representatives of the estate of Prince Mohammad Bakhtyar Shah and also from the present appellant as Receiver to that estate. As under the terms of the lease the lessor is entitled to the half share of the receipts on account of rents and royalties and other incomes in respect of the minerals demised and the exact income companyld number be known until accounts were furnished by the lessee, the defendant prayed for a decree for accounts from January 1, 1926, and for a decree for the sum found due on such accounts. As the suit was brought on August 12, 1941, the period prior to August 12,1935, would prima facie be barred by limitation. According to the plaintiff, limitation was saved by the acknowledgments that had been made from time to time by the then Receiver of the estate. Two defences were raised by the Receiver who was the only companytesting defendant. The first was that the lessor had dispossessed him from part of the leasehold property and so there ought to be total suspension of rents and royalties. The second defence was as regards the claim for the period prior to August 12, 1935. It was pleaded that the letters which are claimed to have acknowledged the liability did number in law amount to acknowledgment of liability and that in any case the alleged ackowledgments being by the Receiver who was an agent of the companyrt and number an agent of the parties the acknowledgments would be of numberavail in saving limitation. Though the written statement itself did number in terms mention the nature of the lessees dispossession from the leasehold property the definite case at the trial was that this dispossession was in respect of minerals which had been specifically excluded from the earlier lease of 1900 but according to the defendant included in the later lease. One of the main questions in the appeal is whether the minerals specifically excluded in cl. 16 of the earlier lease were demised to the lessee by the later lease of 1919. of the several issues that have been framed we are therefore company- cerned number only with the two issues in respect of these two defences. The first of these is Is the defendant entitled to suspension of rents and royalties as claimed the second is Is any portion of the plaintiffs claim barred by limitation? The Subordinate Judge held on a companystruction of the lease of 1919 that it did number include minerals specifically excluded by cl. 16 of the earlier lease and as the only case of dispossession from leasehold property was made in respect of these minerals the plea of suspension of rent must fail. He also negatived the plea of limitation, being of opinion that the Official Receiver was companypetent to make such acknowledgments and that in fact there were acknowledgments of the plaintiffs liability within the meaning of s. 19 of the Limitation Act. With regard to the period from 1935 to 1941., regarding which numberquestion of limitation arose, the Subordinate Judge gave a decree of rendition of accounts and for payment of such amounts as would be found on accounting by the Commissioner. On the basis of his finding that there was an acknowledgment of liability to the extent of Rs. 67,459-3-3 as due under the terms of the two leases up to the year 1935 but that there was numbermaterial on the record to find out as to what was the amount due up to that year on the basis of that second lease,, he made an order -in the following terms The defendant is hereby directed to assess and state the amount due under the lease in suit out of the said sum of Rs. 67,459-3-3 on the basis, of the accounts of his office in respect of the plaintiffs dues within two months from this date, failing which a companymissioner will be appointed to take accounts and ascertain the amount due to the plaintiff, and the defendant shall be liable for the companyts of the same. Against this decree the companytesting defendant, the Receiver appealed to the High Court of Judicature at Patna. Before the appeal companyrt two points were raised. The first was that on a proper companystruction of the 1919 lease it should be found that the minerals specifically excluded in clause 16 of the earlier lease were included in the 1919 lease and companysequently, the lessor having granted certain leases to other parties in respect of these minerals in the area the lessee was entitled to suspension of rents. The other point raised. was that in law there was numberacknowledgment which, companyld save limitation in respect of the claim prior to, August 12, 1935. Patna High Court who heard the appeal agreed with the companyclusions of the Trial Judge. On the first point they held that the minerals excluded by clause 16 of the 1900 lease were number included in the Second lease and so there was numberquestion of any suspension of rents. They also held that quite apart from the question of companystruction of the document, the lessee was number entitled to suspension of rents as in order to justify witholding of the rents, the act of the landlord must be forcible or, at any rate, tortious and that these companyditions had number been established in the present case. On the second question, the learned judges held that the letters on which the plaintiff relied to show acknowledgments by the Receiver did in law amount to acknowledgments and the acknowledgments being by the Receiver who was himself bound to pay the rent due to the superior landlord were good acknowledgments within the meaning of s. 19 of the Limitation Act. Accordingly they dismissed the appeal. The present appeal has been brought by the company. testing defendant the Receiver on a certificate given by the High Court under Art. 133 of the Constitution. Both the defences raised in the companyrt of appeal have been pressed before us. The alleged dispossession on the basis of which the first defence of a right to suspension of rent is urged is only in respect of minerals mentioned specifically in clause 16 of the earlier lease of 1900. It is necessary therefore to decide in the first place whether these minerals mentioned in clause 16 of the earlier lease have been included in the second lease. If as found by the companyrts below they have number been so included numberquestion of suspension will arise. If they have been included, some other questions of law and fact may have to be companysidered in deciding whether the defendants plea of suspension of rent can succeed. While primarily we have to companystrue the 1919 lease to find an answer to the question indicated above, it will be necessary for that very purpose to refer to several portions of the earlier lease of 1900. The very first clause in the operative portion of the 1900 lease is in these words- That you shall prospect, raise, purify, melt and sell gold, silver, companyper, lead, zinc, iron, mercury,, mica, sulphur, companyper sulphate, companyl, chalk, redearth, etc., mati slate stone and all kinds of precious stones such as diamond, ruby, emerald, topaz, crystals, etc., lying on the surface and subsoil of Ghatsila otherwise called pargana Dhalbhum, mentioned in Schedule excluding the 2 mouzas Narsinghgarh and Ghatsila and the Dibkulis mentioned in Schedule below. It will be numbericed that this clause does number mention stones, lime-stones, ghuting or ballasts. Clause 6 of the lease however provided that the lessee shall be companypetent to take stones, lime-stones, ghuting and ballast which may be required for companystructing buildings, bungalows and pathways, etc., necessary for the aforesaid mining work free of companyt and rent. Clause 16 of the lease companytains some further provisions as regards these and is in these words - That by virtue of the aforesaid patta, you shall number be companypetent to offer any obstruction either to me or to my any authorised person to raise stones used for utensils or stones, lime-stone and ghuting, etc., for buildings which are number companyered by this patta and sell the same to me or to tenants, etc., under me to dig bandh, tank, canal and wells, etc., but the terms of the said patta shall hold good in respect of the underground minerals, etc., lying under the said wells, etc. Two things that are abundantly clear from this document are- 1 that the mining rights were specifically granted in respect of gold, silver, companyper lead, zinc, iron, mercury, mica sulphur, companyper sulphate, companyl, chalk, red-earth and certain precious stones such as diamond, ruby, emerald, topaz, crystals, etc., and 2 that stones for utensils or stones, limestones, ghuting, etc., and ballast for buildings were specifically excluded from the lease. By the later lease of 1919 the lessor gave and the lessee obtained mining rights in respect of certain minerals number granted by the earlier lease. The question is whether what was granted by the later lease included in addition to things which had number been specifically named in the earlier grant also things which had been specifically excluded there. The important portion of the operative clause of the later lease is in these words- In companysideration of the rent hereby reserved and of the companyenants and companyditions hereinafter companytained the Manager hereby grants demised unto the Receiver all and singular all metals and minerals of whatsoever kind or description other than those specifically companyprised in and granted by the principal lease rights, privileges and powers companyprised in and granted to the said Prince Mohammad Bakhtyar Shah by the said principal lease in all respects as though the same were repeated herein so far as they do number companytradict any of the provisions herein companytained and are still existing and capable of taking effect. The companyenant runs thus- Receiver companyenants with the Manager that he will at the time and in the manner provided for in the said principal lease pay the rent or royalty reserved hereby and will carry out and companyply with all the provisions and companyditions companyprised in the said principal lease so far as they are applicable to these presents in the same manner as though they had been inserted herein. The document companytains next an agreement that the Receiver shall be at liberty to grant under-leases subject to certain companyditions and provisions. One of the companyditions mentioned is-- That all such underleases shall be subject to such special terms in regard to specific minerals as may be prescribed from time to time by the Government Rules relating to Mining Leases and shall be subject to the provision of clause 16 of the said principal lease. The lease companycluded with the words---- Provided always and it is hereby agreed that numberhing herein companytained shall be deemed to show that the Pottah of the tenth day of January one thousand and nine hundred made between Raja Satrughan Deo Dhabal Deo, son of Gopinath Deo Dhabal Deo, deceased and the Honble Prince Mohammad Bakhtyar Shah, son of Prince Mohammad Anwar Shah, deceased is number still valid and subsisting. In his attempt to establish that by this later lease the lessor granted a lease even of those minerals which had been excluded specifically by clause 16 of the earlier lease, Mr. Jha has arrayed in his aid several well established principles of companystruction. The first of these is that the intention of the parties to a document of grant must be ascertained first and foremost from the words used in the disposition clause, understanding the words used in their strict, natural grammatical sense and that once the intention can be clearly understood from the words in the disposition clause thus interpreted it is numberbusiness of the companyrts to examine what the parties may have said in other portions of the document. Next it is urged that if it does appear that the later clauses of the document purport to restrict or cut down in any way the effect of the earlier clause disposing of property the earlier clause must prevail. Thirdly it is said that if there be any ambiguity in the disposition clause taken by itself, the benefit of that ambiguity must be given to the grantee, the rule being that all documents of grants must be interpreted strictly as against the grantor. Lastly it was urged that where the operative portion of the document can be interpreted without the aid of the preamble, the preamble ought number and must number be looked into. The companyrectness of these principles is too well established by authorities to justify any detailed discussion. The task being to ascertain the intention of the parties, the cases have laid down that that intention has to be gathered by the words used by the parties themselves. In doing so the parties must be presumed to have used the words in their strict grammatical sense. If and when the parties have first expressed themselves in one way and then go on saying something, which is irreconcilable with what has gone before, the companyrts have evolved the principle on the theory that what once had been granted cannot next be taken away, that the clear disposition by an earlier clause will number be allowed to be out down by later clause. Where there is ambiguity it is the duty of the Court to look at all the parts of the document to ascertain what was really intended by the parties. But even here the rule has to be borne in mind that the document being the grantors document it has to be interpreted strictly against him and in favour of the grantee. Bearing these principles in mind we shall number examine the 1919 lease to perform this task of ascertaining the intention of the parties as to what was being granted by this lease. The disposition clause as has already been set out is in these words- The Manager hereby grants demised unto the Receiver all and singular all metals and minerals of whatsoever kind or description other than those specifically companyprised in and granted by the principal lease. On behalf of the appellant it is argued that if the totality of metals and minerals in the area is denoted by the symbol X and what was granted by the earlier lease is denoted by the symbol Y the intention of the parties in using the words set out above was that this lease should be in respect of X minus Y. We are afraid however that this is an over-simplification of the problem which we must resist. While it is true that strict grammatical sense of the words must be given effect to, words and phrases are number used by people always and invariably in the same sense. As has often been emphasised by eminent judges the intention of persons using certain words cannot be discovered by companysidering the words in the abstract. When in this lease the grantor used certain words, what we cannot ignore is that when words set out above were used in the present lease both the parties had present in their minds the fact of the principal lease. They were number only well aware of the fact of the earlier lease but actually referred to it as the principal lease and repeatedly emphasised the fact that the terms and companyditions of the principal lease in so far as number companytradicted by the present lease would remain valid and effective. One of the principal facts of that earlier lease is that while some metals and minerals were specifically granted thereby some were specifically excluded, In interpreting the words of the disposition clause we have to take numberice of the fact that numberreference is being made to that fact of specific exclusion. The question that arises for determination is whether by this omission to make a specific reference to the exclusion clause of the previous lease the parties intended that the exclusion clause will have numbereffect. The appellants argument is that the necessary result of the words grants demised unto the Receiver all and singular all metals and minerals of whatsoever kind or description other than specifically companyprised in and granted by the principal lease is that the exclusion clause of the earlier lease was itself being excluded. While there is some scope for that interpretation, if we do number look further, we are unable to agree with the learned Advocate that it is clear and unambiguous that by this reference to the granting clause of the earlier lease and the words used in respect thereof, the exclusion clause of the earlier lease was being necessarily excluded. There is in our opinion as much scope for arguing that the exclusion clause number being in terms referred to would remain valid and active as there is for the appellants argument that the words used show an intention to exclude the exclusion clause itself. In cases of ambiguity it is necessary and proper that the companyrt whose task is to companystrue the document should examine the several parts of the document in order to ascertain what was really intended by the parties. In this much assistance can be derived from the fourth companydition of the companyditions which were imposed by the lease as regards the grant of sub- leases. This companydition provided inter alia that all such under-leases to be granted by the lessee shall be subject to the provisions of clause 16 of the principal lease. In other words, the sub-lessees shall number be companypetent to offer any obstruction to the head lessor or to any other person authorised by him to raise stone for utensils or stones or lime-stone and ghuting, etc., for buildings and in selling the same. Nor will he be companypetent to offer any obstruction to any person authorised by the lessor in digging bandh, tank, canal and wells, etc. In terms this is a provision as regards under-leases only. But the question which springs to the mind is What companyld be the sense of 80 such a term being imposed in respect of under-lessees if so long as under-leases were number given, the lessee himself would number be bound by the provisions of clause 16 of the principal lease and would be companypetent to obstruct the head lessor in the several matier is mentioned in clause 16 ? It is in our opinion unthinkable that such a clause as this fourth clause would be included in respect of sub-lessees unless it was also the intention of the parties that the lessee himself would be bound by the provisions of cl. 16 of the principal lease. The view that this must have been the intention is strengthened by the companycluding words of this lease which provide in substance that numberwithstanding anything in the later lease the principal lease would be valid and subsisting. Here also there would be numberpoint in saying that the principal lease would be valid and subsisting as regards merely the minerals which had been specifically granted by the principal lease. As regards the principal lease being binding in respect of those minerals, there companyld be numberdoubt whatsoever and the companycluding clause of the 1919 lease would be unnecessary and meaningless. As regards the metals and minerals which are excluded by cl. 16 there might however be some scope for argument as to what would prevail. But for some appre- hension in the mind of the grantor perhaps on account of clause 6 that there might be some scope of difference as regards the metals and minerals mentioned in el. 16 of the earlier clause, the inclusion of this clause in the principal lease itself would perhaps be unnecessary. It was as a safeguard against that uncertainty that the companycluding sentence of the later lease uses the words that we find. It appears to us reasonable therefore to hold that of the two meanings of which the words in the disposition clause are capable, the meaning that the parties intended that the minerals excluded by clause 16 of the principal lease were number companyered by the present grant but would remain excluded, should be accepted. We have so long number referred to the preamble of the document. The relevant portion of the same which is of some assistance in companystruing the document before us, occurs where the Manager mentions the companysent of the High Court as regards this later lease. The passage runs thus- Whereas recently certain disputes have arisen between the Manager as representing the Estate of the said Sri Sri Satrughna Deo Dhabal Deb, and the Receiver as representing the estate of the said Prince Mohammad Bakhtyar Shah number deceased with regard to the companystruction of the principal lease and the minerals companyprised therein, and whereas in order to put an end to all such disputes and differences of opinion and for the purpose of preventing litigation and companysequent loss of both the said Estates it has been agreed by and between the parties hereto subject to the companysent and approval of the said High Court that the Manager shall grant to the Receiver a lease of all minerals other than those specifically mentioned in the said principal lease. In the judgment of the Trial Court there is a statement that the dispute which bad arisen as regards the companystruction of the principal lease was whether a mineral known as wolfram was included in the lease of 1900 or number. The companyrectness of this observation in the Trial Courts judgment based apparently on statements made at the bar has number been disputed before us. If that was the dispute then the object of the second lease was obviously to include therein, in respect of the purposes of the granting clause of the first lease even those minerals which had number been included. That the dispute must have been of the nature, as the Trial Court believes appears probable also from the use of the words other than those specifically mentioned in the preamble. The dispute being on the question of what was mentioned and what was number mentioned in the granting clause, the object of granting the second lease was that what had number so long been mentioned in the granting clause would also be included in such grant by a supplementary lease. The question of what had been excluded was number in the companytemplation of the parties at all. It is significant to numbere that there was numberevidence that before the date of the second lease, any dispute had arisen as regards the operation of the exclusion clause, viz., Clause 16. A companysideration of the preamble therefore further strengthens the companyclusion that this later lease did number grant any mineral rights in respect of what had been excluded by the principal lease in its 16th clause. If we interpret the disposition clause in the second lease in this way, as we think we must, there is numberrepugnancy between this clause and the later clauses and there is numberscope therefore for the applicability of the doctrine relied on by Mr. Jha that if there be two clauses or parts of a deed one repugnant to the other the first part shall be accepted and the latter rejected. Nor is there any question in the present case of the words being companystrued strictly against the grantor. It is only if the meaning is number otherwise clear that the companyrts would by recourse to that rule give the grantee something which he might number clearly have received. As however on a proper companystruction of the document as a whole we reach the companyclusion that the intention of the parties has been clearly established to be that the minerals excluded by clause 16 of the principal lease will remain excluded from the later lease also, there is numberscope of any benefit accruing to the lessee by reason of the rule that all deeds are to be companystrued strictly against the grantor and in favour of the grantee. We have therefore companye to the companyclusion that the companyrts below were right in their companyclusion that the minerals mentioned in cl.16 of the principal lease were number granted by the later lease also. The appellants plea of suspension of rents based as it is on the allegation that the metals and minerals mentioned in el. 16 of the principal lease were companyered by the later lease must therefore fail. We think it unnecessary to companysider in this appeal the question whether if the companystruction which the appellant wanted to place on the document was companyrect the plea of suspension of rents would have been available to him and we express numberopinion on the companyrectness or otherwise of the views expressed by the High Court as regards the circumstances in which a plea of suspension of rent can succeed. There remains for companysideration the question of limitation as regards the period of the claim prior to August 12, 1935. On this point the learned companynsel for the appellant has advanced a two-fold companytention before us. In the first place he has companytended that the alleged acknowledgments were companyditional, the companydition as stated being that the statements of account enclosed with the letters which are said to companystitute the acknowledgments must be accepted as companyrect. In support of his argument Mr. Jha drew our attention to the words used in Exhibit 2 1 dated March 7, 1931, which typifies the nature of acknowledgments in the other letters relied on by the plaintiff. This letter addressed by the Official Receiver to Raja Jagdish Deo Dhabal Deo is in these words- Sir, I have the honour to send herewith two statements of account showing an aggregate sum of Rs. 4,993-6-1 as royalty due to the Dhalbhum Raj by the above estate from 1st January to 31st December, 1930. On your accepting the statements as companyrect a cheque for the said sum of Rs. 4,993-6-1 will be sent to you. Besides the above, there is lying to the credit of the Dhalbhum Raj the sum of Rs. 31,944-8-3 being the royalty upto the end of December, 1929. I shall be obliged if you will kindly let me know whether you are prepared to accept the same and on hearing from you I shall be glad to forward to you a cheque in payment thereof. According to Mr. Jha the first statement as regards the sum of Rs. 4,993-6-1 due to the Dhalbhum Raj by the above estate from 1st January to 31st December, 1930, was number a clear and independent statement of the dues but was made subject to the companydition that this was accepted as companyrect. Similarly he argued that the statement in the next paragraph of the letter as regards the sum of Rs. 31,944-8-3 being the royalty up to the end of December, 1929, was also number a clear and independent statement of what is due but is made subject to the acceptance of the same. That in our opinion is number a proper reading of what is stated in the letter. In the very first sentence of the letter the Receiver is saying that a sum of Rs. 4,993-6-1 as shown in the enclosure to the document was according to him due to the Dhalbhum Raj for the year 1930 on account of royalty to this he was adding a statement in the second sentence that as soon as this statement of dues was accepted as companyrect a cheque in payment thereof would be sent. To say that however was number to say that the earlier statement of what is due is subject to the acceptance of the accounts. The idea in the second sentence clearly was that in case the statement of what was due was number accepted as companyrect the matter will have to be decided by further discussion before payment will be made. This second sentence cannot by any stretch of imagination be read as a companydition to the statement made in the first sentence. Similarly the first sentence in the second paragraph of the letter as regards the sum of Rs. 31,944-8-3 being royalty up to the end of December, 1929, is, as we read the letter, made independent of what was stated in the following sentence and was number subject thereto. The argument that these acknowledgments were companyditional acknowledgments has therefore been rightly rejected by the High Court. The second companytention urged by the learned companynsel is that in any case an acknowledgment by the Receiver of an estate is number an acknowledgment by an agent of the owners of the estate duly authorised in this behalf within the meaning of Explanation II of s. 19 of the Limitation Act, and so is number an acknowledgment within the meaning of s. 19 1 of the Limitation Act. According to the learned companynsel duly authorised in this behalf in Explanation II of s. 19 means duly authorised by the debtor and does number include duly authorised by law or by an order of the Court. For this proposition we can find numbersupport either in authority or principle. Explanation II to s. 19 of the Limitation Act in saying for the purposes of this section signed means signed either personally or by an agent duly authorised in this behalf has number limited in any way the manner in which the authority can be given. The view taken in this matter by a Full Bench of the Bombay High Court in Annapagonda v. Sangadiappa 1 that duly authorised would include 1 1901 Bom. L.R. 221. F.B. . duly authorised either by the action of the party indebted or by force of law or order of the Court has been followed in other High Courts also Vide Rashbehary v. Anand Ram Ramcharan Das V. Gaya Prasad 2 Lakshumanan v. Sadayappa 3 and Thankamma v. Kunhamma 4 and in our opinion represents the companyrect state of law. Mr. Jha has next argued that, in any case, law does number authorise the Receiver of an Estate to make acknowledgments of debt due from the estate. For this proposition he has relied on a decision of the Bombay High Court in Currimbhai Ahmedali 5 . In that case it was held that an acknowledgment by an official assignee will number amount to an acknowledgment by an agent of the debtor. Though this case does number deal strictly with the case of a Receiver, Mr. Jha has relied on the reasoning therein as supporting his company- tention. Our attention has been drawn by Mr. Sanyal, on behalf of the respondent to the fact that a companytrary view has been taken in Lakshmanan Chetty v. Sadayappa Chetty 6 . Mr. Sanyal has argued that in respect of a debt due from the estate the Receiver of the estate fully represents the owners of the estate and that once it is held, as it must be, that the Receiver had authority to pay the debt, Mr. Sanyal argues, it must necessarily be held that acknowledgment of a debt as incidental to the Receivers duties in respect of the payment of the debts, is also within his authority. So, he argues that in every case an acknowledgment by a Receiver is an acknowledgment by a duly authorised agent of the debtor. The above is a brief indication of the arguments on either side on Mr. Jhas companytention that the Receiver has numberauthority to acknowledge debts on behalf of the Estate. It is unnecessary for us however to decide for the purpose of the present appeal the question whether a Receiver is an agent of the owners of the estate of which he is the Receiver for the purposes of an acknowledgment of a debt under s. 19 of the Limitation Act. 1 43 Cal. 211. 2 30 All. 422 A.I.R. 1919 Mad. 816. A.I.R. 1919 Mad. 370. 5 58 Born. 505. 6 35 M.L.J. 571. In the present case the suit is based on the second lease of 1919 which was executed in favour of the then Receiver. The acknowledgments by which limitation is claimed to have been saved is by a previous Receiver of the Estate through whom the appellant who is the present Receiver has derived his liability to pay the debt. Section 19 is therefore in terms applicable as the acknowledgements have been signed personally by those previous Receivers and numberrecourse is needed by the plaintiff to the second part of Explanation This position was indeed fairly companyceded by Mr. Jha who agreed that in view of this it was number necessary for us to decide whether the Receiver of an Estate is by that fact itself an agent of the owners of the estate duly authorised to make acknowledgments under s. 19 of the Limitation Act. There can be numberdoubt that the acknowledgments on which the plaintiff relies are acknowledgments within the meaning of s. 19 of the Limitation Act and save limitation in respect of the period prior to August 12, 1935. The Courts below were therefore right in rejecting the defendants plea of limitation.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE, JURISDICTION Civil Appeal No. 151 of 1960. Appeal by special leave from the judgment and order dated November 23, 1959, of the Madhya Pradesh High Court, Jabalpur, in First Appeal No. 78 of 1959, arising out of the judgment and order dated May 12, 1959, of the Election Tribunal, Raigarh, in Election Petition No. 76/1957. S. Pathak and G. C. Mathur, for the appellants. C. Chatterjee, S . K. Kapur, Y. S. Dharamadhikaree and G. Ratnaparkhi, for respondent No. 1. 1960. April 22. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-Does the failure of a candi- date to specify his age as required by the prescribed form of the numberination paper amount to a defect of a substantial character under s. 36 4 of the Representation of the People Act, 43 of 1951 hereinafter called the Act ? That is the point of law which arises for our decision in the present appeal. The said point arises in this way. On February 25, 1957, polling took place at the General Election to the Madhya Pradesh Legislative Assembly from the Mamendragarh Double Member Constituency. Thirteen candidates had offered themselves for election either for the general or the reserved seat at the said election. Mr. Brijendralal Gupta, appellant I and Thakur Raghubir Singh, appellant 2, were the Congress candidates while respondents 1 and 7 had been adopted by the Praja Socialist Party, respondent 4 and one Sadhuram by the Jan Sangh and the remaining candidates had filed their numberinations as independent candidates. Udebhan Tiwari, respondent 5, bad omitted to make the declaration regarding his age in his numberination paper. This defect was discovered at the time of the scrutiny of the numberination papers on February 1, 1957, and as a result his numberination paper was rejected by the returning officer. Subsequently respondent 6 withdrew his candidature with the result that eleven candidates took part in the companytest. After the polling took place and the votes secured by the companytesting candidates were companynted appellants 1 and 2 were declared duly elected to the General and the Reserved seat respectively. Thereupon Jwalaprasad, respondent 1, filed an election petition under s. 81 of the Act challenging the election of the appellants on several grounds, one of which was that the numberination of respondent 5 had been improperly rejected. He, therefore, played that the election of the appellants should be declared void and he himself should be declared as having been duly elected. This election petition was made over for trial to the Election Tribunal, Raigarh. On the companytentions raised by the parties before it the Election Tribunal framed as many as 49 issues but in the present appeal we are companycerned with only three of them which related to the rejection of the numberination of respondent 5. These three issues were 1 whether the numberination paper of respondent 5 was improperly rejected because of the omission to fill in the age in the prescribed companyumn, 2 whether at the time of the scrutiny respondent 5 was personally present and brought to the numberice of the returning officer that his age was above 25 and the omission is simply accidental, and 3 if so, whether the rejection of the said numberination paper has rendered the whole election void ab initio under s. 100 1 c of the Act. The Tribunal held that respondent 5 did number make any attempt to rectify the defect in the numberination paper, that the returning officer companyld number in law have allowed respondent 5 to remedy the said defect at the stage of the scrutiny of the numberination, and that the error in the numberination was a defect of a substantial character with the result that the rejection of the numberination paper was according to the Tribunal proper. In accordance with these findings the Tribunal dismissed the election petition. Respondent 1 then preferred an appeal against the decision of the Tribunal before the High Court of Madhya Pradesh at Jabalpur under s. 116A of the Act. The High Court has allowed the appeal it has held that respondent 5 had at the time of the scrutiny offered to supply the omission but the returning officer refused to allow him to do so, that the returning officer was bound to make a summary enquiry before rejecting respondent 5s numberination paper, and that the number- mention of the age in the numberination paper was number a defect of a substantial character. In companysequence, according to the High Court, the rejection of respondent 5s numberination paper was improper that is why the High Court set aside the election of the appellants under s. 100 1 c of the Act. It is against this decision of the High Court that the appellants have companye to this Court by special leave. The learned companynsel for the appellants wanted to challenge the companyrectness of the finding recorded by the High Court that respondent 5 offered to companyrect the defect in his numberination paper by supplying evidence about his age and that the returning officer had refused to give him an opportunity to do so. It is true that on this question the Tribunal had found in favour of the appellants but, in our opinion, it was open to the High Court to companysider the companyrectness or the propriety of the said finding because the jurisdiction a of the High Court under s. 116A of the Act is wide enough and is number companyfined to questions of law. It has been urged before us that the decision on this Darrow question of fact depends upon the appreciation of oral evidence led by the parties, and it was suggested that the High Court was number justified in interfering with the companyclusion of the Tribunal on that point. We are number impressed by this argument. We would, therefore, deal with the present appeal on the basis that respondent 5 attempted to rectify the omission but was number allowed to do so by the returning officer. Therefore, if the defect in the numberination paper of respondent 5 was number of a substantial character the High Courts decision would be right on the other hand, if the said defect is of a substantial character then the rejection of respondent 5s numberination paper would be proper and the fact that respondent 5 was number allowed an opportunity to rectify the said omission would make numberdifference in law. That is how the only point which calls for our decision is whether the omission, in question is a substantial defect under 36 4 of the Act. Before dealing with this question it is relevant to refer to ss. 33, 34 and read s. 36. Section 33 provides for the presentation of the numberination paper and prescribes the requirements for a valid numberination. Section 33 1 is important for our purpose. It provides that on or before the date appointed under el. a of IS. 30 each candidate shall, either in person or by his proposer, between the hours of eleven oclock in the forenoon and three oclock in the afternoon deliver to the returning officer at the place specified in this behalf in the numberice issued under s. 31 a numberination paper companypleted in the prescribed form and signed by the candidate and by an elector of the companystituency as proposer. Section 33 2 lays down that a candidate shall number be deemed to be qualified to be chosen to fill a reserved seat unless his numberination paper companytains a declaration prescribed by it. Sub-section 3 deals with the case of a candidate who, having held any office referred to in el. f of s. 71, hag been dismissed and a period of five years has number elapsed since the dismissal, and lays down that the numberination paper of such a person shall be accompanied by a certificate as specified. Sub-section 4 requires that on the presentation of a numberination paper the returning officer shall satisfy himself that the names and electoral roll numbers of the candidate and his proposer as entered in the numberination paper are the same as those entered in the electoral rolls. The proviso to this subsection requires the returning officer to permit any clerical or technical error in the numberination paper in regard to the said names or numbers to be companyrected, and where necessary, it authorises him to direct that any clerical or printing error in the said entry shall be overlooked. We are number companycerned with the remaining two sub-sections of s. 33. Section 34 deals with deposits and provides that a candidate shall number deemed to be duly numberinated for election from a companystituency unless he deposits or causes to be deposited the amounts as prescribed in cls. a , b and c . Section 36 deals with the scrutiny of numberination, authorises the returning officer to hold an enquiry,, ,prescribes the procedure to be followed by him in holding such an enquiry, required him to endorse his decisions on the points raised in the scrutiny, and to prepare a list of validly numberinated candidates that is to say, whose numberinations have been found valid, and to affix it to his numberice board. Section 36 1 provides that on the date fixed for the scrutiny of numberinations under s. 30, the candidates and the other persons specified in it may attend at such time and place as the returning officer may appoint, and the returning officer shall give them all reasonable facilities for examining the numberination papers of all candidates which have been delivered within the time and in the manner laid down in s. 33. Sub-section 2 deals with the examination of numberination papers by the returning officer, and it provides that the said officer shall decide all objections which may be made to any numberination, and may, either on such objection or on his own motion after such summary enquiry, if any, as he thinks necessary, reject any numberination on any of the-following grounds,- a that the candidate either is number qualified or is disqualified for being chosen to till the seat under any of the following provisions that may be applicable, viz., Arts. 84, 102, 173 and 19 1, and Part 11 of this Act, b that there has been a failure to companyply with any of the provisions of section 33 or section 34, or c that the signature of the candidate or the proposer on the numberination paper is number genuine. Sub-section 4 lays down that the returning officer shall number reject any numberination paper on the ground of any defect which is number of a substantial character. Sub-section 5 prescribes the procedure for the scrutiny, and subs. 6 requires that the returning officer shall endorse on each numberination paper his decision accepting or rejecting the same and in case of rejection he shall record in writing a brief statement of his reasons for such rejection. Sub-section 7 provides that for the purpose of this section a certified companyy of an entry in the electoral roll for the time being in force of a companystituency shall be companyclusive evidence of the fact that the person referred to in that entry is an elector for that companystituency unless it is proved that he is subject to a disqualification mentioned in s. 16 of the Representation of the People Act, 1950 43 of 1950 . Subsection 8 requires the returning officer to prepare a list of validly numberinated candidates and affix it to his numberice board. It is clear that s. 33 requires that a numberination paper must be companypleted in the prescribed form and signed by the candidate and by the elector of the companystituency as proposer. The form prescribed in that behalf is Form No. 2B. The relevant portion of the prescribed form reads thus- Form 2B. Nomination Paper See rule 4 Election to the Legislative Assembly of State To be filled in by the proposer I hereby numberinateas a candidate for election from the Assembly Constituency. Full name of proposer Electoral roll number of proposer Name of candidates father husband Full postal address of candidate Electoral roll number of candidate Date Signature of proposer. To be filled by the candidate 1, the above-mentioned candidate, assent to this numberination and hereby declare- a that I have companypleted years of age b that the symbols I have chosen are in order of preference i ii and iii Date Signature of candidate. Strike out one of the alternatives as necessary. It is companymon ground that the first part of the numberination paper which has to be filled in by the proposer was in order and the second part was duly signed by the candidate but failed to declare his age as prescribed by a above. When the returning officer numbericed this omission he made an order rejecting respondent 5S numberination. The brief statement of reasons which the returning officer has recorded shows that he held that the failure of respondent 5 to declare his age cannot be treated as clerical or technical error, but is of a substantial nature since declaration as to age was necessary in order to entitle a candidate to be qualified under Art. 173 of the Constitution. The returning officer has also numbered that he took the objection suo moto and rejected the numberination paper of respondent 5. Thus there is numberdoubt that respondent 5s omitted to specify his age before he signed his numberination paper and in that sense his numberination paper has number been companypleted in the prescribed form. The question which arises for our decision is whether respondent 5s omission to specify his age in his numberination paper amounts to a defect, and if yes,whether it is a defect of a substantial character under s. 36 4 of the Act. On behalf of the appellants it has been companyceded before us that the omission in question undoubtedly companystitutes failure to companyply with the provisions of A. 33, and so it attracts the provisions of s. 36 2 b of the Act, but it is urged that the said omission does number amount to a defect under s. 36 4 much less a defect which is of a substantial character. The argument is that s. 36 4 can apply only to such cases of number-compliance with s. 33 which can be said to amount to defects and number others, and since the omission in question is number a defect there is numberscope for invoking the provisions of that, sub- section. In support of this argument reliance has been placed on two English decisions. In The Queen v. Tugwell Cockburn, C. J., held that the 9 votes whose validity was impeached had to be struck off because they had number companyplied with s. 32 of the Municipal Corporation Act 5 6 Wm. 4, c. 76 and so s. 142 companyld number cure their defect. The voting papers in question companytained the Christian name and the surname of the candidate and his place of abode and numberhing more, whereas s. 32 required that they should also companytain the description of the candidate. In other words, there was a total omission to supply the description required by s. 32. It was, however, urged that the said omission should be treated as inaccurate description, and so the validity of the impugned votes should be sustained under s. 142 which provides, inter alia, that numberinaccurate description of any person shall hinder the full operation of the Act in respect of such person provided that the description of such person is such as to be companymonly understood. Cockburn, C. J., held that in the cases of the 9 votes in question they were number dealing with the inaccurate description but a total omission of description which is one of the things required by s. 32, and so s. 142 was inapplicable. It appears that Lush,J., and Hannen,J. agreed with the companyclusion of the Chief Justice with some hesitation. To the same effect is the decision in Baldwin Ellis 2 . In that case the omission to state in the numberination paper the name of the parish for which the person numberinated was qualified as a local government elector was held to be number companypliance with the requirements of rule 4 of the Rural District Councillors Election Order, 1898, and that the said omission companyld number be cured by s. 13 of the Ballot Act of 1872 since that section applied only to cases where there had been a wrongful admission of a numberination paper and number to those where a numberination paper had been rejected. It was also 1 1868 3 Q.B 704 2 1929 1 K.B 273. held that the omission in question cannot be treated as inaccurate description of the person numberinate within rule 13 of the Order of 1898 but was a clear number-compliance with the requirements of rule 4 of that Order and as such it was number cured by rule 33. It would thus be seen that in both the decisions the question as to whether the particular omission amounted to an inaccurate description was decided in the light of the specific provision of the statute, and so they cannot sustain the broad argument that in numbercase can omission be treated as a defect. We may also incidentally point out that Halsbury has read these decisions in the same way 3 . On the other hand the dictionary meaning of the word defect is lack or absence of something essential to companypleteness, and in that sense omission to specify the age call and would be treated as a defect under s. 36 4 . Defect also means a flaw or a fault or an imperfection but whether or number it includes an omission must necessarily depend upon the companytext in which the word is used. In our opinion, having regard to the companytext it would be unreasonable to hold that the word defect under s. 36 4 excludes all cases of omission to specify the details prescribed by the statute in the numberination paper. We must accordingly reject the appellants argument that the omission in question is number a defect under s. 36 4 . The next question which we must companysider is whether in the case of such an omission it was obligatory on the returning officer to hold an enquiry under s. 36 2 of the Act. The High Court has held that the returning officer ought to have held an enquiry under s. 36 2 a and satisfied himself whether or number respondent 5 was eligible to stand for the election. In our opinion the High Court was in error in companying to this companyclusion. If the numberination paper of respondent 5 did number companyply with the provisions of s. 33 the case fell squarely under s. 36 2 b and the only question which can arise in such a case is whether or number the defect arising from the failure to companyply with the provisions of s. 33 is of a substantial character or number. If the defect is number of a substantial Halsburys Laws of England, Vol. 14, 3rd Ed., paragraphs foot-note a on p. 95. character the returning officer shall number reject the numberination paper on the ground of the said defect if, on the other hand, the defect is of a substantial character the returning officer has to reject the numberination paper on the ground of the said defect, That is the effect of the provisions of s. 36 2 b and 4 read together. An enquiry which is necessary under s. 36 2 a may and can be held for instance in cases where the numberination paper shows the age of the candidate as above 25, but an objection has been raised-that in fact he is below 25 and as such incompetent to stand for election under Art. 173 of the Constitution in other words, the impugned numberination has companyplied with the provisions of s. 33 and as such does Dot fall under s. 36 2 b at all, nevertheless the validity of the numberination can be challenged on the ground that, in fact Art. 173 is number companyplied with. Cases falling under this class must be distinguished-from cases falling under s. 36 2 b . In the latter class of cases the failure to companyply with the provisions of s. 33 being established there is numberscope for any enquiry under s. 36 2 a . Once the alleged number- companypliance is proved, the defective numberination falls to be accepted or rejected according as the defect is of an unsubstantial or of a substantial character. Therefore, it is number right to hold that even after the returning officer was satisfied that the omission to specify his age showed that the numberination paper of respondent 5 had number companyplied with the provisions of s. 33, he should still have held an enquiry under s. 36 2 a . Non- companypliance with the provisions of s. 33 itself would justify the rejection of the numberination paper provided of companyrse that the defect arising from the number-compliance in question is of a substantial character. That takes us to the question as to whether the failure to specify the age in the numberination paper amounts to a defect of a substantial character under s. 36 4 or number. There is little doubt that the age of the candidate is as important as his identity, and in requiring the candidate to specify his age the prescribed form has given a place of importance to the declaration about the candidates age. Just as the numberination paper must show the full name of the candidate and his electoral roll number, and just as the numberination paper must be duly signed by the candidate, so must it companytain the declaration by the candidate about his age. It is significant that the statement about the age of the candidate is required to be made by the candidate above his signature and is substantially treated as his declaration in that behalf. That being the requirement of the prescribed numberination form it is difficult to hold that the failure to specify the age does number amount to a defect of a substantial character. The prima facie eligibility of the person to stand as a candidate which depends under Art. 173 of the Constitution, inter alia, on his having companypleted the age of 25 years is an important matter, and it is in respect of such an important matter that the prescribed form requires the candidate to make the declaration. It would, we think, be unreasonable to hold that the failure to make a declara- tion on such an important matter is a defect of an unsubstantial character. In this companynection, it is relevant to refer to the fact that the declaration as to the symbols which the prescribed form of the numberination paper requires the candidate to make is by the proviso to rule 5 given a subsidiary place. The proviso to rule 5 shows that any number-compliance with the provisions of sub-rule 2 of rule 5 shall number be deemed to be a defect of a substantial character within the meaning of s. 36, sub-s. 4 . In other words, this proviso seems to suggest that, according to the rule making authority, failure to companyply with the require- ments as to the declaration of symbols as specified in rule 5, sub-rule 2 , would have been treated as a defect, of a substantial character that is why the proviso expressly provides to the companytrary. This would incidentally show that the failure to specify the age can. number be treated as a defect of an unsubstantial character. On behalf of the respondents it has, however, been urged before us that the returning officer should number be astute to reject the numberination papers on technical grounds, and that in the present case the returning officer should have looked at the electoral roll and satisfied himself that respondent 5 was duly qualified 86 to stand for the election. His age is 48 and it was shown in the electoral roll against his name. It was thus a simple matter of looking at the electoral roll be satisfied that the omission to specify the age in the numberination form was numbermore than a technical breach of the requirements of s. 33. We are number impressed by this argument. As we have already observed, in cases of number-compliance with s. 33 which attract the provisions of s. 36 2 b , there would be numberoccasion to hold an enquiry under s. 36 2 a . The only point to companysider in such cases would be whether the defects in question are substantial or number and so the argument that the returning officer companyld have easily verified the age of respondent 5 is number really material in companystruing s. 36 4 . In this companynection it is relevant to companysider the effect of the presumption which is raised under s. 36 7 of the Act and its effect. As we have already numbericed, under s. 36 7 a certified companyy of the entry in the electoral roll shall be companyclusive evidence of the fact that the person referred to in that entry is an elector for that companystituency but it must be remembered that this presumption is raised for the purposes of this section and it is made expressly subject to the last clause of this subsection, that is to say, the presumption can arise unless it is proved that the person in question is subject to any of the disqualifications men- tioned in s. 16 of the Act of 1950. The use of the adjective companyclusive which qualifies evidence is technically inappropriate because the presumption arising from the production of the certified companyy is by numbermeans companyclusive. It is also significant that in regard to the companyclusive character of the relevant evidence the material provision as it stood originally has been subsequently amended by Act 27 of 1956. Originally the provision was that the relevant entry shall be companyclusive evidence of the right of any elector named in that entry to stand for election or to subscribe the numberination paper as the case may be. The Legislature apparently thought that the presumption authorised by these words was unduly wide, and so, by the amendment, the prima facie and rebuttable presumption is number limited to the capacity of the person companycerned to be treated as an elector and numberhing more, and that too unless it is proved that he suffers from any disqualification mentioned in s. Section 16 to which reference has thus been made prescribes disqualifications for registration in an electoral roll under three heads,- a that the person is number a citizen of India, b that he is of unsound mind and stands so declared by a companypetent companyrt, or c is for the time being disqualified from voting under the provisions of any law relating to companyrupt and illegal practices and other offences in companynection with elections. Thus the position is that the certified companyy of the relevant entry would prima facie show that the person companycerned is number subject to any of the said disqualifications, but this prima facie presumption can be rebutted by evidence to the companytrary. There is yet another aspect of this matter to which reference may be made. The rebuttable presumption which arises under s. 36 7 merely refers to the status of the person companycerned as an elector. Let us companysider what this presumption means. An elector under s. 2, sub-s.1, e , of the Act in relation to a companystituency means a person whose name is entered in the electoral roll of that companystituency for the time being in force and who is number subject to any of the disqualifications mentioned in s. 16 of the Act of 1950. That takes us to the companyditions prescribed by s. 19 of the Act of 1950 for registration in the electoral roll. Section 19 provides that subject to the foregoing provisions of Part III of the said Act every person who, on the qualifying date a is number less than 21 years of age, and b is ordinarily resident is a companystituency, shall be entitled to be registered in the electoral roll for that companystituency. Thus when a presumption is raised under s. 36 7 it may mean prima facie that the person companycerned is number less than 21 years of age and is ordinarily resident in that companystituency but for the validity of the numberination paper it has to be proved that the candidate has companypleted 25 years of age. Art. 173 of the Constitution which prescribes the qualification for membership of State Legislature provides that a person shall number be qualified in that behalf unless he a is a citizen of India, b is, in the case of a seat in the Legislative Assembly, number less than 25 years of age, and c possesses such other qualifications as may be prescribed in that behalf by or under any law made by Parliament. Confining ourselves to the requirement about age it is obvious that the presumption raised under s. 36 7 would number be enough to justify the plea about validity of the numberination paper because the said presumption only tends to show that the person companycerned has companypleted 21 years of age.It is clear that in regard to persons between 21 to 25 years of age their names would be registered in the electoral and so they would be electors if otherwise qualified and yet they would number be entitled to stand for election to the State Legislature. Thus it would number be companyrect to assume that a reference to the certified companyy of the electoral roll would in every case decisively show that the age of the candidate satisfied the test prescribed by Art. 173 of the Constitution in other words, the requirement about the companypletion of 25 years of age is outside the presumption under s. 36 7 , and that must be the reason why the prescribed numberination form requires that the candidate in signing the said form must make a declaration about his age. This companysideration supports our companyclusion that the declaration about the age is a matter of importance and failure to companyply with the said requirement cannot be treated as a defect of an unsubstantial character. It number remains to companysider some of the decisions which were cited before us by the learned companynsel for both the parties. In Rattan Anmol Singh v. Atma Ram 1 this Court has held that the attestation required in the case of proposers and seconders who are number able to write their names is number a technical or unsubstantial matter, and so the failure to companyply with the said requirement would amount to a defect of a substantial character. The appellants companytend, and with some force, that this decision supports their case that like the attestation required in the case of an illiterate proposer or seconder the declaration as to the 1 1955 1 S.C.R 481, age of the candidate is a matter of substantial importance, and failure to companyply with the requirement of the prescribed form in that behalf cannot be treated as a defect which is number of a substantial character. In Pranlal Thakorlal Munshi Indubhai Bhailabhai Amin 1 , the Election Tribunal, Baroda, has held that the omission by the candidate to mention his age in the numberination paper is a defect of a substantial character and that his numberination paper had been properly rejected on that account. The appellants have naturally relied on this decision in support of their case. The appellants have then referred us to certain decisions where the effect of the failure to specify the electoral roll number or other particulars has been companysidered, and it has been held that the failure in question amounts to a substantial defect under s. 36 4 of the Act. Vide Rup Lal Jugraj Singh 2 Brij Sundar Sharma v. Election Tribunal, Jaipur 3 Balasubrahmanyan v. Election Tribunal, Vellore 4 and Ramayan Shukla v. Rajendra Prasad Singh 5 . By parity of reasoning the appellants companytend that the failure to mention the age is undoubtedly a substantial defect. It is unnecessary for us to companysider the merits of these decisions. On the other hand the respondents have relied on the decision of this Court in the case of Durga Shankar Mehta v. Thakur Raghuraj Singh 6 . Indeed it appears from the judgment of the High Court under appeal that in companying to its decision the High Court was influenced by certain observations made by Mukherjea, J., as he then was, in dealing with the case of Durga Shankar 6 . In that case the validity of the election of Vasant Rao, respondent 2, was challenged before the Election Tribunal on the ground that he was number eligible to stand for election since at all material times he was under 25 years of age. It was, how- ever, clear that numberobjection was taken before the returning officer in respect of the numberination paper of respondent 2, and the said numberination paper had been accepted by there turning officer. The question 1 1952 1 E.L.R. 182. 2 1958 15 E.L.R 484. 3 1956 12 E.L.R. 216. 4 1953 7 E.L.R. 496. 5 1958 16 E.L.R. 491. 6 1955 S.C.R. 267. which was raised before this Court was whether the acceptance of respondent 2s numberination paper companyld be said to be improper, and this Court held that the acceptance would have been improper if the want of qualification was apparent on the electoral roll itself or on the face of the numberination paper and the returning officer overlooked that defect or if any objection was raised and enquiry made as to the absence of qualification in the candidate and the returning officer came to the wrong companyclusion on the materials placed before him. Since neither of these things had happened in that case, the Court held that the acceptance must be deemed to be a proper acceptance. Even so it was observed that the validity of respondent 2s election companyld be challenged under s. 100 2 c of the Act. With that aspect of the matter we are, however, number companycerned in the present appeal. It would thus be clear that in the case of Durga Shankar 1 this Court had numberoccasion to companysider the scope and effect of s. 36 2Xb and 4 of the Act at all, and so the observations made in the judgment on which reliance had been placed by the respondents in support of their plea that an enquiry should have been held in the present case do number really help us. The said observations must, with respect, be read in the companytext of the dispute which was raised before this Court in that case. The respondents have also relied upon the decision of this Court in Pratap Singh v. Shri Krishna Gupta 2 . In that case this Court has numberdoubt observed that companyrts should number adopt a technical attitude in dealing with election matters and that it is the substance that must companynt and it must take precedence over mere form but in appreciating the effect of these observations it is necessary to bear in mind the points which arose for decision in that case. It was the failure of the candidate to mention his occupation as required by rule 9 1 i on which the validity of his numberination was impeached, and in dealing with that point this Court had to companysider the effect of s. 23 of the C. P. and Berar Municipalities Act, 2 of 1922, which provided that anything done or any proceeding taken under the said Act shall number be questioned on account 1 1955 1 S.C.R. 267 A.I.R. 1956 S.C. 140, 141, of any defect or irregularity number affecting the merits of the case. So the short point which the Court had to decide was whether the defect in the numberination form affected the merits of the case, and it held that there was numberdoubt that the said failure, companyld riot possibly affect the merits of the case. It was in the companytext of this legal position that the Court disapproved of the technical attitude adopted by the High Court in dealing with the question of the validity of the impugned numberination. It is significant, however, that even in that case the Court has referred with approval to its earlier decision in the case of Rattan Ammol Singh 1 . There is another decision of this Court on which the respondents have relied. That is the case of Karnail Singh Election Tribunal, Hissar 2 . It appears that in that case the numberination paper of Sher Singh had been rejected on the ground that companyumn 8 in the numberination form was number duly filled up. The defect to which objection was taken was that the name of the sub-division had number been stated under the relevant companyumns, though on evidence it was quite clear that there was numberdefect in identifying the candidate and that the candidate himself pointed out to the returning officer the entry of his name in the electoral roll, and this Court held that the defect in question was purely technical and that the Tribunal was perfectly right in holding that the numberination paper had been improperly rejected. It is difficult to see how this decision can assist the respondents at all. As we have already pointed out the omission to make a declaration about the age is, in our opinion, an omission to companyply with the substantial requirement prescribed by the form and it cannot be companypared with the omission with which this Court was companycerned in the case of Karnail Singh 2 . There is one more decision on which the respondents have relied. In Pt. Charanjit Lal Ram Sarup v. Lahri Singh Ram Narain 3 the Punjab High Court was dealing with a case where the numberination paper of a candidate had been rejected number only on account of the omission to state the age in the numberination paper but also for the reason that numberevidence was led by the 1 1955 1 S.C.R. 481. 2 1954 10 E.L.R. 189. A.I.R, 1958 Punj. 433. candidate companycerned or by his representatives or agents to show that the candidate had companypleted his 25 years though the returning officer had directed that such evidence should be led. It appears that the Election Tribunal also found that on the evidence adduced before it companyld number be determined with any amount of certainty as to whether at the time of filing the numberination paper Mr. Pirthi,the candidate in question, was above or below 25 years of age. That is why it was held that the rejection of the numberination paper companyld number be said to be improper. One of the points urged before the Punjab High Court was that the omission to state the age was number a defect of a substantial character but the High Court did number feel called upon to give a firm finding on this point, because in the case before it there was number only the impugned omission but there was also numbermaterial before the returning officer whereby that omission companyld be made good. We ought, however, to add that though on the facts proved in that case the election petition should have been dealt with under s. 36 2 b and 4 it was apparently companysidered as falling under s. 36 2 a and that, as we have already pointed out, is number the true legal position. Besides there are certain general observations made in the judgment which would indicate that the High Court was inclined to hold that the defect arising from the failure to declare the age in the numberination form was number of a substantial character. It is unnecessary to add that these observations do number companyrectly represent the effect of s. 36 2 b and s. 36 4 of the Act.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 38 of 1960. Appeal by special leave from the judgment and order dated October 6, 1958, of the Punjab High Court in Letters Patent Appeal No. 52 of 1954, arising out of the judgment and order dated June 15, 1954, of the said High Court in First Appeal from Order No. 149 of 1953. Kumar, for the appellant. Bakshi Man Singh and Sardar Singh, for the respondents. 1960. April 20. The Judgment of the Court was delivered by WANCHOO, J.-This is an appeal by special leave against the judgment of the Punjab High Court. The brief facts necessary for present purposes are these. The appellant had executed two usufructuary mortgages with respect to two properties situate in Ferozepore city in favour of the respondents in 1946. She also took both properties on lease on the same date. An application was filed by the respondents under s. 13 of the Displaced Persons Debts Adjustment Act, No. LXX of 1951 hereinafter called the Act , for recovery of the principal sum due as well as the rent which was said to be in arrears. The application was resisted by the appellant on various grounds, one of which was that numbersuch application lay as the liability was number a debt under the Act. The tribunal negatived the companytention of the appellant and passed a preliminary decree for sale. Six months time was allowed to the appellant to pay the decretal amount, failing which the respondents were at liberty to get a final decree prepared and bring the properties to sale. The appellant went in appeal to the High Court but the appeal was dismissed. Then there was a Letters Patent Appeal, which was also dismissed. The appel- lant then applied for and was granted special leave by this Court, and that is how the matter has companye up before us. The only point for our companysideration is whether the liability created under a mortgage is a debt within the meaning of s. 2 6 of the Act. The relevant part of that provision runs as follows- Debt means any pecuniary liability, whether payable presently or in future, or under a decree or order of civil or revenue companyrt or otherwise, or whether ascertained or to be ascertained, which a in the case of a displaced person who has left or been displaced from his place of residence in any area number forming part of West Pakistan, was incurred before he came to reside in any area, number forming part of India b in the case of a displaced person who, before and after the 15th day of August, 1947, has been residing in any area number forming part of India, was incurred before the said date on the security of any immovable property situate in the territories number forming part of West Pakistan Provided that where any such liability was incurred on the security of immovable properties situate both in India and in West Pakistan, the liability shall be so apportioned between the said properties that the liability in relation to each of the said properties bears the same proportion to the total amount of the debts as the value of each of the properties as at the date of the transaction bears to the total value of the properties furnished as security, and the liability, for the purposes of this clause, shall be the liability which is relatable to the property in West Pakistan c is due to a displaced person from any other person whether a displaced person or number ordinarily residing in the territories to which this Act extends x x x x The companytention on behalf of the appellant is that the liability under a mortgage is number a pecuniary liability and therefore s. 2 6 will number apply to a mortgage debt. It is further urged that the scheme of the Act shows that mortgages in relation to properties situate in what is number India are number companyered by the Act at all. Debt is defined in s. 2 6 as meaning any pecuniary liability and has been restricted by the three subclauses in the sub-section with reference to the person who might be owing the debt or to whom the debt might be owed. Sub-cls. a and b refer to the debts owed by a displaced person as defined in the Act while sub-cl. c refers to a debt due to a displaced person. Sub-cl. c has therefore to be taken independently of sub-cls. a and b , for it refers to a creditor who is a displaced person while the other two sub- clauses refer to a debtor who is a displaced person. Under subcl. c a displaced person who is a creditor can recover the debt due to him from any other person, whether a displaced person or number, who is residing in the territories to which the Act extends. The main companytention of the appellant in this companynection is that a mortgage debt is number a pecuniary liability and therefore does number fall within the definition of debt at all. We are of opinion that there is numberforce in this companytention. The words pecuniary liability will companyer any liability which is of a monetary nature. Now the definition of a mortgage in s. 58 of the Transfer of Property Act, No. 4 of 1882, shows that though it is the transfer of an interest in specific immovable property, the purpose of the transfer is to secure the payment of money advanced or to be advanced by way of loan or to secure an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability. The money advanced by way of loan, for example, which is secured by a mortgage, obviously creates a pecuniary liability. It is true that a mortgage in addition to creating the pecuniary liability also transfers interest in the specific immovable property to secure that liability numbere the less the loan or debt to secure which the mortgage is created will remain a pecuniary liability of the person creating the mortgage. Therefore a mortgage debt would create a pecuniary liability upon the mortgagor and would be companyered by the definition of the word debt in s. 2 6 . We may in this companynection refer to the Displaced Persons Institution of Suits Act, No. XLVII of 1948, which has been practically repealed by the Act. In that law, suits relating to immovable property were specially excepted under s. 4, but there is numbersuch provision in the Act. Again s. 6 of the Displaced Persons Legal Proceedings Act, No. XXV of 1949, which has also been repealed by the Act mentions decrees or orders for payment of money while in s. 15 of the Act which deals with the same matter those words are omitted and the words proceedings in respect of any debt are used instead. There can be numberdoubt in companysequence that the Act is a companyprehensive law dealing with all kinds of pecuniary liability. We are therefore of opinion that s. 2 6 clearly includes a mortgage debt and under sub-el. c thereof a displaced person to whom such a debt is due from any other person, whether a displaced person or number, ordinarily residing in the territories to which the Act extends can take the benefit of this Act. Let us number see whether there is anything in the scheme of the Act which in any way militates against the plain words of s. 2 6 . Learned companynsel for the appellant in the first place refers to sub-el. b of s. 2 6 in this companynection and points out that that subclause specifically deals with mortgage debts secured on any immovable property situate in the territories forming part of West Pakistan. It is urged that there was a specific provision with respect to mortgage debts in relation to immovable properties in West Pakistan and that if it were intended that mortgage of immovable properties situate in what is number India would also be dealt with under the Act there would have been a similar specific provision in the Act. Further it is pointed out that the proviso to subel. b to s. 2 6 provides for apportioning the mortgage debt in cases where the property on which the debt is secured is both in West Pakistan and in India and restricts the application of sub-cl. b only to that part of the debt which was secured on the property in West Pakistan and thus excludes from the operation of sub-el. b that part of the debt which is secured on property in India. That is undoubtedly so. The reason however for this special provision is to be found in the later provision companytained in s. 16 by which a charge was created on companypensation to be given to a displaced person with respect to the mortgage debt secured on immovable property in Pakistan or in the alternative a charge was created on property given in exchange for the property in Pakistan on which the debt was charged. The special provision there-,. fore in sub-cl. b of s. 2 6 would number in these circumstances cut down the plain meaning of the words used in sub-cl. c or restrict the wide words pecuniary liability to liability other than that secured by a mortgage. Incidentally we may mention that subcl. b itself shows that pecuniary liability includes a mortgage debt, for it shows that any liability which was incurred on the security of any immovable property situate in West Pakistan would be a debt within the meaning of s. 2 6 and therefore a pecuniary liability. It is next urged that when the legislature excepted the property in India which was encumbered from being dealt with under sub-el. b so far as displaced debtors were companycerned, there is numberreason why it should allow the displaced creditors to proceed under the Act with respect to mortgage debts. This argument, however, overlooks the provision in sub-cl. a under which a displaced debtor can take the benefit of the Act, once it is held that the words pecuniary liability also include mortgage debt. As we have said before sub-cl. b was dealing with a special situation which was worked out in s. 16 of the Act and the general right of a displaced debtor to take advantage of the Act is to be found in sub-cl. a and that subclause will companyer a mortgage debt as it is a pecuniary liability. Reliance was then placed on s. 16 5 , which gives a right to the creditor to elect to be treated as an unsecured creditor in relation to the debt, in which case the provisions of the Act would apply accordingly. It was urged that this sub-section requires that a creditor must make an election before he can take the benefit of this Act. We are of opinion that this argument has numberforce, for sub-s. 5 of s. 16 only deals with a situation which arises where the mortgage, charge or lien was on immovable property situate in West Pakistan. It does number deal at all with cases where the mortgage, charge or lien is on immovable property situate outside West Pakistan. Reference was then made to s. 17 of the Act. It deals with debts secured on movable properties. That section is again companycerned with displaced debtors and provides how equities will be worked out between a displaced debtor and his creditor with respect to debts secured on movable property. We see numberhing in this section which can cut down the amplitude of the words used in s. 2 6 c . Reference was then made to s. 21 which provides for scaling down debts. That is however a general provision dealing with debts of all kinds and there is numberhing in that section which shows that the word debt as defined in s. 2 6 refers only to claims for money and does number include a mortgage debt. Thus we see numberhing in any provision of the Act or in its scheme which would cut down the meaning we have given to the words pecuniary liability as used in s. 2 6 read with sub-cl. c thereof. It was also urged that if mortgage debts on property situate in India were companyered by the Act, there is numbermachinery like s. 16 for enforcement of the creditors rights in respect thereof. This is number companyrect. Section 10 provides for the claim of a displaced creditor against a displaced debtor and s. 13 provides for the claim of a displaced creditor against any other person who is number a displaced debtor. Section 11 then provides how an application under s. 10 A-ill be dealt with and under sub-s. 2 thereof a decree can be passed under certain circumstances against the displaced debtor. Similarly under s. 14 2 a tribunal can pass such decree in relation to an application under s. 13 as it thinks fit. These decrees are executable under s. 28 of the Act. Therefore even when the debt is a mortgage debt there is provision in the Act for enforcement of that debt, though of companyrse this provision is different from the provision companytained in s. 16, which was dealing with the special situation of properties under ,mortgage situate in West Pakistan. We may also refer to s. 3 of the Act which lays down that the provisions of the Act and of the Rules and Orders made thereunder shall have effect numberwithstanding anything inconsistent therewith companytained in any other law for the time being in force. The effect of this overriding provision is to make a suit like the present maintainable in spite of the provisions applying to such suits in other laws. The last companytention on behalf of the appellant is that if s. 2 6 c empowers a displaced creditor to make an application under s. 13 even with respect to a mortgage debt, there will be hardship to prior mortgagees or subsequent mortgagees inasmuch as these persons cannot be dealt with under the Act. Section 13 empowers a displaced person claiming a debt from any other person who is number a displaced person to apply within one year of the companying into force of the Act in any local area to the tribunal having jurisdiction in the matter. The provision is obviously enacted to give relief for a short period only. Section 25 of the Act provides for the regulation of all proceedings under the Act by the provisions companytained in the Code of Civil Procedure save as expressly provided in the Act or in any rules made thereunder. But assuming that in spite of this provision, 0. XXXIV, r. 1 of the Code of Civil Procedure will number apply to proceedings under the Act and all those having an interest in the mortgage security cannot be joined as parties as required by 0. XXXIV, r. 1, the interest of prior or puisne mortgagees cannot in any case be affected by the decree passed under the Act. The Explanation to 0. XXXIV, r. 1, shows that a prior mortgagee need number be made a party to a suit for sale by a puisne mortgagee. So far therefore as a prior mortgagee is company- cerned, his rights will number be affected by the decree passed under s. 13 of the Act, just as his rights are number affected by the decree passed under 0. XXXIV. So far as mortgagees subsequent to the displaced creditor who applies under s. 13 are companycerned, their interests will also number be jeopardized by the decree which may be passed under s. 13. Even under XXXIV, which requires puisne or subsequent mortgagees to be joined as parties in a suit for sale, a decree obtained in a suit to which the subsequent mortgagee was number joined as a party does number affect his rights and the proceedings in such a suit are number binding on him so as to affect his rights under the second mortgage. He can thus follow the property by suing his mortgagor, even though it may have been sold under the decree of an earlier mortgagee in a suit to which he was number a party. Therefore, the interest of the prior mortgagee or the subsequent mortgagee, if any, would number be affected by a decree passed on an application under s. 13 and there is numberreason therefore to cut down the plain meaning of the words used in s. 2 6 c on the ground that the proceedings under the Act would prejudicially affect the rights of prior or puisne mortgagees.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 117 of 1958. Appeal by special leave from the judgment and order dated September 13, 1957, of the Bombay High Court in Criminal Petition Application No. 834 of 1957, arising out of the judgment and order dated April 30, 1957, of the Presidency Magistrate, IV Class, Girgaon, Bombay, in Case No. 6/1 R of 1956. M. Choksi, Rajni Patel, B. K. B. Naidu and I. N. Shroff, for the appellant. Janardan Sharma, for respondent No. 1. Purshottam Trikamdas, H. R. Khanna, D. Gupta and R. H. Dhebar, for respondent No. 2. 1960, May 6. The Judgment of the Court was delivered by K. DAS, J.-This is an unfortunate case in which a companyplaint filed in the Court of the Presidency Magistrate, Bombay, on October 31, 1956, by one Dattatraya Dulaji Ghadigaonkar, respondent herein, has to be finally disposed of in the year 1960 in circumstances which we shall state at once. On June 3, 1956, in the evening, a public meeting was held at a place called Chowpatty in Bombay which was to be addressed by the Prime Minister of India. The meeting was called in companynexion with an agitation which was then going on for the reorganisation of the State of Bombay. There was companysiderable disturbance at the meeting as a result whereof it had to be dispersed, and large crowds of people began to wander about in various localities around Chowpatty including an area round Charni Road Station. The case of the companyplaining respondent was that at about 8 p. m. his younger brother Sitaram was crossing Queens Road Dear a building called Laud Mansion. At that time there was a large crowd on the road and members of that crowd were stopping vehicles passing by that road. One taxi cab which had companye from the direction of the Opera House and was going towards Churchgate was already stopped. Sitaram was then accompanied by Sashikant Kamtekar and Nand Kumar Vagal. When these three had crossed the road, they heard the reports of revolver shots and on looking back they found that a person called Bhayya was injured by one of the shots and fell down on the footpath. Sitaram and his friends went to help Bhayya at this stage, another shot was fired by one of the occupants of a blue car which was near the taxi cab referred to earlier. Sitaram was hit on his chest, and the bullet having entered the chest cavity injured the right ventricle of the heart. Sitaram was removed to the G. T. Hospital but died before medical assistance companyld be given. Dr. H. S. Metha, Police Surgeon, who made a postmortem examination of the dead body, opined that Sitaram died of shock and hemorrhage as a result of the gun shot wound he had received. The doctor further said that the charring round the wound indicated that the shot had been fired from a distance of 2 to 18 inches only. The case of the respondent was that Vadilal Panchal, appellant before us, fired the shot from the blue car. The occupants of the car were K. K. Shah, advocate, his son Vinay, and one Ratilal Sanghvi on the back seat, and the appellant and chauffeur Mohiddin on the front seat. K. K. Shah was mentioned in the companyplaint as one of the companyplainants witnesses. He was examined and said that after the meeting was over, he and his companypanions were returning in his car to his house. Because of the trouble, the car travelled by a longer route and when it reached Queens Road, there were large crowds on that road who were pelting stones. shouting slogans and companymitting other acts of violence a public bus was burnt, and a taxi cab which was proceeding ahead of K. K. Shahs car was stopped. Some three or four hundred people surrounded his car, pelted stones and shouted maro maro. Some of them attempted to drag out Ratilal Sanghvi who occupied a companyner seat some caught hold of the appellant by his neck and hair and wanted to drag him out of the car. The appellant then opened fire with his revolver. The rioters then held back, and the way was clear for the car to pass. The car then drove away and after some time K. K. Shah and the appellant went to Gamdevi Police Station where the latter made a report of what had happened. The appellant was sent to Nair Hospital where he was medically treated and allowed to go. The Coroner of Bombay held an inquest into the death of Sitaram at which K. K. Shah, Sashikant Kamtekar and several other witnesses were examined. The Coroners Jury returned a verdict that Sitaram died of the gunshot wound caused by a bullet fired by the appellant under such circumstances as would render the firing to be in exercise of the right of private defence and as such justified . This verdict was returned on October 16, 1956. Sometime earlier, on July 3, 1956, to be precise, the companyplaining respondent had made an enquiry through his advocate from the Commissioner of Police, Bombay, as to whether the appellant had been arrested the reply received was that the enquiries made by the police did number reveal any offence having been companymitted by the appellant and the police proposed to take numberaction. On October 31, 1956, the respondent filed his companyplaint. The learned Presidency Magistrate to whom,, the companyplaint was made referred it to the Superintendent of Police, C. 1. D., for enquiry and report. Presumably, he acted under s. 202 of the Code of Criminal Procedure. On November 15, 1956, the Superintendent of Police submitted the report of his Inspector in which it was stated From the exhaustive enquiries made immediately after the incident it was disclosed that Shri Vadilal Panchal was justified in resorting to firearms in self defence of himself and the other occupants of the motor car . On January 17, 1957, the learned Magistrate gave the respondent another opportunity to examine his witnesses before the enquiring officer, because by reason of a revision application made to the High Court earlier against the order referring the case to the police for enquiry, the respondent did number produce his witnesses before the enquiring officer. The enquiring officer then examined all the witnesses and submitted his report on March 12, 1957. This time also the enquiring officer said From their statements and other evidence on record, it is clear that Shri Wadilal Panchal opened fire in the exercise of his, right of private defence, which verdict the learned Coroners Jury also brought after a protracted hearing of the Inquest Proceedings. Copies of all statements recorded by me, are attached for reference . On April 30, 1957, the learned Presidency Magistrate companysidered the report of the enquiring officer in great detail with reference to the statements of all the witnesses and said The Police have recorded in detail the statements of all witnesses produced by the companyplainant as well as of all the occupants of the car. There is, therefore, material on record showing fully whether the circumstances existed making out the right of private defence available to the accused. The fact whether the case falls within one of exceptions or number can be established on the evidence of the witnesses produced by the prosecution itself though of companyrse the burden of proof lies on the accused. From the statements, recorded by the Police in this case and from the surrounding circumstances of the case, I have companye to the definite companyclusion that the report of the police stating that the shot was fired by the accused in self-defence is true. As I have stated the statement of the police surgeon companyclusively supports the companyclusion. I have companye to the companyclusion that the state- ments of the four eye witnesses brought by the companyplainant are false. These eye witnesses are number credible witnesses. It will be harassment to the accused and waste of public time if any process is issued in this case . Accordingly, he dismissed the companyplaint under s. 203, Code of Criminal Procedure. Against this order of dismissal the respondent-complainant moved the High Court. The High Court set aside the order of dismissal and directed the learned Presidency Magistrate to issue process against the appellant and deal with the case in accordance with law, on a ground which the High Court expressed in the following words Now, in the case before us, causing of the death of Sitaram being indisputable, if it was found as the petitioner alleges that it was the shot fired by the res- pondent that caused the death of Sitaram, the accused ,would have to establish the necessary ingredients of the right of private defence as laid down in section 96 and onwards of the Penal Code. We do number find anything in any of the sections in Chapter XVI to show that such an exception can be held to be established from the mere report of the police. That, in our view, is companytrary to the provisions of s. 105 of the Indian Evidence Act which are mandatory provisions. There is numberhing in s. 202 or s. 203 of the Criminal Procedure Code which abrogates the rule as to the presumption laid down in s. 105 of the Evidence Act and the mode of proof of exception laid down in imperative language in that section. In these circumstances and for the reasons aforesaid, we find that this was number a case in which it was proper for the learned Magistrate to dismiss the companyplaint under s. 203, there being numberevidence before the learned Magistrate as and by way of proof to establish the exception of the right of private defence pleaded by the respondent The appellant then moved this Court and obtained special leave to appeal from the order of the High Court dated September 13,1957. The short question before us is-was the High Court right in its view that when a Magistrate directs an enquiry under s. 202 of the Code of Criminal Procedure for ascertaining the truth or falsehood of a companyplaint and receives a report from the enquiring officer supporting a plea of self-defence made by the person companyplained against, it is number open to him to hold that the plea is companyrect on the basis of the report and the statements of witnesses recorded by the enquiring officer ? Must he, as a matter of law, issue process in such a case and leave the person companyplained against to establish his plea of self-defence at the trial ? It may be pointed out here that the High Court itself recognised that it would number be companyrect to lay down a proposition in absolute terms that whenever a defence under any of the exceptions in the Indian Penal Code is pleaded by the person companyplained against, the Magistrate would number be justified in dismissing the companyplaint and must issue process. Said the High Court As we have already observed, if there is a companyplaint, which itself discloses a companyplete defence under any of the exceptions, it might be a case where a Magistrate would be justified in dismissing such a companyplaint finding that there was numbersufficient ground to proceed with the case. We are of the view that the High Court was in error in holding in this case that as a matter of law, it was number open to the learned Presidency Magistrate to companye to the companyclusion that on the materials before him numberoffence had been made out and there was numbersufficient ground for proceeding further on the companyplaint. The relevant sections bearing on the question are ss. 200, 202 and 203. S. 200. A Magistrate taking companynizance of an Offence on companyplaint shall at once examine the companyplainant and the witnesses present, if any, upon oath, and the substance of the examination shall be reduced to writing and shall be signed by the companyplainant and the witnesses, and also by the Magistrate Provided as follows- a aa b where the Magistrate is a Presidency Magistrate, such examination may be on oath or number as the Magistrate in each case thinks fit, and where the companyplaint is made in writing need number be reduced to writing but the Magistrate may, if he thinks fit, before the matter of the companyplaint is brought before him, require it to be reduced to writing c S. 202 1 . Any Magistrate, on receipt of a companyplaint of an offence of which he is authorised to take companynizance, or which has been transferred to him under section 192, may, if he thinks fit, for reasons to be recorded in writing, postpone the issue of process for companypelling the attendance of the person companyplained against, and either inquire into the case himself or, if he is a Magistrate other that a Magistrate of the third class, direct an inquiry or investigation to be made by any Magistrate subordinate to him, or by a police officer, or by such other person as he thinks fit, for the purpose of ascertaining the truth or falsehood of the companyplaint. Provided that it is unnecessary to read the proviso. If any inquiry or investigation under this section is made by a person number being a Magistrate or a police-officer, such person shall exercise all the powers companyferred by this Code on an officer in charge of a police-station, except that he shall number have power to arrest without warrant. 2A Any Magistrate inquiring into a case under this section may, if he thinks fit, take evidence of wit- nesses on oath. This section applies also to the police in the towns of Calcutta and Bombay. S. 203. The Magistrate before whom a companyplaint is made or to whom it has been transferred, may dismiss the companyplaint, if, after companysidering the statement on oath if any of the companyplainant and the witnesses and the result of the investigation or inquiry if any under section 202, there is in his judgment numbersufficient ground for proceeding. In such cases he shall briefly record his reasons for so doing The general scheme of the aforesaid sections is quite clear. Section 200 says inter alia what a Magistrate taking companynisance of an offence on companyplaint shall do on receipt of such a companyplaint. Section 202 says that the Magistrate may, if he thinks fit, for reasons to be recorded in writing, postpone the issue of process for companypelling the attendance of the person companyplained against and direct an inquiry for the purpose of ascertaining the truth or falsehood of the companyplaint in other words, the scope of an inquiry under the section is limited to finding out the truth or falsehood of the companyplaint in order, to determine the question of the issue of process. The inquiry is for the purpose of ascertaining the truth or falsehood of the companyplaint that is, for ascertaining whether there is evidence in support of the companyplaint so as to justify the issue of process and companymencement of proceedings against the person companycerned. The section does number say that a regular trial for adjudging the guilt or otherwise of the person companyplained against should take place at that stage for the person companyplained against can be legally called upon to answer the accusation made against him only when a process has issued and he is put on trial. Section 203, be it numbered, companysists of two parts the first part indicates what are the materials which the Magistrate must companysider, and the second part says that if after companysidering those materials there is in his judgment numbersufficient ground for proceeding, he may dismiss the companyplaint. Section 204 says that if in the opinion of the Magistrate there is sufficient ground for proceeding, he shall take steps for the issue of necessary process. Now, in the case before us it is number companytended that the learned Presidency Magistrate failed to companysider the materials which he had to companysider, before passing his order under s. 203 of the Code of Criminal Procedure. As a matter of fact the learned Magistrate fully, fairly and impartially companysidered these materials. What is companytended on behalf of the respondent-complainant is that as a matter of law it was number open to the learned Magistrate to accept the plea of right of self-defence at a stage when all that he had to determine was whether a process should issue or number against the appellant. We are unable to accept this companytention as companyrect. It is manifestly clear from the provisions of s. 203 that the judgment which the Magistrate has to form must be based on the statements of the companyplainant and his witnesses and the result of the investigation or inquiry. The section itself makes that clear, and it is number necessary to refer to authorities in support thereof. But the judgment which the Magistrate has to form is whether or number there is sufficient ground for proceeding. This does number mean that the Magistrate is bound to accept the result of the inquiry or investigation or that he must accept any plea that is set up on behalf of the person companyplained against. The Magistrate must apply his judicial mind to the materials on which he has to form his judgment. In arriving at his judgment he is number fettered in any way except by judicial companysiderations he is number bound to accept what the inquiring officer says, number is he precluded from accepting a plea based on an exception, provided always there are satis- factory and reliable materials on which he can base his judgment as to whether there is sufficient ground for proceeding on the companyplaint or number. If the Magistrate has number misdirected himself as to the scope of an enquiry under s. 202 and has applied his mind judicially to the materials before him, we think that it would be erroneous in law to hold that a plea based on an exception can never be accepted by him in arriving at his judgment. What bearing such a plea has on the case of the companyplainant and his witnesses, to what extent they are falsified by the evidence of other witnesses-all these are questions which must be answered with reference to the facts of each case. No universal rule can be laid in respect of such questions. In support of its view the High Court has relied on some of its earlier decisions Emperor v. Dhondu Bapu 1 Emperor Finan 2 and Tulsidas v. Billimoria 3 . We do number think that any of the aforesaid decisions lays down any such proposition in absolute terms as is companytended for on behalf of the respondent. In Emperor v. Dhondu Bapu 1 a companyplaint charging defamation was dismissed by the Magistrate under s. 203 without taking any evidence, on the ground that the accused was protected by s. 499, exception It was held that the order of dismissal was bad. Patkar, J., significantly observed If the Magistrate in this case had taken evidence on behalf of the prosecution and on behalf of the accused, and passed a proper order for discharge, the order of the District Magistrate ordering a further enquiry without giving reasons might have stood on a different footing. We do number think that, under the circumstances of this case, there are adequate grounds for interfering with the order of the District Magistrate. In Emperor v. Finan 2 the accused did number dispute the companyrectness of the statements made by the companyplainant, but in justification pleaded the order passed by his superior officer and claimed protection under ss. 76 and 79 of the Indian Penal Code. It is worthy of numbere that the order of the superior officer was number produced, but that officer very improperly wrote a letter to the Magistrate saying that he bad given such an order. In these circumstances, the same learned Judge who decided the earlier case observed It was, therefore, incumbent on the Magistrate to investigate the companyplaint and to find out whether 1 1927 29 Bom. L.R. 713,715. 2 1931 33 Bom. L.R. 1182. 3 1932 34 Bom. L.R. 910 the allegation of the accused that he was protected by ss. 76 and 79 of the Indian Penal Code was made out by legal evidence before him. The facts in Tulsidas v. Billimoria 1 were different, and the question there companysidered was whether a member of the Bar in India had absolute privilege. That decision has very little bearing on the question number before us. Our attention has also been drawn to a decision of the Lahore High Court where the facts were somewhat similar Gulab Khan, deceased, through Karam Khan v. Gulam Muhammad Khan and Others 2 . In that case also the person companyplained against took the plea of self-defence, which was accepted. In the High Court an objection was taken to the procedure adopted and it was argued that the order of discharge should be set aside. In dealing with that argument Broadway, J., said Now a Magistrate is empowered to hold an enquiry into a companyplaint of an offence in order to ascertain whether there is sufficient foundation for it to issue process against the person or persons companyplained against. In the present case the Magistrate clearly acted in the exercise of these powers under s. 202, Criminal Procedure Code. He allowed the companyplainant to produce such evidence in support of his company- plaint as he wished to produce, and after a companysideration of that evidence came to the companyclusion that that evidence was so wholly worthy unworthy ? of credence as to warrant his taking numberfurther action in the matter. Therefore, numbere of the aforesaid decisions lay down as an absolute proposition that a plea of self-defence can in numberevent be companysidered by the Magistrate in dealing with a companyplaint under the provisions of ss. 200, 202 and 203 of the Code of Criminal Procedure. On the facts, there is very little to be said. Learned Counsel for the State of Bombay supported the order of the learned Magistrate and pointed out that even on the narrow view taken by the High Court, a view 1 1932 34 Bom. L.R. 910. A.I.R. 1927 Lah 30 to which he did number, however, subscribe, the learned Magistrate rightly held that there was numbersufficient ground for proceeding because the earlier version of some of the witnesses for the companyplainant itself showed that there was a riotous mob on the road which attacked cars, burnt a public bus, pelted stones, etc., which was quite inconsistent with their later version that Sitaram and his companypanions were quietly crossing the road and a shot was fired from a passing or moving car. There was overwhelming material to show Chat K. K. Shahs car was surrounded by the mob and some of the rioters tried to drag out and attack the appellant. K. K. Shah was one of the witnesses mentioned by the companyplainant and so also two of the Inspectors of Police. Their evidence clearly supported the plea of the appellant and in any case, showed that the witnesses examined on behalf of the respondent were totally unworthy of credence as to the circumstances in which the shots were fired. We cannot therefore say that the learned Magistrate was wrong in his judgment that there was numbersufficient ground for proceeding further on the companyplaint. We accordingly hold that the High Court set aside the order of the learned Magistrate on an erroneous view of the scope of s. 203 of the Code of Criminal Procedure.

Case appeal was accepted by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 96 of 1959. Appeal by special leave from the judgment and order dated August 19, 1957, of the Calcutta High Court in Criminal Revision No. 1577 of 1956, arising out of the judgment and order dated August 3, 1956, of the Magistrate, First Class, at Krishnagar, Nadia, in G. R. Case No. 69 of 1954. K. Daphtary, Solicitor-General of India and K. Chatterjee, for the appellant. The respondent did number appear. 1960. May 5. The Judgment of the Court ,as delivered by GAJENDRAGADKAR, J.-This appeal by special leave raises a short question about the companystruction and effect of the provisions of s. 22 1 d of the Industrial Disputes Act, 14 of 1947, hereinafter called the Act . The appellant, Ramnagar Cane Sugar Co. Ltd., Calcutta, is a companypany incorporated under the Indian Companies Act and carries on the business of manufacturing sugar which is an essential companymodity in its factory at Plassev in the District of Nadia. The appellant was declared a public utility companycern or service by a numberification duly issued in that behalf on October 8, 1953. The appellant employs in its business about 545 permanent men and 703 seasonal men excluding casual labourers. A majority of the workmen employed by the appellant belong to the Ramnagar Cane Sugar Co. Employees Union hereinafter called the Employees Union , whereas a minority of workmen belong to the rival Union called Ramnagar Sugar Mill Workers Union hereinafter called the Workers Union . It appears that on December 9, 1953, the Workers Union presented a charter of demands to the appellant. This was followed by a similar charter of demands by the Employees Union on January 20,1954. On the same day the Workers Union served a numberice of strike on the appellant. On February 1, 1954, a meeting was held before the Conciliation Officer which was attended by the Emplo- yees Union and the appellant. A numberice of the said meeting had been served on the Workers Union as well. On February 2,1954, the appellant suggested to the companyciliation officer that it should discuss the matter separately with the representatives of the two Unions but to this suggestion the Workers Union took an objection. Thereupon the said Union informed the companyciliation officer that it assumed that the companyciliation had failed. Consequently on February 3, 1954, the companyciliation officer sent his report under s. 12, sub-s. 4 of the Act about the failure of companyciliation with the Workers Union only. On February 25, 1954, the appellant and the Employees Union arrived at a settlement, and it was recorded in the form of a memo of settlement which was duly signed by both the parties. Meanwhile, on February 13, 1954, the Workers Union companymenced a strike. As a result of this strike a criminal companyplaint was filed against the eleven respondents under s. 11 of the West Bengal Security Act, XIX of 1950, and a charge was subsequently framed against them. The case as formulated in the charge against the said respondents was that on or about February 13, 1954, at Plassey each one of them did companymit subversive acts which were intended or likely to impede, delay or restrict the work of Ramnagar Cane Sugar Co. Ltd., which was a public utility companycern for production of sugar, an essential companymodity. The respondents pleaded number guilty to the charge substantially on the ground that the strike in question was number illegal. It was number denied that they had gone on strike on February 13, 1954 it was, however, urged that since the strike was lawful the offence charged companyld number be said to be proved. The learned magistrate upheld the respondents plea and acquitted the respondents. The appellant challenged the companyrectness of the said order of acquittal by preferring a revisional application before the Calcutta High Court. Its revisional application, however, failed since the High Court held that the strike was number illegal and agreed with the companyclusion of the trial magistrate. The appellant then applied for a certificate before the said High Court but its application was dismissed. Then the appellant applied for and obtained special leave from this Court and the only point which is raised on its behalf before us is that in companying to the companyclusion that the strike in question was number illegal the Courts below have misconstrued the provisions of s. 22 1 d of the Act. Before we companysider this point it is relevant to refer to the relevant provisions of the West Bengal Security Act. Section 11 of this Act provides Chat if any person companymits any subversive act he shall be punish. able with imprisonment for a term which may extend to five years or with fine or with both. Section 2 9 e defines a subversive act as meaning any act which is intended or is likely to impede, delay or restrict- any work or operation, or ii any means of transport or locomotion,-necessary for the production, procurement, supply or distribution of any essential companymodity, except in furtherance of an industrial dispute as defined in the Industrial Disputes Act, 1947. Explanation ii to this definition provides that an illegal strike or an illegal lock-out as defined in s. 24 of the Industrial Disputes Act, 1947, shall number be deemed to be an act in furtherance of an industrial dispute for the purposes of sub-el. e . It is thus clear that if the impugned strike is held to be illegal it would companystitute a subversive act as defined by s. 2 9 e of the West Bengal Security Act. This position has been accepted in the companyrts below. That is why the only question which arises for our decision is whether the strike in question is an illegal strike under s. 24 of the Act. Section 24 of tile Act provides, inter alia, that a strike shall be illegal if it is companymenced or declared in companytravention of s. 22 or s. 23. That takes us to the provisions of s. 22, and we have to find out whether in companymencing the strike on February 13, 1954, the respondents had companytravened the provisions of s. 22 1 d of the Act, Section 22 1 d lays down that numberperson employed in a public utility service shall go on strike in breach of companytract during the pendency of any companyciliation proceedings before a companyciliation officer and seven days after the companyclusion of such proceedings. The effect of this provision is clear. If a strike is declared in a public utility service during the pendency of a companyciliation proceeding it is illegal. Was any companyciliation proceeding pending between the appellant and the respondents at the relevant time ? That is the question which calls for an answer in the present appeal. The respondents companytend that the Workers Union to which they belonged had left the companyciliation proceedings on February 2,1954, and that in fact the companyciliation officer had submitted his failure report to that effect on February 3, 1954 and so, between the Workers Union and the appellant numberconciliation proceeding was pending after February 5, 1954, in any case when the Government received the failure report of the companyciliation officer. On the other hand, the appellant companytends that companyciliation proceedings with the Employees Union companytinued until February 25, 1954, and in fact settlement was arrived at between the parties on that date and duly signed by them. The appellants argument is that the pendency of the companyciliation proceedings between the appellant and the Employees Union makes illegal the strike in which the respondents joined on February 13, 1954. The High Court has held that since it is number shown that the respondents belong to the Employees Union it would number be possible to hold that any companyciliation proceedings was pending between them and the appellant. It is the companyrectness of this view that is challenged before us. In appreciating the merits of the rival companytentions thus raised in this appeal it is necessary to bear in mind the scheme of the Act. It is number well settled that an industrial dispute can be raised in regard to any matter only when it is sponsored by a body of workmen acting through a union or otherwise. When an industrial dispute is thus raised and is decided either by settlement or by an award the scope and effect of its operation is prescribed by s. 18 of the Act. Section 18 1 provides that a settlement arrived at by agreement between the employer and the workman otherwise than in the companyrse of companyciliation proceeding shall be binding on the parties to the agreement whereas s. 18 3 provides that a settlement arrived at in the companyrse of companyciliation proceedings which has become enforceable shall be binding on all the parties specified in cls. a , b , c and d of sub-s. 3 . Section 18 3 d makes it clear that, where a party referred to in cl. a or b is companyposed of workmen, all persons who were employed in the establishment or part of the establishment, as the case may be, to which the dispute relates on the date of the dispute and all persons who subsequently become employed in that establishment or part, would be bound by the settlement. In other words, there can be numberdoubt that the settlement arrived at between the appellant and the Employees Union during the companyrse of companyciliation proceedings on February 25, 1954, would bind number only the members of the said Union but all workmen employed in the establishment of the appellant at that date. That inevitably means that the respondents would be bound by the said settlement even though they may belong to the rival Union. In order to bind the workmen it is number necessary to show that the said workmen belong to the Union which was a party, to the dispute before the companyciliator. The whole policy of s. 18 appears to be to give an extended operation to the settlement arrived at in the companyrse of companyciliation proceedings, and that is the object with which the four categories of persons bound by such settlement are specified in s. 18, sub-s. 3 . In this companynection we may refer to two recent decisions of this Court where similar questions under s. 19 6 and s. 33 1 a of the Act have been companysidered. Vide The Associated Cement Companies Ltd., Porbandar v. Their Workmen 1 and Messrs. New India Motors P. Ltd. v. K. T. Morris 2 . This position has an important bearing on the companystruction of s. 22 1 d . When the said provision refers to the pendency of any companyciliation proceedings it must reasonably be companystrued to mean any companyciliation proceedings which may lead to a settlement before the companyciliation officer and which settlement may bind all the workmen companycerned in other words, if a companyciliation proceeding is pending between one union and the employer and it relates to matters companycerning all the employees of the employer, the pendency of the said companyciliation proceeding would be a bar against all the employees of the employer employed in a public utility service to go on a strike during the pendency of the said proceeding under s. 22 1 d . In our opinion, this companystruction would be companysistent with the specific provisions as to the effect of companyciliation settlements prescribed by s. 18 3 d and is harmonious with the general policy of the Act otherwise, it would unnecessarily disturb industrial peace, if one union employed in a public utility service is allowed to go on strike even though demands companymon to the members of the said union as well as the rest of the workmen are being companysidered in companyciliation proceedings between the said employer and his other employees 1 1960 2 S.C.R. 974. 2 1960 3 S.C.R. 350. represented by another union. It would be another matter if the companyciliation proceedings in question are companyfined to specific demands limited to a specified class of employees. In such a case it may be companytended that the other workmen who are number interested in the said demands may number be bound by the said proceedings. That, however, is another aspect of the matter with which we are number companycerned in the present appeal. We have seen the charter of demands submitted by both the Unions to the appellant, and it is clear that the said demands companyer all employees of the appellant and number only one section of them in other words, both the charters have made demands the benefit of which was- intended to accrue to all the workmen of the appellant they are number demands by one section of the workmen belonging to one separate part of the establishment run by the appellant. The demands made are numberdoubt by two Unions but they companyer the same ground and in effect they represent the demands made by the whole body of workmen. In fact the companyciliation settlement reached between the appellant and the Employees Union has benefited the members of the Workers Union as much as those of the Employees Union. That being so we think the companyrts below were in error in putting an unduly narrow and restricted companystruction on the provisions of s. 22 1 d of the Act. In our opinion, the pendency of the companyciliation proceedings between the appellant and the Employees Union attracts the, provisions of s. 22 1 d to the strike in question and makes the said strike illegal under s. 24 1 1 of the Act. If the strike is illegal it follows that the respondents have taken part in a subversive activity as defined by s. 2 9 e of the West Bengal Security Act and as such have companymitted an offence punishable under s. 11 of the said Act. We would accordingly set aside the order of acquittal passed by the High Court in favour of the respondents and companyvict them of the offence charged. The Solicitor-General hag fairly told us that the appellant has companye to this Court number so much for the purpose of pressing for the companyviction of, and a heavy sentence against, the respondents but for obtaining a decision on the important question of law in regard to the companystruction of s. 22 1 d of the Act.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 100 of 1.959. Appeal from the judgment and order dated February 11, 1957, of the Bombay High Court in Income-tax Reference No. 53 of 1956. J. Kolah, Dwarkadas, S. N. Andley J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants. N. Rajagopal Sastri and D. Gupta, for the respondent. 1960. May 3. The Judgment of the Court was delivered by K. DAS, J.-This is an appeal on a certificate granted by the High Court of Bombay, under s. 66A 2 of the Indian Income-tax Act, 1922. The short facts are these. The Cotton Agents Limited, Bombay, are a limited liability companypany registered under the Indian Companies Act and will be called the assessee Company in this judgment. It held a substantial number of shares of the New Swadeshi Mills of Ahmedabad, Ltd. hereinafter called the Mills Company . Messrs. Shivnarayan Surajmal Nemani called the Nemani group also held a block of shares of the Mills Company along with its managing agency. The assessment year was 1946-47, and the year ending with Diwali, 1945 October 18, 1944, to November 4, 1945 was the accounting year. Sometime in 1944 some differences arose between the assessee Company and the Nemani group these differences were referred to one Govindram Seksaria, who decided that the Nemani group should sell its block of shares to the assessee Company at an agreed price, It was further decided that a sum of Rs. 5,00,000 be paid by the assessee Company to the Nemani group as the price of the, managing agency rights. This arrangement was approved by the share-holders of the Mills Company by a resolution dated January 4, 1945, and came into effect immediately. The agreement further was that the assessee Company would companye in as managing agents of the Mills Company in place of the Nemani group and would be entitled to the emoluments of the managing agents as from April 1, 1944. The managing agency companymission from April 1, 1944, to December 31, 1944, amounted to Rs. 2,20,433 and from January 1, 1945, to March 31, 1945, to Rs. 67,959. The case of the assessee Company was that for the assessment year 1946-47 it was liable to pay tax only on the companymission of Rs. 67,959 which it had earned by working as managing agent of the Mills Company and it was number liable to pay tax on the sum of Rs. 2,20,433. This companytention of the assessee Company was number accepted by the departmental taxing authorities but the Tribunal decided in its favour. The assessee Companys case before the Tribunal was that as the managing agency companymission was based on the sales, the company- mission accrued to the managing agents as and when the sales were made and furthermore the sum of Rs. 5,00,000 paid by the assessee Company to the retiring managing agents included the purchase price of the managing agency companymission which had accrued in the hands of the retiring agents. The Tribunal expressed the view that on a true companystruction of the relevant managing agency agreement, the 31 per cent. companymission on sales made when the Nemani group was the managing agent accrued to that group and number to the assessee Company and thus a debt was created in favour of the Nemani group on every sale during its period of managing agency and only the payment of the debt was deferred till the accounts of the Mills Company were passed at a general meeting therefore, the companymission prior to the close of the year 1944 was assessable in the hands of the Nemani group and thereafter in the hands of the assessee Company. The Department, however, companytended that the whole of the managing agency companymission accrued to the assessee. Thereupon, at the instance of the Department, the Tribunal referred the following question of law to the High Court for decision - Whether on the facts and circumstances of the case the managing agency companymission at 3-1/2 on sales made by the New Swadeshi Mills of Ahmedabad Ltd., between April 1, 1944, and December 31, 1944, accrued to Shivnarayan Surajmal Nemani, or to the assessee ? The High Court held that the matter was companycluded by the decision of this Court in E. D.Sassoon and Company Ltd. v. Commissioner of Income-tax, Bombay City 1 . With reference to the argument of learned companynsel for the assessee Company that the companymission was payable on the sale proceeds and number on the profits as in Sassoons case 1 , it said We would have given serious thought to this aspect of the matter but for the view we take that the decision of the Supreme Court with regard to the question of creation of the debt and with regard to the serving by the managing agents for a term of one year being a companydition precedent for their being entitled to receive payment, is indistinguishable on the facts of this case. We may point out that here as in the Sassoons case 1 the companymission of 31 per cent. is to be earned in any year, and also by clause 3 of the agreement the companymission is to become due to the managing agents at the end of each financial year. Therefore, till the end of the financial year there is numberdebt whatsoever created in favour of the managing agents and also their right to receive payment depends upon their having served for a whole year. Under the circumstances we must hold, following the decision of the Supreme Court, that the assessees are liable to pay tax on the whole of the companymission as the companymission accrued due on March 31, 1945, and they became entitled to receive it at the end of the year. We do number agree with the view of the Tribunal that according to the agreement of the managing agents the debt was 1 1955 1 S.C.R. 313. created in favour of the agents when the goods were sold by the companypany and that the payment was deferred to a date after the accounts having been passed by the shareholders in the general meeting of the companypany. In numberview of the case can it be said that the debt was created in favour of the agents when the goods were sold . The answer to the question really depends on a companystruction of the relevant terms of the managing agency agreement dated March 15, 1925, entered into between the Mills Company and the Nemani group. Before we proceed to a companysideration of those terms it is necessary to state that the Department has assessed the Nemani group also to tax in respect of the companymission for the period April 1, 1944, to December 31, 1944. That circumstance has, however, numberbearing on the question of companystruction and learned companynsel for the Department has stated before us that there is numberintention to tax two parties for the same income and if the tax has been realised from both for the same income, it will have to be refunded to one of the two parties after the decision of this Court. We are number companysidering in this case the validity or otherwise of what are known as protective or precautionary assessments, and numberhing said in this judgment has any bearing on that question. We go at once to the Managing Agency Agreement dated March 15, 1925. Under that agreement the managing agents were appointed for a period of fifty. one years, but with liberty to them to resign the appointment and retire from the agency at any time by twelve calendar months numberice in writing, such numberice to expire at the end of any financial year of the Mills Company. Then came cls. 2 and 3 of the agreement, which are material and must be quoted so far as they are necessary for our purpose- , 2 The remuneration of the Agents as such Agents of the Company as aforesaid shall be as follows- A companymission at the rate of three and a half per cent. on the gross proceeds of all sales of the yarn, cloth, waste and other articles manufactured by the Company earned in any year or other period for which the accounts of the Company are made up and laid before the General Meeting. Provided, etc., it is unnecessary to quote the proviso . The said companymission shall become due to the Managing Agents at the end of each financial year or other period for which the accounts of the Company are to be laid before the General Meeting and shall be payable and paid immediately after such accounts have been passed by the General Meeting. Clauses 6 to 11 recited the rights and duties of the managing agents, one of such rights being to retain, reimburse and pay themselves all sums due to the agents for companymission . Clauses 13 and 14 dealt with the right to assign the remuneration and the managing agency, and said inter alia that it shall be lawful for the agents to assign this agreement and the benefit thereof and their rights and privileges, etc., to any person or firm or companypany having authority by its companystitution to become bound by the obligations undertaken by the agents and the Company shall be bound to recognise the person, firm or companypany aforesaid as the agents of the Company. It is unnecessary to read the other clauses of the managing agency agreement, The companytroversy before us hinges really on the scope and effect of clauses 2 and 3 , read in the companytext of the agreement as a whole. On behalf of the assessee Company the argument is that under el. 2 the managing agency remuneration accrued at the rate of 31 per cent. on the gross proceeds of all sales the word all is emphasised, and it is argued that the remuneration accrued as each sale took place, the totality of sales giving the gross sale proceeds. It is argued that embedded in each sale was the managing agency companymission of the assessee Company. It is further suggested on behalf of the assessee Company that though cl. 3 uses the word due , it merely indicated the time of payment and number that of accrual. We do number think that this reading of the two clauses is companyrect. In our view, cl. 3 is the accrual clause it shows that the companymission became due at the end of each financial year or other period for which the accounts of the Mills Company were to be laid before the General Meeting. Significantly enough, the clause companysists of two parts one part says when the companymission becomes due and the other says when it is to be payable and paid. In very clear terms, the clause says that the companymission becomes due numbermally at the end of the financial year, but is payable after the accounts have been passed by the General Meeting. Let us companytrast el. 3 with cl. 2 . Clause 2 states how the remuneration has to be calculated. It says in effect that the remuneration has to be calculated at the rate of 3-1/2 per cent. on the gross proceeds of all sales, etc., earned in any year or other period for which the accounts of the Mills Company are made up. Putting the two clauses side by side, the companyclusion at which we have arrived is that in their true scope and effect cl. 3 determines the time of accrual of the managing agency remuneration and cl. 2 determines the rate at which the remuneration is to be calculated and as to the time of payment, that is determined by the second part of cl. 3 . This view of the managing agency agreement of March 15, 1925, companycludes the appeal. If the remuneration accrued at the end of the financial year, then undoubtedly it accrued in the hands of the assessee Company. It remains number to refer briefly to some of the decisions cited at the Bar. As to the decision in Sassoons case 1 it is pointed out that the companymission there payable by way of remuneration was a percentage on the net profits and this, it is argued for the assessee Company, distinguishes that decision from the present case. Indeed, it is true that in Sassoons case 1 the remuneration was fixed at a percentage on the net profits, but the real point of the decision was as to when the remuneration accrued. On this point the majority of learned Judges said 1 1955 1 S.C.R. 313. It is clear therefore that income may accrue to an assessee without the actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to have accrued to him though it may be received later on its being ascertained. The basic companyception is that he must have acquired a right to receive the income. There must be a debt owed to him by somebody. There must be as is otherwise expressed debitum in presenti, solvendum in futuro see W. S. Try Ltd. v. Johnson 1 and Webb v. Stenton 2 . Unless and until there is created in favour of the assessee a debt due by somebody it cannot be said that he had acquired a right to receive the income or that income has accrued to him. It has been argued before us that the decision requires reconsideration because it failed to make a further distinction, a distinction which it is stated arises in law, between the right to receive payment and the creation of a debt. We companysider it unnecessary to companysider such a distinction, if any such exists, in the present case. On our view of the managing agency agreement, the companymission of the managing agents became due at the end of the financial year and that is when it accrued and there were neither any debt created number any right to receive payment when each transaction of sale took place. We were also addressed at some length on the further question whether managing agency is service and if so, whether it must be for one full year or whether apportionment is permissible. These questions do number fall for decision in the present case and we express numberopinion thereon. We have proceeded in this case on the footing that the managing agency work of the assessee Company companystituted business within the rule of the decision in Lakshminarayan Ram Gopal and Sons Ltd. v. The Government of Hyderabad 3 and on that footing we have decided the question of accrual. In Commissioners of Inland Revenue v. Gardner Mountain DAmbrumenil Ltd. 4 , on which learned companynsel for the appellant placed reliance, the facts were quite 1 1946 1 All E.R. 532, 539. 2 1883 11 Q.B D. 518, 522,527. 3 1955 1 S.C.R. 393. 4 1947 29 T.C. 69. different and on a true companystruction of the agreements there, it was held that the companymission payable under certain under-writers agreements arose in the year in which the policies were underwritten. That decision proceeded on a companystruction of the agreements there companysidered and it is numberauthority for companystruing other agreements of a different character. Learned companynsel for the appellant relied on Turner Morrison Co. Ltd. v. Commissioner of Income-tax, West Bengal 1 for his companytention that in the sale proceeds of each transaction of sale were embedded the income, profits or gains to be earned by the managing agents and, therefore, the accrual took place on each transaction, of sale. The observations at page 160 of the report on which reliance was placed were made in a different companytext, namely, in the companytext of the place of receipt of income in relation to the provisions of s. 4 1 a of the Income-tax Act. Learned companynsel for the respondent has pointed out to us that the observations of Lord Justice Fry in Colquhoun v. Brooks 2 were number very accurately reproduced in Rogers Pyatt Shellac and Co. v. Secretary of State for India 3 .

Case appeal was rejected by the Supreme Court

ORIGINAL JURISDICTION Petition No. 199 of 1959. Petition under Article 32 of the Constitution of India for enforcement of Fundamental Rights. V. Viswanatha Sastri, N. A. Palkhivala S. N. Andley, J. Dadachanji, Rameshwar Nath and P. L. Vohra, for the petitioner. Sen, K. C. Mukherjee and P. K. Bose, for respondents Nos. 1 and 2. Lal Narayan Sinha and S. P. Varma, for respondent No. 3. K. Daphtary, Solicitor-General of India, R. Ganapathy Iyer, B. H. Dhebar and P. M. Sen for respondent No. 4. 1960. August 29. The judgment of the Court was delivered by SHAH J.-By this petition for writs of certiorari and mandamus, the Tata Iron and Steel Co., Ltd., hereinafter referred to as the-company, challenges the authority of the Commercial Tax Officer, Lyons Range, Calcutta, to demand payment of Rs. 41,14,718.12 nP. to the West Bengal Government as tax leviable under the Central Sales Tax Act No. 74 of 1956 in respect of certain sales of steel goods. The companypany has its registered office in Bombay, its Head Sales office in Calcutta in the State of West Bengal and its factories in Jamshedpur in the State of Bihar. The companypany is registered as a dealer under the Bihar Sales Tax Act, and is also registered as a dealer in the State of West Bengal under the Central Sales Tax Act, 1956. For the period of assessment July 1, 1957, to March 31, 1958, the companypany submitted its return of taxable sales to the Commer- cial Tax Officer, Lyons Range, Calcutta, disclosing a gross taxable turnover of Rs. 9,561-71 nP. in respect of sales liable to Central sales tax in the State of West Bengal. By his memorandum dated August 12, 1959, the Commercial Tax Officer directed the companypany to submit a statement of sales from Jamshedpur for the period under assessment, documents relating to which were transferred in West Bengal or of any other sales that may have taken place in West Bengal under s. 3 b of the Central Sales Tax Act, 1956 . The companypany, by its letter dated September 30, 1959, informed the Tax Officer that the requisition for production of statement of sales made from Jamshedpur in the companyrse of inter-State trade or companymerce was without jurisdiction. The companypany companytended that all the sales from Jamshedpur were of the type mentioned in s. 3 a of the Central Sales Tax Act and at the same time, some of them also fell within the category mentioned in s. 3 b of the Act , that even if the sales were of the type mentioned in s. 3 b of the Act, the appropriate State of the place where the sales take place or are effected alone had jurisdiction to assess such sales to Central sales tax , and that in respect of inter-State sales from Jamshedpur, the situs of the sale was always the State of Bihar as the goods were in Bihar either at the time of the companytract of sale or at the time of appropriation to the companytract. By his order dated October 21, 1959, the Commercial Tax Officer made a best judgment assessment on a gross turnover of Rs. 9,00,09,561.71 nP. of interState sales and called upon the companypany to pay Rs. 41,14,718.12 nP. as tax under the Central Sales Tax Act. The companypany had, on December 15, 1958, filed with the Sales Tax Officer, Jamshedpur, a return of interState sales made from Jamshedpur for the period July 1, 1957, to March 31, 1958, and a return for the same period for the sales made from Dhanbad with the Sales Tax Officer, Dhanbad. In these returns, the companypany included all sales in which movement of the goods had taken place from the State of Bihar to destinations outside that State. The total turnover in respect of such inter-State sales as shown in the return exceeded Rs. 26 crores and the companypany paid as required by the Bihar Sales Tax Act Rs. 71 lakhs odd as advance tax under the Central Sales Tax Act, 1956. By this petition the companypany impugns the validity of the order of the Commercial Tax Officer and claims a writ of certiorari quashing and setting aside the assessment order dated October 21, 1959, and a writ of mandamus directing the Commercial Tax Officer to refrain from taking steps in enforcement or implementation of the order. Counsel for the respondents companytends that the petition under Art. 32 of the Constitution is number maintainable because numberfundamental right of the companypany is infringed by the order passed by the Commercial Tax Officer and the remedy of the companypany, if it feels aggrieved by the order, is to seek relief by resorting to the machinery provided by the West Bengal Sales Tax Act. Counsel relies in support of his companytention upon the judgments of this companyrt in Ramjilal V. Income Tax Officer, Mohindargarh 1 and Laxmanappa 1 1951 S.C.R. 127. Hanumantappa Jamkhandi v. The Union of India and another 1 . In Ramjilals case 2 , this Court held that the protection against imposition and companylection of tax save by authority of law directly arises from Art. 265 and is number secured by cl. 1 of Art. 31 and Art. 265 number being in Ch. III of the Constitution, its protection is number a fundamental right which can be enforced by an application under Art. 32 of the Constitution. It was observed in Ramjilals case 2 that the right secured by Art. 265 may be enforced by adopting appropriate proceedings under the Act authorising levy of tax but a petition founded on Art. 32 read with Art. 31 1 was misconceived and must fail. That view was reiterated in Laxmanappas case 1 . But it has been held that a threat by the State to realize without authority of law tax from a citizen by using companyrcive machinery of an impugned Act is an infringement of the fundamental right guaranteed to him under Art. 19 1 g and gives to the aggrieved citizen a right to seek relief by a petition under the Constitution see Himmatlal Harilal Mehta v. The State of Madhya Pradesh and others 3 , The Bengal Immunity Company Ltd. v. The State of Bihar and others 4 and The, State of Bombay v. The United Motors India Ltd. and others 5 . In these cases, in appeals from orders passed by the High Courts in petitions under Art. 226, this Court held that an attempt to levy tax under a statute which was ultra vires infringed the fundamental right of the citizens and recourse to the High Court for protection of the fundamental right was number prohibited because of the provisions companytained in Art. 265. In the case before us, the vires of the Central Sales Tax Act, 1956, are number challenged but in Kailash Nath and another v. The State of Uttar Pradesh and others 6 a petition challenging the levy of a tax was entertained by this Court even though the Act under the authority of which the tax was sought to be recovered was number challenged as ultra vires. It is number necessary for purposes of this case to decide whether the principle of Kailash Naths case 6 is inconsistent 1 1955 1 S.C.R. 769 3 1954 S.C.R. 1122. 5 1953 S.C.R. 1069 2 1951 S.C.R. 127. 4 1955 2 S.C.R. 603. A.I.R. 1957 S. C. 790. with the view expressed by this Court in Ramjilals case 1 . Evidently, the companypany has paid to the Sales Tax Officer, Bihar, tax due under the Central Sales Tax Act on its turnover including sales on which the tax is sought to be levied by the Commercial Tax Officer, West Bengal. Under the Central Sales Tax Act, there is a single liability to pay tax on inter-State sales. The companypany having paid the tax to the Bihar State for and on behalf of the Central Government, the threat to recover again sales tax on behalf of the Central Government in respect of the same sales, i. e., sales which are included in the assessment proceedings before the Bihar Sales Tax authorities prima facie infringes the fundamental right of the companypany to hold its property and the companypany is entitled to approach this Court under Art. 32 of the Constitution. The preliminary objection raised by companynsel for the respondents must therefore fail. To appreciate the arguments advanced on the merits of the claim made by the companypany, it is necessary to set out the relevant legislative history and the companyrse of judicial decisions. Under the Government of India Act, 1935, power to make laws in respect of taxes on sale of goods and advertisements was companyferred by s. 100 1 read with entry 48 of List II in Schedule VII upon the Provincial Legislatures. This power was exercised by all the Provinces and by picking out one or more ingredients companystituting a sale, as determinative of the place where the sale took place, they brought within the taxing laws transactions substantially outside the territorial limits of their authority. Statutes so enacted led to multiple taxation of the same transaction by several Provinces, each Province seeking to rely upon some ingredient of the sale within its jurisdiction as establishing a territorial nexus. This burden lay heavily upon the companysumer. The Constituent Assembly was seriously exercised over this situation and tried to meet the problem by placing restrictions upon the taxing power of the States in respect of sales and purchases having inter-State elements. Article 286 of the Constitution was one of 1 1951 S.C.R. 127. the Articles enacted for that purpose. That Article before it was amended by the Constitution Sixth Amendment Act, 1956, stood as follows No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- a outside the State or b in the companyrse of the import of the goods into, or export of the goods out of, the territory of India. Explanation-For the purposes of sub-clause a , a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of companysumption in that State, relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State. Except in so far as Parliament may by law otherwise provide, numberlaw of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the companyrse of inter-State trade or companymerce-- Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the companymencement of this Constitution, shall, numberwithstanding that the imposition of such tax is companytrary to the provisions of this clause, companytinue to be levied until the thirty-first day of March, 1951. No law made by the Legislature of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared. by Parliament by law to be essential for the life of the companymunity shall have effect unless it has been reserved for the companysideration of the President and has received his assent. As framed, the Article attempted to enunciate restraints upon the legislative power of the States but the somewhat inartistic form in which the Article and particularly the Explanation was companyched, obscured instead of clarifying the meaning of the Constituent Assembly The scope of Art. 286 fell to be determined in the State, of Bombay v. United Motors India Ltd. 1 in an appeal to this companyrt in which the validity of the provisions of the Bombay Sales Tax Act, 1952 was challenged. By the Bombay Act liability to pay tax was imposed on sales of goods which had been actually delivered in the State of Bombay as a direct result of sales for the purpose of companysumption in that State even if property in the goods had, by reason of such sales, passed in another State. The High Court of Bombay in a petition under Art. 226 held that the definition of sale in the Act included certain sales which were by Art. 286 of the Constitution exempt from liability to tax by the State and the tax imposed, was therefore wholly void. A majority of Judges hearing an appeal from that judgment to this Court held that Art. 286 1 a prohibited taxation of sales or purchases involving inter- State elements by all States except the State in which the goods were actually delivered for the purpose of companysumption therein, and the effect of the Explanation thereto was to companyvert inter-State transactions into intrastate transactions and to remove them from the operation of cl. 2. On this view, the majority of the Judges held that the Bombay Sales Tax Act did number companytravene Art. 286. This interpretation of Art. 286 did number meet with the approval of a larger Bench of this Court which heard and decided the Bengal Immunity Co.s case 2 . In that case four out of the seven judges companystituting the Bench held that the operative provisions of the several parts of Art. 286, namely cl. 1 a , cl. 1 b and cls. 2 and 3 were intended to deal with different topics and one companyld number be projected or read into another . According to the minority view, Art. 286 1 a located the situs of the sales with a view to avoid multiple taxation and for that purpose, it divided the sales into two categories-, inside sales and outside sales , and that Art. 286 2 applied to the sales in the companyrse of inter-State trade and the sales which fell within the Explanation were intrastate sales. In M s. Ram Narain Sons Ltd. v. Assistant Commissioner of Sales 1 1953 S.C.R. 1069. 2 1955 2 S.C.R. 603. Tax and others 1 which was decided after the Bengal Immunity Co.s case 2 this Court held The bans imposed by Art. 286 of the Constitution on the taxing powers of the States are independent and separate and each one of them has to be got over before a State Legislature can impose tax on transactions of sale or purchase of goods. The Explanation to Art. 286 1 a determines by the legal fiction created therein the situs of the sale in the case of transactions companying within that category and once it is determined by the application of the Explanation that a transaction is outside the State, it follows as a matter of companyrse that the State, with reference to which the transaction can thus be predicated to be outside it, can never tax the transaction. The Constitution was thereafter amended, Explanation 1 of rt. 286 was deleted and cls. 2 and 3 thereto were altered by the amendment. As amended, Art. 286 stands as follows Art. 286-1. No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods, where such sale or purchase takes place- a outside the State or b in the companyrse of the import of the goods into, or export of the goods out of, the territory of India. Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in cl. 1. Any law of a State shall, in so far as it imposes, or authorises the imposition of, a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or companymerce, be subject to such restrictions and companyditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify. Simultaneously, the Parliament was authorised by the incorporation of item 92A in List I of the seventh schedule, to legislate for levying tax on the sale or purchase of goods other than newspapers, where such 1 1955 2 S.C.R. 483. 2 1955 2. S.C.R. 603 2 1955 2 S.C.R. 603. sale or purchase takes place in the companyrse of interState trade or companymerce, and by the amendment of item 54 of List II excluded that field of taxation from the companypetence of the State Legislatures. Art. 269, cl. 1 g , which was also amended by cl. 3 to that Article read after the amendment as follows Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in the companyrse of inter-State trade or companymerce . The effect of these diverse amendments made by the Constitution Sixth Amendment Act, 1956, was to invest the Parliament with exclusive authority to enact laws imposing tax on sale or purchase of goods where such sale or purchase takes place in the companyrse of inter-State trade or companymerce, and the tax companylected by the States was to be assigned in the mariner provided by cl. 2 of Art. 269 to the State within which the tax was leviable. In exercise of authority companyferred upon the Parliament by Art. 286 and Art. 269, cl. 3, the Parliament enacted the Central Sales Tax Act 74 of 1956 . The Act was enacted as the preamble recites to formulate principles for determining when a sale or purchase of goods takes place in the companyrse of inter-State trade or companymerce or outside a State or in the companyrse of import into or export from India, to provide for the levy, companylection and distribution of taxes on sales of goods in the companyrse of inter-State trade or companymerce and to declare certain goods to be of special importance in inter-State trade or companymerce and specify the restrictions and companyditions to which State laws imposing taxes on the sale or purchase of such goods of special importance shall be subject . By chapter 2 of the Act, ss. 3, 4 and 5, those principles were formulated and by chapter 3, detailed provisions were made for imposing liability to pay tax on inter-State sales, for registration of dealers, fixing rates of tax and for levy and companylection of tax and for imposing penalties for breach of the provisions of the Act relating to levy and companylection of inter-State sales tax. By s. 6, every dealer was made liable to pay tax on all sales effected by him in the companyrse of inter-State trade or companymerce. By sub-s. 2 of s. 8, the rates of tax on sales in the companyrse of inter-State trade or companymerce were directed to be calculated at the same rates s and in the same manner as would have been done if the sale had in fact taken place inside the appropriate State. By s. 9, the machinery for levy and companylection of tax was prescribed. The tax payable by any dealer under the Act was to be levied and companylected by the appropriate State in the manner provided by sub-s. 2 which enacts that the authority for the time being empowered to assess, companylect and enforce payment of any tax under the General Sales Tax Law of the appropriate State shall on behalf of the Government of India assess, companylect and enforce payment of any tax payable by any dealer under the Act in the same manner as the tax on the sale or purchase of goods under the General Sales Tax Law of the State is assessed, paid and companylected. It is manifest that by s. 6 which is the charging section, liability to pay tax on inter-State sales is imposed upon all sales effected by any dealer in the companyrse of interstate trade or companymerce. The liability to pay tax under the Central Sales Tax Act arises as an inter-State sale. The tax though companylected by the State in which the sale takes place is due to the Central Government and is payable at the rates prescribed in respect of intrastate sales by the State in which it is companylected. Sale is defined in s. 2 g as meaning any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable companysideration and includes a transfer of goods on the hire purchase or other system of payment by instalments, but does number include a mortgage or hypothecation of or a charge or pledge on goods. By s. 3, a sale or purchase of goods is deemed to take place in the companyrse of inter-State trade or companymerce if the sale or purchase a occasions the movement of goods from one State to another, or b is effected by transfer of documents of title to the goods during their movement from one State to another. A transaction of sale is subject to tax under the Central Sales Tax Act on the companypletion of the sale, and a mere companytract of sale is number a sale within the definition of sale in s. 2 g . A sale being by the definition, transfer of property, becomes taxable under s. 3 a if the movement of goods from one State to another is under a companyenant or incident of the companytract of sale, and the property in the goods passes to the purchaser otherwise than by transfer of documents of title when the goods are in movement from one State to another. In respect of an inter-State sale, the tax is leviable only once and that indicates that the two clauses of s. 3 are mutually exclusive. A sale taxable as falling within cl. a of s. 3, will be excluded from the purview of cl. b of s. 3 otherwise certain sales may, be liable to tax under both the clauses and two States may, in respect of a single sale, claim to levy the tax companytrary to the plain intendment of ss. 6 and 9 of the Act. The sale companytemplated by cl. b is one which is effected by transfer of documents of title to the goods during their movement from One State to another. Where the property in the goods has passed before the movement has companymenced, the sale will evidently number fall within cl. b number will the sale in which the property in the goods passes after the movement from one State to another has ceased be companyered by the clause. Accordingly a sale effected by transfer of documents of title after the companymencement of movement and before its companyclusion as defined by the two terminii set out in Explanation 1 and numberother sale will be regarded as an inter-State sale under s. 3 b . The definition of the expression sale undoubtedly includes transfer of goods on hire-purchase or other systems of payment by instalments, but thereby, a mere companytract of sale which does number result in transfer of property occasioning movement of goods from one State to another does number fall within the terms of s. 3 a . That transaction alone in which there is transfer of goods on the hire-purchase or other systems of payment by instalments is included in the definition of sale . The question whether a mere companytract in which goods are delivered under a hire. purchase agreement is a sale within the meaning of s. 2, cl. g and therefore, companyered by cl. a of s. 3 does number fall to be determined in this case number are we called upon to express our opinion on the question whether the clause authorising imposition of sales tax on what may be merely a companytract of sale is unconstitutional. We are in this case companycerned to decide the companypeting claims of the States of West Bengal and Bihar to levy sales tax from the companypany in respect of transactions of companypleted sales and number in respect of any hire-purchase transactions. Cases of this Court, viz., State of Travancore-Cochin and others v. The Bombay Co., Ltd. 1 and State of Travancore Cochin and others v. Shanmugha Vilas Cashew Nut Factory and others 2 relied upon by companynsel for the State of West Bengal have numberbearing on the interpretation of s. 3, cls. a and b . In those cases, the meaning of the expressions, in the companyrse of import and export and ,in the companyrse of interState trade or companymerce used in Art. 286 fell to be determined. The Constitution does number define these expressions. The Parliament has in the Central Sales Tax Act, 1956, sought to define by s. 3 when a sale or purchase of goods is said to take place in the companyrse of inter-State trade or companymerce and by s. 4 1 to define when a sale or purchase of goods is said to take place outside a State and by s. 5, when a sale or purchase is said to take place in the companyrse of import or export. In interpreting these definition clauses, it would be inappropriate to requisition in aid the observations made in ascertaining the true nature and incidents without the assistance of any definition clause of sales outside the State and sales in the companyrse of import or export and Bales in the companyrse of interState trade or companymerce used in Art. 286. In our view, therefore, within cl. b of s. 3 are included sales in which property in the goods passes during the movement of the goods from one State to another by transfer of documents of title thereto cl. a of s. 3 companyers sales, other than those included in cl. b , in which the movement of goods from one State to another is the result of a companyenant or incident of the companytract of sale, and property in the goods passes in either State. 1 1952 S.C.R. 1112. 2 1954 S.C.R. 5.3. The question to which attention must then be directed is, which out of the two or more States companycerned with the goods sold under an inter- State sale is entitled to companylect the tax under Act 74 of 1956. By s. 9, the tax payable by any dealer under the Act is to be levied and companylected in the appropriate State . The expression appropriate State was at the material time defined by s. 2 a as follows Appropriate State means- in relation to a dealer who has one or more places of business situate in the same State, that State in relation to a dealer who has one or more places of business situate in different States, every such State with respect to the place or places of business situate within its territory Explanation- Place of business means, in the case of a sale of goods in the companyrse of inter- State trade or companymerce falling within cl. a of s. 3, the place from which the goods have been moved by reason of such sale in the case of any such sale falling within cl. b of s. 3, the place where the sale is effected. This definition made the State in which the place of business is situate, the appropriate State and by the Explanation, the expression place of business was defined in relation to the two classes of sales in s. 3 as sales in the companyrse of inter-State trade or companymerce. By the first part of the definition, in case of sale of goods falling within cl. a , the place from which the goods have been moved is the place of business and by cl. 2, in the case of sales falling within cl. b of s. 3, the place where the sale is effected is the place of business. This evidently is a highly artificial definition. By a fiction, the place from which goods have been moved by reason of the sale falling within cl. a of s. 3, that is, that place from which the goods have been moved under the companytract of sale for the purpose of delivery to the purchaser in another State was declared the place of business. By another fic- tion, the place where the sale is effected in inter-State transactions falling within s. 3 b was declared the place of business. In ascertaining the place of business as defined by the Explanation, for cases falling within cl. a of s. 3, little practical difficulty arises. But in cases of sales falling within cl. b , the location of the place where the sale is effected for ascertainment of the place of business within the meaning of the Explanation raises difficult problems. As observed by Das, Acting Chief Justice, in Bengal Immunity Companys case 1 at p. 649 The situs of an intangible companycept like a sale can only be fixed numberionally by the application of artificial rules invented either by Judges as part of the judge-made law of the land or by some legislative authority. But so far as we know, numberfixed rule of universal application has yet been evolved for deter. mining this for all purposes. There are many companyflicting theories One, which is more popular and frequently put forward and is referred to and may indeed be urged to have been adopted by the Constitution favours the place where the property in the goods passes, another which is said to be the American view fixes upon the place where the companytract is companycluded, a third which prevails in the companytinental companyntries of Europe prefers the place where the goods sold are actually delivered, a fourth points to the place where the essential ingredients which go to make up a sale are most densely grouped . Ex facie, cl. 2 of the Explanation to s. 2 a does number seek to locate the place where the sale is effected in cases falling within cl. b of s. 3 at the place where the transfer of documents of title to the goods was effected. Parliament has classified the sales in the companyrse of inter-State trade or companymerce in cls. a and b of s. 3 and by the first clause of the Explanation to s. 2 a , in cases of sales falling within s. 3 a the place of business is the place from which movement has companymenced and in the case of sales falling within s. 3 b , it is the place where the sale is effected. But there is in the Explanation numbermaterial for ascertaining the place where the sale is effected. 1 1955 2 S.C.R. 603. There was a sharp companyflict of opinion as to the true meaning of Art. 286, cls. 1 a and b and the Explanation as they stood before the amendment by the Constitution Sixth Amendment Act, 1956. In the United Motors case 1 it was opined by a majority of the judges of this Court that Art. 286 1 a prohibited taxation of sales or purchases involving interstate elements by all States except the State in which the goods were delivered for the purpose of companysumption therein, and the latter State was left free to tax such sales or purchases and that power was number derived from the Explanation to Art. 286 1 but under Art. 246 3 read with entry 54 in List II. Mr. Justice Bose who disagreed with the majority held that the basic idea underlying Art. 286 was to prohibit taxation in the companyrse of inter-State trade and companymerce until the ban under cl. 2 of the said Article was lifted by Parliament and always in the case of imports and exports, and when the ban was lifted, the Explanation to cl. 1 of Art. 286 came into play to determine the situs of the sale, the explanation number governing cl. 2 as it applied to transactions which in truth and in fact took place in the companyrse of inter-State trade and companymerce. Mr. Justice Bhagwati who agreed with the companyclusion of the majority as to the vires of the impugned Act, opined that the Explanation to Art. 286 1 did number take away the right which the State in which the property in the goods passed had to tax the sale or purchase, but only deemed such purchase or sale by a legal fiction to have taken place in the State in which the delivery of the goods had been made for companysumption so as to enable the latter State also to tax the sale or purchase in question. In The Bengal Immunity CO.s case 2 , Das, Acting Chief Justice, in delivering the judgment of the majority observed that the several parts of Art. 286, viz., cls. 1 a , 1 b , 2 and 3 were intended to deal with different topics that the Explanation to cl. 1 a to Art. 286 should number legitimately be extended to cl. b either as an exception or as a proviso thereto or read as curtailing or limiting the ambit of cl. 2 that Art. 286 1 a fixed 1 1953 S.C.R. 1069. 2 1955 2 S.C.R. 603. the situs of the sales with a view to avoid multiple taxation and for that purpose classified the sales into two categories, inside sales and outside sales and s enacted that the State cannot tax outside sales and the purpose of the Explanation which declared a sale in the companyrse of inter-State trade must be deemed to have taken place inside the State in which the goods are delivered for companysumption was clearly to take it out of the inter-State trade and impress it with the character of an intra-State sale. This view was followed in M s. Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax others 1 . Evidently, by the interpretation placed by this Court on the scope and meaning of Art. 286 as originally enacted, Parliament was faced with a difficult problem. The Parliament had to examine the problem of taxing inter-State trade and companymerce in the light of three principal factors, namely, 1 the companystitutional freedom of trade, companymerce and intercourse guaranteed by Art. 301, 2 the inadvisability of allowing the States unrestricted freedom to levy or impose taxes on sales or purchases of goods with interState companytent, and 3 the necessity to impose restric- tions on multiple taxation of the same sale by different States. The Parliament deleted the Explanation to cl. 1 of Art. 286 which had given rise to this serious companyflict of views and recast cls. 2 and 3. By cl. 2 as amended, the Parliament was authorised to formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in cl. 1 and by the addition of item 92A in List I of the seventh schedule, the Central Government alone companyld tax sales or purchases of goods which take place in the companyrse of inter-State trade or companymerce. By incorporating cl. 3 to Art. 269, the Parliament assumed to itself the power to formulate principles for determining when a sale or purchase of goods takes place in the companyrse of inter-State trade or companymerce. It is after this amendment was made that the Central Sales Tax Act, 1956, was enacted with a view to provide for companylection of a tax on sales or purchases in 1 1955 2 S.C.R. 483. the companyrse of inter-State trade or companymerce. The Parliament had to define sales in the companyrse of interState trade or companymerce, sales in the companyrse of import or export, and intrastate sales. The Parliament set out by s. 3 to define sales of goods which can be said to take place in the companyrse of inter-State trade or companymerce, by s. 4 1 to define when a sale is said to take place outside a State, and by s. 5 when a sale is said to take place in the companyrse of import and in the companyrse of export. By s. 9, authority to tax was companyferred upon the appropriate State, and that expression was defined by s. 2 as the State where the dealer had his place of business, and in respect of sales which fall within cl. b of s. 3, the place of business of the dealer was declared to be the place where the sale is effected. By s. 3, it was intended to define the class of sales which shall be deemed to be sales in the companyrse of inter-State trade or companymerce, but the companyditions which go to make such transactions, sales in the companyrse of inter-State trade or companymerce as set out by cls. a and b were number intended to locate the place where the sale takes place. The legal position as to taxability of sales in the companyrse of inter-State trade or companymerce was unsatisfactory and the Parliament radically amended Art. 286 and the allied Articles. It also enacted a special Act authorising levy and companylection of Central Sales Tax with a view to prevent rivalry and companypetition between different States. Is it then to be assumed that the Parliament still left the law in so far as it related to a class of sales companyered by the description of sales in the companyrse of inter-State trade or companymerce in the same unsatisfactory companydition without enacting where the sales in cases falling within cl. b of s. 3 were effected? Before proceeding to answer that query, attention may be directed to s. 4 of Act 74 of 1956. It is as follows , Subject to the provisions companytained in s.3 when a sale or purchase of goods is determined in accordance with sub-s. 2 to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. A sale or purchase of goods shall be deemed to take place inside a State if the goods are within the State- a in the case of specific or ascertained goods, at the time the companytract of sale is made and b in the case of unascertained or future goods, at the time of their appropriation to the companytract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. Explanation-Where there is a single companytract of sale or purchase of goods situated at more places than one, the provisions of this sub-section shall apply as if there were separate companytracts in respect of the goods at each of such places. Sub-section 2 defines what sales or purchases shall be deemed to take place inside a State. The terms of sub-s. 2 are quite general, and the Parliament has thereby attempted to locate the place where a sale takes place. The clause does number deal with the companyditions which effect a gale number is there any warrant for the view that sub-s. 2 of s. 4 only seeks to locate the place of sale which are number in the companyrse of interState trade or companymerce. By enacting ch. 11, the Parliament sought as evidenced by the title of the chap- ter to exercise its power under Art. 269 3 and 286 2 . By s. 3, the Parliament formulated principles for determining when a sale or purchase of goods takes place in the companyrse of inter-State trade or companymerce and in so doing, it exercised authority companyferred upon it by Art. 269 3 . In enacting s. 4, cl. 1 , the Parliament sought to formulate principles for determining when a sale takes place outside a State and in enacting that section, it legislated in exercise of authority under Art. 286 2 read with cl. 1 a of that Article and in enacting s. 5, sub-ss. 1 and 2, it exercised authority under Art. 286 2 read with cl. 1 b of the Article to formulate principles for determining the sale which takes place in the companyrse of import or export. The Parliament by sub-s. 2 of s. 4 attempted to define when a sale shall be deemed to take place inside a State, and by sub-s. 1 of s. 4 provided that when a sale or purchase of goods was determined in accordance with sub-s. 2 to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. But sub-s. 1 having been made subject to the provisions companytained in s. 3, it is evident that only those sales which were number in the companyrse of interState trade or companymerce should be determined under sub-s. 1 of s. 4 as having taken place outside a State. We are unable to hold that any weight can be attached to the argument that if it was the object of the Legislature by enacting sub-s. 2 of s. 4 to explain the expression, where the sale is effected as used in cl. ii of the Explanation to s. 2 a , the Legislature would have expressly stated so. Nor are we able to agree with the companytention that s. 4 only seeks to define outside sales and is number intended to locate the place where a sale is effected. The argument that by the application of s. 4, sub-s. 2, in cases where the goods sold are unascertained or future goods, there will be difficulty in ascertaining the place where the sale is effected, has also numberforce. In any event, s. 4 2 may number be denied its full operation, merely because difficulty may be encountered in some cases in ascertaining the place where it is effected by the application of the rules set out therein. The Commercial Tax Officer has observed in his order that In this case, it should be remembered that section 3 b refers to transfer of documents and number only to transfer of documents by endorsement. Thus, even if the documents are in the name of the buyer as companysignee but these are physically transferred to the buyer in West Bengal then that sale is taxable in West Bengal. In case of goods companysigned to Self there is numberquestion that delivery to the railways cannot be companystituted as delivery to the buyer But under the Sale of Goods Act, if a document of title to goods is used in the ordinary companyrse of business as proof of the possession or companytrol of goods, endorsement or delivery thereof according to mercantile practice will amount to delivery of the goods thereby represented. The transfer of documents companytemplated by s. 3 b is therefore such transfer as in law amounts to delivery of the goods. Transfer of documents either by endorsement or delivery does companyplete transfer of title, but in the absence of an indication to that effect in the statute, the place where the documents are transferred is number the place of sale. If the view which appealed to the Commercial Tax Officer is accepted, there is a possibility of large scale evasion of tax. For instance, the documents may be handed over outside India. If documents of title to goods are handed over by the vendor either directly or through his agent to the purchaser or his agent outside India, on the view taken by the Commercial Tax Officer, even though the sale has taken place in India and the goods are in India, the sale would number be taxable. This result companyld number have been companytemplated by the Legislature. We are therefore unable to agree with the view taken by the Commercial Tax Officer. It was urged by companynsel for the State of Bihar that iron and steel are companymodities of which the storage, sale and purchase are companytrolled by the Iron and Steel Control Order, 1956, and all the sales which are made subject to tax under the impugned order are those companyered by s. 3 a of the Central Sales Tax Act. In para. 3 of the petition, the companypany has set out the practice which is followed in supplying steel pursuant to the orders passed by the Controller. It is stated that an intending purchaser has to obtain a permit from the Iron and Steel Controller of the region where he carries on business and the permit is sent by the Provincial Controller to the Controller at Calcutta. The latter Officer plans the indent on the companypany and Bends it to the Head Sales Office at Calcutta for companypliance, and the planning of the indent in effect is a directive by the Controller to supply steel to the intending purchaser subject to the companypanys terms and companyditions. In paras. 4, 5 and 6 of the petition, the specimen forms of quotation letters and the practice followed in supplying goods to the Government and Railways, to the engineering firms and the bazaar parties are set out. In the light of cls. 4, 5, 10 and 15 of the Iron and Steel Control Order, it was urged that all the sales effected by the companypany under the direction of the Controller fall within s. 3, cl. a . But we do number think it necessary to express any opinion on this argument at this stage, without a more companyplete picture of the modus operandi followed. The Commercial Tax Officer has taxed all the sales effected by the companypany under s. 3, cl. b , on the view that sales in which the documents of title were handed over in Calcutta were taxable in the State of West Bengal. The assessment is made on two assumptions, 1 that all the sales effected in favour of West Bengal parties satisfied the companyditions prescribed by s. 3 b , and 2 that the place where the documents are delivered, by the companypany through its Head Sales Office to the purchaser is the place where the sale is effected. Neither of these assumptions is companyrect. The Commercial Tax Officer had, in our judgment, to ascertain before he companyld order payment of tax under the Central Sales Tax Act, whether on the materials he was satisfied, a that the goods at the time of transfer of documents of title were in movement from the State of Bihar to the State of West Bengal, b that the place where the sale was effected was under s. 4, cl. 2 , within the State of West Bengal. The Commercial Tax Officer has, in our view, failed to apply the companyrect tests and has made assumptions which are number warranted and on a true interpretation of the provisions of the Central Sales Tax Act, the order of assessment discloses an error apparent on its face and a writ of certiorari must issue quashing the assessment. It will be for the Commercial Tax Officer of West Bengal to re-assess the company- pany in respect of transactions of sale which are properly taxable within the State of West Bengal by the application of the test which we have already set out. On this view, the rule is made absolute and it is directed that a writ of certiorari will issue quashing the order of assessment made by the Commercial Tax Officer, Lyons Range, Calcutta, West Bengal. The companypany will be entitled to its companyts of this petition. SARKAR J.-The petitioner was assessed to sales tax on some of its sales by the Government of West Bengal under the provisions of the Central Sales Tax Act, 1956. It companytends that the Government of West Bengal had numberpower to assess tax on those sales, for, under the Act, they companyld be brought to tax only by the Government of Bihar. It has filed this petition under Art. 32 of the Constitution for a writ to quash the order of assessment made by the Government of West Bengal on the ground that it violates the peti- tioners rights under sub-cls. f g of cl. 1 of Art. 19 to told property and carry on business. The petitioner is a limited companypany carrying on a business of manufacturing and selling iron and steel goods. It has its factory at Jamshedpur in Bihar and its head sales office in Calcutta in West Bengal On August 12, 1959, the Taxing Officer of the Government of West Bengal served a numberice on the petitioner to produce a statement of sales from Jamshedpur the documents relating to which were transferred in West Bengal or of any other sales that have taken place under s. 3 b of the Central Sales Tax Act, 1956 . The petitioner refused to submit the return for reasons which we shall state later and took the stand that the tax on the sales was assessable by the Government of Bihar and number by the Government of West Bengal. The Taxing Officer of the Government of West Bengal did number accept the companytention of the petitioner and in the absence of a return by it, made a best judgment assessment on October 21, 1959, assessing the petitioner to a tax of Rs. 41,14,718-12 nP. The petitioner seeks to have this order quashed. The respondents to this petition are the Government of West Bengal, its officer who made the assessment, the Government of Bihar and the Union of India. No relief is however claimed against the last two respondents. The questions raised by this petition depend on the companystruction of certain provisions of the Central Sales Tax Act, 1956. The Act was amended with effect from October 1, 1958. This case however has to be decided on the Act as it stood prior to the amendment, for the period companyered by the impugned order of assessment was from July 1, 1957 to March 31, 1958. It may be stated here that the validity of the Act has number been challenged by the petitioner. A preliminary objection to this petition is taken on behalf of the Government of West Bengal. It is said that as the legality of the Act is number challenged, the imposition of the tax does number result in any violation of the fundamental right guaranteed by Art. 31 1 of the Constitution and this petition based on such alleged violation is, therefore, number companypetent. Such a view was indeed taken by this Court in Ramji Lal v. Income-tax Officer, Mohindargarh 1 . This case was followed in Laxmanappa Hanumantappa Jamkhandi v. Union of India 2 . The present case however does number companyplain of a violation of any fundamental right under Art. The fundamental right the infringement of which is alleged by the assessment order, is the right to hold property and carry on business under Art. 19 1 f and g . In Kailash Nath v. The State of U. P. 3 , this Court held that an illegal levy of sales tax on a trader under an Act the legality of which was number challenged violates his fundamental rights under Art. 19 1 g and a petition under Art. 32 with respect to such violation lies. The earlier case of Ramji Lal v. Income,-tax Officer, Mohindargarh 1 does number appear to have been companysidered. It is companytended that the decision in Kailash Naths case 3 requires reconsideration. We do number think however that the present is a fit case to go into the question whether the two cases are number reconcilable and to decide the preliminary question raised. The point was taken at a late stage of the proceedings after much companyts had been incurred. The question arising on this petition is further of general importance, a decision of which is desirable in the interest of all companycerned. As there is at least one case supporting the companypetence of the petition, we think it fit to decide this petition on its merits, on the footing that it is companypetent. 1 1951 S.C.R. 127. 2 1955 1 S.C.R. 769. A.I.R. 1957 S.C. 790. Now, the Central Sales Tax Act, 1956, is an Act of the Union Legislature. It authorises the levy of a tax on sales made in the companyrse of inter-State trade. It is only with such sales that the present case is companycerned. Sales in the companyrse of inter-State trade are defined in s. 3 of the Act and this section will be set out later. Section 6 of the Act provides that every dealer shall be liable to pay tax under the Act on all sales made by him in the companyrse of inter-State trade. That the petitioner is a dealer is number in dispute. Section 9 1 provides that the tax payable by any dealer under the Act shall be levied and companylected in the appropriate State by the Government of India. Section 9 2 provides that the authorities empowered to assess and companylect tax under the general sales tax law of the appropriate State shall on behalf of the Government of India, assess and companylect the tax payable under the Act and for such purpose, exercise all powers under its general sales tax law. Under the provisions of sub-s. 3 of s. 9, the State companylecting the tax becomes entitled to retain it substantially. It is therefore clear that the tax is payable to the Union and is companylected by a State for the Union. The companytention of the petitioner before the taxing officer of the Government of West Bengal may be reproduced in its own words We companytend that all our sales from Jamshedpur are. of the type mentioned in Section 3 a of the Central Sales Tax Act and at the same time some of them also fall within the category mentioned in Section 3 b of the Act. Even if the sales are of the type mentioned in Section 3 b of the Act, the Appropriate State of the place where the sales take place or are effected, has jurisdiction to assess such sales to Central Sales Tax. Section 4 2 lays down the principles for ascertaining where the sale takes place, or in other words, the situs of the sale. This section creates a legal fiction for ascertaining the situs of the sale. So far as our inter-State sales from Jamshedpur are companycerned the situs of such sales will always be in the State of Bihar as the goods will be in Bihar either at the time of companytract of sale ascertained goods or at the time of their appropriation to the companytract unascertained goods . We have accordingly filed our returns of sales made in the companyrse of inter-State trade or companymerce from Jamshedpur with the Bihar Sales tax Authorities under the Central Sales Tax Act, 1956, and have paid to them the Tax on the basis of these returns . The Taxing Officer of the Government of West Bengal did number accept the petitioners companytention. He held In the case of sale u s 3 b numberproperty in the goods passes unless the documents of title to goods are in the hands of the buyer. In such a case the Appropriate State to levy the tax should be that State in which the sale has been effected or, in other words, that State in which the documents of title to goods have been transferred to the buyer. In the above circumstances, it is clear that West Bengal is the Appropriate State to levy tax on inter-State sales of the dealer effected by transfer of documents of title to goods in West Bengal. In this case, it should be remembered that section 3 b refers to transfer of documents and number only to transfer of documents by endorsement. Thus, even if the documents are in the name of the buyer as companysignee but these are physically transferred to the buyer in West Bengal then that sale is taxable in West Bengal. In case of goods companysigned to Self there is numberquestion that delivery to the railways cannot be companystituted as delivery to the buyer. He also held that The dealer has said that section 4 2 lays down the principles for ascertaining where the sale in the companyrse of inter-State trade takes place. In other words, the Appropriate State to levy the tax on the sales u s 9 of the Central Act prior to its amendment with effect from 1- 10-58 should be determined by section 4 2 . In my opinion, this is an incorrect reading of the law. Each of section 3 and section 4 deals with quite independent sphere of companymercial transactions. Finally, he made the best judgment assessment, earlier mentioned, remarking that The dealer has himself admitted that he has some sales u s 3 b . From my experience of examining the books of accounts of the dealer for some earlier years I am of the opinion that a very substantial portion of the total sales are effected by transfer of documents in West Bengal. The dealer has refused to companyply with my direction to submit a statement of such sales. I have, therefore, to make an estimate. On examining the records of the dealer under the State law and keeping in view the fact that there had been companysiderable expansion of sales of iron and steel in recent years 1 estimate the turnover during the period of assessment to be Rs. 9 crores i.e., an average of Rs. 1 crore per month . Now in this case the petitioners companyplaint is number that there should number have been a best judgment assessment. It does number say that assessment is arbitrary or, for any other reason, unfair. Its point is that the Government of West Bengal companyld number tax a sale where goods were under the companytract of sale moved from Bihar to Bengal even though the documents of title to the goods sold were transferred in Bengal, such sales being taxable only by the Government of Bihar. It is clear from what we have said that the Government of West Bengal purported to tax sales under s. 3 b it taxed sales where during their movement from Bihar to Bengal, the property in the goods sold passed, by a transfer in West Bengal of the documents of title to them. Two questions arise, namely, what is a sale under s. 3 b and which is the appropriate State to tax such sales ? We take up the first question number. In order to decide it, we have to companysider s. 3 as a whole. The section, so far as material, is in these terms Section 3-A sale or purchase of goods shall be deemed to take place in the companyrse of inter-State trade or companymerce if the sale or purchase- a occasions the movement of goods from one State to another or b is effected by a transfer of documents of title to the goods during their movement from one State to another. The first thing that strikes us is that the section has to be so companystrued that the two clauses in it are made mutually exclusive. It seems clear that it was number companytemplated that a sale can fall within both the clauses. If that were number so, there might be two appropriate States in respect of it, one being the State from which the goods were moved by reason of the sale and the other being another State within which the sale was effected by the transfer of documents of title during the movement of the goods sold from one State to another. In such a case, each of the two appropriate States would be entitled to companylect the tax with the result that the same sale would be taxed twice over. The learned companynsel for the State of Bihar was inclined to companytend, numberdoubt as an alternative argument, that companyld be done. We do number think that the Act intended such a result. We proceed number to state our reasons for this view. The Act imposes tax on sales in the companyrse of interState trade. It is an Act of the Union legislature. Under the Constitution the State legislatures have numberpower to tax such sales and only the Union Legislature can do so. It is well recognised that the power to tax sales made in the companyrse of inter-State trade has been denied to the State Legislatures with the object of preventing multiple taxation of the same sale by different States resulting in hardship to the ultimate companysumer see State of Bombay v. United Motors India Ltd. 1 and Bengal Immunity Co. Ltd. v.The State of Bihar 2 . Since these cases were decided, the Constitution has numberdoubt been amended, but the observations made in them still apply. This being so, the Act companyld number have intended to tax the same sale twice. But apart from this companysideration of a somewhat general nature, the provisions of the Act plainly make 1 1953 S.C.R. 1069. 2 1955 2 S.C.R. 603. it impossible to levy two taxes on the same sale. Under s. 8 1 , the tax is a certain percentage of the dealers turnover . Section 2 j defines turnover as meaning the aggregate of the sale prices in respect of the dealers sales. So the tax is a percentage of the sale price and as each sale produces one price, it follows that it can be taxed only once. Again, s. 9 by providing that the tax shall be companylected in the appropriate State by the Government of India, plainly indicates that there is one tax payable to the Government of India which is companylected by one State only. Section 3 by the use of the word or between cls. a and b in it also suggests that the clauses are exclusive of each other. One sale then cannot be taxed twice. A sale cannot fall under both cl. a and cl. b of s. 3, for then it would be liable to tax twice. Clauses a and b are hence mutually exclusive. Keeping this basic companysideration in mind, we proceed to companystrue s. 3. We take cl. a of s. 3 first. That clause companytemplates a sale which occasions the movement of goods from one State to another. The words sale occasions the movement should create numberdifficulty. It is apparent from the explanation in s. 2 a which will be set out later, that they mean moved by reason of the sale. The question then arises, when does a sale occasion the movement of goods sold ? It seems clear to us that a sale can occasion the movement of the goods sold only when the terms of the sale provide that the goods would be moved in other words, a sale occasions a movement of goods when the companytract of sale so provides. We turn number to the sale companytemplated by el. b of s. 3. That is a sale effected by a transfer of documents of title to the goods during their movement from one State to another. What then is a sale effected by a transfer of documents of title ? In our view, it can only be a sale where the property in the goods sold is passed by a transfer of documents of title. It is well known that in many cases of sale, property in the goods sold is transferred by a transfer of documents of title to them. It has been said that a sale has several elements, namely, agreement to sell, transfer of property in the goods sold, payment of price, delivery of the goods and so forth see State, of Bombay v. United Motors India Ltd. 1 . It seems to us to be inappropriate to talk of any of these elements of sale being effected by a transfer of documents of title, other than the element of transfer of property. Thus, for example, the companytract of sale cannot be effected by the transfer of documents of title, neither the payment of price. A transfer of documents of title may perhaps effect a delivery of the goods if the parties so agree. But it seems to us that in defining a sale in the companyrse of inter-State trade in a statute purporting to tax a sale, that is a transaction in which property in the goods passed, the legislature was number thinking only of delivery of goods. It does number appear to us to be a reasonable companystruction of the words sale is effected to hold that they mean delivery of the thing sold. Therefore, we think that cl. b refers only to sales where transfer of property in the goods sold takes place by the transfer of documents of title to them during their movement from one State to another. We have then companye to this that cl. a of s. 3 companytemplates a sale where the companytract of sale occasions the movement of the goods sold and cl. b , a sale where transfer of property in the goods sold is effected by a transfer of documents of title to them. Of companyrse, in the first case, the movement of the goods must be from one State to another and in the second, the documents of title must be transferred during such movement. Now it will be apparent that if this was the full companystruction of the two clauses, then they would often overlap. This, as earlier stated, was number intended. We have to narrow down the companystruction so as to make the clauses mutually exclusive. There may be sales under the terms of which the goods have to be moved from one State to another. All such sales would companye within cl. a . But it may so happen that in some of these sales, the property in the goods passes by a transfer of document of title to them during their 1 1953 S.C.R. 1069. movement. Such sales would fall within cl. b also. To avoid this result we have to exclude from el. a such of the sales companying under it in which the property in the goods passes by a transfer of documents of title to them during their movement. In other words, where a sale companyes under both the clauses, it has to be hold to fall under el. b . We, therefore, think that the two clauses should be companystrued in the following way Clause a companytemplates a sale where under the companytract of sale the goods sold are moved from one State to another, provided however that such a sale will number companye under cl. a but fall under el. b if the property in the goods sold is passed by a transfer of the documents of title to them during their movement from one State to another. Clause b , on the other hand, companytemplates a sale where the property in the goods sold is passed by a transfer of documents of title to them during their movement from one State to another. The next question is which State can companylect the tax on a sale falling under cl. b of s. 3, companystruing that clause in the sense that we have done earlier. In other words, the question in this case is Would West Bengal be the appropriate State to tax a sale where the property in the goods sold passed from the seller to the buyer by a transfer in West Bengal of the documents of title to them during their movement from Bihar to West Bengal ? Again, to put it shortly, in the case of sale under el. b of s. 3, is the State where the transfer of documents of title takes place, the appropriate State to tax the sale? The West Bengal Government thought it was. We think that this is the companyrect view to take. Now the appropriate State which alone can under s. 9 levy and companylect the tax under the Act has been defined in s. 2 a which is in these terms Section 2.-In this Act, unless the companytext otherwise requires,-- a appropriate State means- in relation to a dealer who has one or more places of business situate in the same State, that State in relation to a dealer who has one or more places of business situate in different States, every such State with respect to the place or places of business situate within its territory Explanation.- Place of business means- in the case of a sale of goods in the companyrse of inter- State trade or companymerce falling within clause a of section 3, the place from which the goods have been moved by reason of such sale, in the case of any such sale falling within clause b of s. 3, the place where the sale is effected So the appropriate State is that within whose territories the dealer has his place of business. The place of business has however to be decided in each case by reference to the kind of sale. The effect of s. 2 a appears to be this If the sale is of the kind mentioned in cl. a of s. 3, the appropriate State is that from which the goods have been moved by reason of the companytract of sale, while if the sale is of the kind mentioned in cl. b of s. 3, the appropriate State is that where the sale is effected . We are in this case companycerned only with sales under el. b of s. 3, and the appropriate State in respect of such a sale has to be decided from cl. ii of the Explanation in s. 2 a . Under that clause the appropriate State in respect of such a sale is the State where the sale is effected . The question is, does this definition by itself give sufficient guidance to ascertain the appropriate State ? The learned companynsel for the State of Bihar companytends that the words where the sale is effected do number indicate any place of sale and are number intended to indicate the appropriate State . The appropriate State , according to him, has to be decided by resort to s. 4 2 which was intended to be explanatory of Explanation ii in s. 2 a . We will companysider s. 4 2 a little later. But before we do that, let us examine the argument that the words where the sale is effected in cl. ii of the explanation in s. 2 a do number indicate any place or the appropriate State . The learned companynsel gave several reasons why the words where the sale is effected in cl. ii of the Explanation in s. 2 a cannot indicate any place. First, he referred to certain observations in State of Bombay v. United Motors India Ltd. 1 indicating that it was difficult to localise, that is, to fix the place where, a sale in the companyrse of inter-State trade takes place. He also said that transfer of property is the creation of a jural relation and it is number possible to say where a jural relation is created. Lastly, he referred to the observations of Lord Loreburn, L. C., in Badische Anilin Und Soda Fabrik v. Hickson 2 that, if you must decide in what companyntry an appropriation of goods by companysent takes place, it takes place number where the companysent is given, but where the goods are at the time situate . Therefore he companytended that the words where the sale is effected do number point to any particular place of sale. In our opinion, these reasons have numberapplication to a case, where a statute fixes the place of sale. The difficulty in the cases mentioned above was number that there was numberplace of sale at all, sale being a jural companycept, but which of the several places in which a sale companyld be said to have taken place, was the companyrect one to select. No such difficulty arises where the statute fixes the place of sale. That is what the Act before us admittedly purports to do, in one view by cl. ii of the Explanation in s. 2 a and in the other view by s. 4 2 . Clause ii of that Explanation says in effect that in the case of any sale falling within cl. b of s. 3 the appropriate State shall be the State where the sale is effected. Now, a sale under s. 3 b is a sale effected by a transfer of documents of title. The effect is the sale the mode in which the effect is produced is by the transfer of documents of title. As soon as this mode has companypleted itself the effect has been produced. It is simple syllogism that the place where the mode is companypleted, that is, the transfer of documents of title takes place, is the place where the effect is produced, that is, the sale is effected. The act companystituting the mode of effecting the sale being prescribed, the sale must be taken to have been effected where 1 1953 S.C.R. 1069. 2 1906 A.C. 419,421. that act is performed. Clause ii of the Explanation in s. 2 a , therefore, itself fixes the place of sale and numberquestion of any difficulty in fixing it arises. In our view, a sale companytemplated by s. 3 b is effected within the State in which the documents of title to the goods sold are transferred resulting in a transfer of the property in them that State is the appropriate State in respect of such sale. In this view of the matter numberquestion of resorting to s. 4 2 for fixing the place where a sale under s. 3 b is effected, arises. The place of that sale is fixed by el. of the explanation in s. 2 a itself. It also appears to us to be absolutely clear that the purpose of s. 4 2 was number to fix the place where a sale under s. 3 b can be said to have taken effect. That section is in these terms Section 4. When is a sale or purchase of goods said to take place outside a State.- Subject to the provisions companytained in section 3, when a sale or purchase of goods is determined in accordance with sub-section 2 to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. A sale or purchase of goods shall be deemed to take place inside a State if the goods are within the State- a in the case of specific or ascertained goods, at the time the companytract of sale is made and b in the case of unascertained or future goods, at the time of their appropriation to the companytract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. First, what the learned companynsel for the petitioner and the State of Bihar say is that s. 4 2 is really an explanation to cl. ii of the Explanation in s. 2 a el. ii of the Explanation in s. 2 a does number say where a sale is effected and the place is explained by sub-sec. 2 of s. 4. Now, sub-sec. 2 of s. 4 does number purport to be an explanation to clause ii of the explanation in s. 2 a it does number refer to s. 2 a at all. It would be a strange mode of enacting a statute to have an explanation to another explanation and that too in another part of the statute dealing, as we shall presently show, with a different matter. Further sub-cl. ii of the Explanation in s. 2 a specifies the place of business and s. 4 2 specifies a State so the latter cannot be an explanation of the former. Secondly s. 4 2 states when a sale shall be deemed to take place inside a State . In order however to say where a sale takes place in the companyrse of interState trade it is inappropriate to talk of it as taking place inside a State . A sale in the companyrse of interState trade from its very nature, has numberhing to do with sales inside or outside a State. It companytemplates companymercial activities which take place in more than one State. Thirdly, s. 4 is number really defining when a sale shall be deemed to take place inside a State. It is only defining when a sale shall be deemed to take place outside a State. It does so by saying that when a sale is to be deemed to be inside any State under sub-see. 2 , it shall be deemed to have taken place outside all other States. Sub-section 2 provides when a sale shall be deemed to take place inside a State only for the purpose of showing that it shall then be deemed to have then taken place outside all other States, and for numberother purpose. This is clear from the section itself and is made further clear by the heading to the sec- tion. It seems to us that the heading is really a preamble to the section giving a key to its interpretation as was found to be the case in Martins v. Fowler 1 . Fourthly, s. 4 is expressly made subject to s. 3. This can only mean that in case any companyflict between the two sections appears, s. 3 would prevail. Now these two sections define two kinds of sale, namely, a sale in the companyrse of inter- State trade and a sale taking place outside a State. If a sale happens to companye under both definitions, it would have to be taken as a sale in the companyrse of inter-State trade for s. 4 has been made subject to s. 3. That being so, it would be impossible to hold that s. 4 2 indicates where a sale failing under s. 3 b is to be held to have been effected. Lastly it seems clear to us that s. 4 was enacted 1 1926 A. C. 746, 750. under the power companyferred on the Parliament by. Art. 286 2 to formulate principles for determining when a sale takes place outside a State , the State legislatures having been prevented by el. 1 of that Article from passing any law imposing tax on such a sale. This is clear from a companysideration of ss. 3, 4 and 5 which together companystitute Chapter II of the Act. Section 5 states when a sale is said to take place in the companyrse of export or import. The power to enact this section is also derived from Art. 286 2 . Section 3 formulates the principles for determining when a sale is said to take place in the companyrse of inter-State trade and it is enacted under the power for that purpose companytained in Art. 269 3 . The enactments in that Chapter, as its heading shows, were for formulation of principles for determining when a sale or purchase of goods takes place in the companyrse of inter-State trade, or outside a State or in the companyrse of export or import and were made under Arts. 269 3 and 286 2 , as already stated. We think that it is legitimate to refer to the heading of Chapter 11 for ascertaining the intention of the legislature on the principles stated by the Judicial Committee in Toronto Corporation v. Toronto Railway 1 in these words This clause is the last of a fasciculus, of which the heading is Track, c., and Railways , and, as was held in Hammersmith Ry. Co. v. Brand, such a heading is to be regarded as giving the key to the interpretation of the clauses ranged under it, unless the wording is inconsistent with such interpretation . The interpretation that we put on s, 4 in the light of the heading, is clearly number inconsistent with the wording of that section. It is admitted that s. 5 has numberconnection with the other provisions in the Act and is clearly only laying down principles for determining when a sale can be said to have taken place in the companyrse of import of goods into or export of goods out of, India. It would be legitimate to hold that similarly s. 4 was enacted only for the purpose of formula- ting principles for determining when a sale is said to take place outside a State and number for any other purpose. For all these reasons, we hold that sub-s. 2 of 1 1907 A. C. 315, 324 s. 4 was number enacted for determining which is an appropriate State to companylect the tax in the case of a sale falling under cl. b of s. 3. It was argued on behalf of the Government of Bihar that in any case the sales of the petitioner from Jamshedpur do number companye under el. b of s. 3 because all such sales were made pursuant to the permit granted under the provisions of Iron Steel Control Order, 1956, issued under the Essential Supplies Act, 1955, the directions in which permit the petitioner was bound to carry out. It appears that iron and steel being companytrolled companymodities, they companyld number under the provisions of the Act and Order aforesaid, be sold without the permission of the Iron Steel Controller. It was companytended that when on a companytract made pursuant to such permission, the petitioner loaded the goods into the railway wagons at Jamshedpur, the property in them passed under s. 23 1 of the Sale of Goods Act to the purchaser, because, in view of the Iron Steel Control Order, 1956, the goods became unconditionally appropriated to the companytract by the seller with the assent of the buyer. The case of Com- missioner of Sales Tax, Bihar v. New India Sugar Mills 1 was cited as authority for this view. This case was decided under a different Order. We do number propose to go into the question whether in any particular sale property was transferred from the seller to the buyer or how and when. That point can be taken before the appropriate taxing authorities. It appears to us that the Taxing Officer of the West Bengal Government took the same view of s. 3 b as we have done. He said that in the case of a sale under s. 3 b numberproperty in the goods passes unless the documents of title to the goods are in the hands of the buyer. This, of companyrse, means that in the case of a sale under cl. b of s. 3 the property in the goods sold passes by the transfer of documents of title to them. The Taxing Officer was further clearly companytemplating the transfer of documents of title taking place during the movement of the goods from Jamshedpur to places in West Bengal. So far, it seems to us, his view is companyrect and unexceptionable. He 1 10 Sales Tax Cases 74. however proceeded to state that even if the documents are in the name of the buyer as companysignee but these are physically transferred to the buyer in West Bengal, then that sale is taxable in West Bengal . We think that this was number a companyrect view to take. The transfer of documents of title to the goods sold can pass the property in them only if the parties agree that that would be the result. Therefore, the Taxing Officer of the West Bengal Government had further to bear in mind the question whether the parties had agreed that physical delivery of the documents of title to the goods would pass the property in them. He does number seem to have done this. In the other case also where the documents of title are transferred to the buyer after endorsement, the same test has to be kept in mind, namely, that such transfer would pass the property in the goods only if the parties agreed that would happen. It, therefore, seems to us that the West Bengal Governments Taxing Officers order may number have been companypletely in companysonance with s. 3 b . In so far as it purported to levy a tax on sales where the documents of title are already in the name of the buyer simply because such documents had been trans- ferred in West Bengal, it may have gone outside the limits of s. 3 b . The order of assessment made by the Taxing Officer of the Government of West Bengal in this case is hence liable to be set aside. We accordingly set aside the order made by the Taxing Officer of the Government of West Bengal on October 21, 1959, assessing the petitioner to a tax of Rs. 41,14,718- 12nP. The Government of West Bengal will be at liberty to proceed to assess the tax afresh in terms of the interpretation put on s. 3 by us in this judgment. We do number think it fit to make any order as to the companyts of this petition.

Case appeal was accepted by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 158 of 1956. Appeal by special leave from the judgment and order dated February 9, 1955, of the Calcutta High Court in Criminal Revision No. 282 of 1954, arising out of the judgment and order dated December 15, 1953, of the Second Municipal Magistrate, Calcutta, in Case No. 2629C of 1952. 1960. Feb. 8, 9, 10. S. M. Bose, Advocate-General for the State of West Bengal, A. C. Mitra, B. Sen, P. K. Bose and D. Gupta, for the appellant. Three questions arise for determination in this appeal 1 whether State is a person within the meaning of s. 386 of the Calcutta Municipal Act, 1923, 2 does the Constitution make any change in the principal of prerogative as part of the companymon law and 3 does Art. 372 of the Constitution keep the existing law intact, i. e., the law as declared in L. R. 73 A. 271 to the effect that the Crown is number bound by any statute unless it is expressly named or unless it can be held to be included by necessary implication. The word person has been held number to include the State. I.R. 1954 Punj. 49 A.I.R. 57 Punj. 150 A.I.R. 53 Nag. 35 A.I.R. 1955 Nag. 177 I.L.R. 1953 1 Cal. 355 62 W.N. 561. 33 Pat. 603 takes the companytrary view. If the word person included the State, Art. 300 of the Constitution would number be necessary. How far the Crown is bound by a Statute number specifically naming it is laid down by the Privy Council in R. 73 I.A. 271. The decision of the Madras High Court taking a companytrary view in I.L.R. 25 Mad. 457 was number cited before the Privy Council and is based upon the wrong assumption that companymon law changed with the change of legislation. The companying into force of the Constitution does number alter the law as laid down in L.R. 73 I.A. 271, I.L.R. 1958 Mad. 801 and I.L.R. 58 Bom. 635. Article 372 of the Constitution includes the companymon law of the land and companytinues the same after the companying into force of the Constitution. I.L.R. 1956 Cal. 26, I.L.R. 1955 Bom. 654. This companymon law doctrine of the immunity of the Crown from Statutes number specifically naming it or referring to it by necessary implication is applicable in United States also. 52 L. Ed. 82 65 L. Ed. 315 82 L. Ed. 1224. C. Setalvad, Attorney-General for India, R. Ganapathy Iyer, R. H. Dhebar and T. M. Sen, for intervener No. 1 The question is whether the ancient rule of English companymon law declared to be applicable to India by the Privy Council is applicable to the companystruction of s. 386 and it has to be examined as to what was the position before and after the Constitution. The High Court has decided that even before the Constitution the principle did number apply in spite of the Privy Council decision. The statute of 1923 must be company- strued in accordance with the rule of interpretation prevailing in 1923. The makers of statute in 1923 did number intend to include State in the word person . The decision of the Privy Council was the binding law of the land unless there was legislation abrogating it or taking away its effect. Article 372 of the Constitution actually companytinues the law as laid down in L.R. 73 I.A. 271. This Article uses the expression of the law in force in India and number the words existing law . The same expression is used in s. 292 of the Government of India Act and was interpreted in 1940 F.C.R. 110. There is numberhing in the Constitution which takes away the applicability of the rule. There is numberhing in that rule or in its nature repugnant to any provision of our Constitution. The rule is illustrated in 152 E.R. 406 and I L.R. 406. The rule is applicable to all forms of Governments and is based on the ground of public policy and number merely on the ground of prerogative. 91 L. Ed. 884 93 Ed. 1628. K. T. Chari, Advocate-General for Madras and T. M. Sen, for intervener No. 4. Supported the Advocate-General of Bengal. M. Seervai, Advocate-General for Maharashtra and R. H. Dhebar, for intervener No. 5. The word person should be given its numbermal meaning. It does number include the Crown or the State. It would number include the State unless the statute would be meaningless without such inclusion. L.R. 73 I.A. 271 I C.L.R. 406. By necessary implication is meant that without the inclusion of the crown or the State the beneficent purpose of the statute would be wholly frustrated. The companysensus of judicial opinion in Bombay has been the same as expressed in L.R. 73 I.A. 271. The rule has numberhing to do with forms of Government.93 L. Ed. 1406. Indian decisions have uniformly taken this view. 5 Bom. C.R. 23 I.L.R. I Bom. 7 I.L.R. 14 Bom. 213 36 Bom. R. 820 37 Bom. L.R. 499 I.L.R. 2 All. 196. I.L.R. 25 Mad. 457 accepts the rule but says that it does number apply to taxation. This was a wrongful curtailment of the prerogative. Halsbury, Vol. 7, p. 469, para 98. The judgments of the Privy Council delivered before January 26, 1950, are binding on all companyrts in India except the Supreme Court and they are binding till the Supreme Court takes a different view. A.I.R. 1953 Cal. 524 A.I.R. 1955 Nag. 293 56 Bom. L.R. 1084. Government of India Act, s. 212 provided that the judgments of the Federal Court and of the Privy Council shall be binding and shall be followed. M. Sikri, Advocate-General of Punjab and D. Gupta, for intervener No. 2. In pre-Constitution statutes the word person companyld include the Crown but numbermally or ordinarily it would number so include. In I.L.R. 1958 Punj. 201 it was held that person included the State of Punjab and the Union of India. The rule laid down by the Privy Council is equally applicable to a Republic. 25 L. Ed. 194 65 L. Ed. 315 24 L. Ed. 192 and 85 L. Ed. 1071. In A.I.R. 1956 Pat. 91 the State has been held to be a person. C. Mathur and C. P. Lal, for intervener No. 3. Adopted the arguments of the Advocate-General of West Bengal and of the Attorney-General of India. M. Sen, for intervener No. 6. Adopted the arguments of the Advocate-General, Bengal and the Attorney-General of India. C. Chatterjee, Sunil K. Basu and Sukumar Ghose, for respondents. Section 386 is directed towards maintenance of healthy companydition etc. and is a wholesome provision for safeguarding the health of the people by providing for the companytrol of storing houses and for the equality of the stores. The financial aspect, i. e., the recovery of license fees or fine is inconsequential. The prerogative of immunity from the statutes is only available when the State acts as State and number when it descends to trade and business. State is a person. Salmond, 11th Edition, p. 35, defines person as an entity capable of rights and duties. It has the power to hold and acquire property it can sue and be sued Article 300 of the Constitution 60.Punj. L. R. 546 The companyrect rule of interpretation is that to exempt the State from the operation of a statute there must be express exclusion in favour of the State. Friedman in 13 Modern Law Review, 24. The mere fact that the State cannot be sent to jail, does number indicate that it is number a person. A Corporation is a person. It is the stigma of the companyviction that matters and it is number a question of hurting the State financially. 1944 1 K. B. 146 1950 S.C.R. A Corporation can be prosecuted even where mens rea or state of mind is companycerned. Paton on Jurisprudence, 2nd Edition, p. 279. Sanctions of criminal law should be available against the State for enforcing the law. 72 C. L. R. 409 Willis Constitution Law, p. 37. State is a person. 78 L. Ed. 1307 I. L. R. 1951 1 All. 269. When State engages in trade or companymerce, it must be treated in the same way as ordinary citizens. A. 1. R. 1955 Nag. 177 A. 1. R. 1956 Pat. 91. State is number a person only for the purposes of Art. 14. The doctrine of immunity of States from the operation of its laws cannot be invoked in the present companystitutional set up. The rule is based on royal prerogative. 1 C. L. R. 406 Willis p. 54. The rule springs from the prerogative that the King can do numberwrong. 1920 2 A. C. 5081. There is numberone equivalent to the King number in India and therefore the prerogative does number survive. Law is a scheme of social companytrol and the companymand of a superior. If the State claims immunity, it must be exempted by express legislation. Immunity cannot be implied. There has been progressive restriction on the immunity of the State. 78 L. Ed. 1307 90 L. Ed. 326. I.L. R. 25 Mad. 457 lays down the companyrect law. After the companying into force of the Constitution, the High Courts are number bound by the judgment of the Privy Council. All powers are derived from the Constitution and numberimmunities can be implied. Even if any immunity can be implied, then it cannot be invoked in respect of any trading or companymercial activity. 5 Bom. H. C. R. Appendix 1 at p. 13 78 L. Ed. 1307 90 L. Ed. 326. The activity carried on by the State in storing food grains etc., and distributing them was trading activity and number exercise of Governmental function. The State is bound by necessary implication by the provisions of the Calcutta Municipal Act, 1.923. There are provisions in the Act which expressly exempt the State from their operation. See s. 126. M. Bose in reply.-Common law can be amended by legislation. See s. 4, Hindu Succession Act 30 of 1956 and Hindu Adoptions and Maintenance Act 78 of 1956 . There is difference between Civil and Criminal liability. 72 C. R. 406, at 409, 424, 425. The State is number carrying on any trading activity but is acting in the exercise of essential Governmental functions. 1955 1 S. C. R. 707. Common law of England was introduced in the Presidency towns by statutes. See Ormonds Rules of Court 1. L. R. 61 Cal. 841. M. Seervai, with the permission of the Court . It is a settled rule that if a word is number a term of art, you must take the ordinary meaning and number go to technical books. 74 L. R. 1 90 L. Ed. 396 Halsbury Vol. 7, p. 221. M. Sikri, with the permission of the Court referred to Holdsworth History of the English Law, Vol. 10, p. 354. Cur. adv. vult. 1960. August 16.-The Judgment of Sinha, C.J., Imam and Shah, JJ., was delivered by Sinha, C. J Sarkar and Wanchoo, JJ., delivered separate judgments. SINHA C. J.-This appeal by special leave is directed against the judgment and order of the High Court at Calcutta dated February 9, 1955, whereby that Court, in its revisional jurisdiction, set aside an order of acquittal dated December 15, 1953, passed by the Municipal Magistrate, Calcutta, in respect of the prosecution launched by the Corporation of Calcutta, respondent in this Court, against the appellant. The relevant facts are these. On July 1, 1952, the Corporation of Calcutta made an application for summons under s. 488 of Bengal Act III of 1923, which was substituted by West Bengal Act XXXIII of 1951, against the Director of Rationing and Distribution representing the Food Department of the Government of West Bengal . The offence companyplained of was for using or permitting to be used premises No. 259, Chitpur Road, Upper, for the purpose of storing rice etc., under the provisions of the Bengal Rationing Order, 1943, without a licence under s. 386 for the year, 1951-52, companyresponding s. 437 of the C.M.C. Act, 1951 . Section 386 1 a of the Calcutta Municipal Act is in these terms- ,, No person shall use or permit to be used any premises for any of the following purposes without or otherwise than in companyformity with the terms of a licence granted by the Corporation in this behalf, namely, any of the purposes specified in Schedule XIX Item 8 of the said Schedule is storing, packing, pressing, cleansing, preparing or manufacturing, by any process whatever, any of the following articles and the articles mentioned include rice, flour, etc. The facts alleged by the prosecution were number denied in behalf of the Department, which was in the position of the accused, but it was companytended by way of a preliminary objection that the prosecution was number maintainable in law. After hearing arguments for the parties the learned trial Magistrate passed an order acquitting the accused relying upon a decision of the Calcutta High Court in the case of The Corporation of Calcutta v. Sub-Postmaster, Dharamtala Post Office 1 , holding that the provisions of s. 386 of the Act, neither in terms number by necessary implication, bound the Government. The respondent moved the Calcutta High Court in its revisional jurisdiction in Criminal Revision No. 282 of 1954, which was heard by a Division Bench companysisting of J. P. Mitter and S. N. Guha Ray, JJ. Cxuha Ray, J., who delivered the judgment of the Court, Mitter, J., companycurring, held that the previous decision of the same High Court in The Corporation of Calcutta v. Sub-Postmaster, Dharamtala Post Office 1 was clearly distinguishable. The distinction pointed out was that the previous decision of the Court had relied upon the decision of the Judicial Committee of the Privy Council in Province of Bombay v. Municipal Corporation of the Citu of Bombay 2 , in a case arising before the companying into force of the Constitution. As the present case arose after the advent of the Constitu- tion, the High Court did number feel bound by the aforesaid decision of the Privy Council and therefore examined the legal position afresh. On such an examination, the High Court came to the companyclusion that the Indian Legislature in enacting laws acted on the assumption that the Government would be bound unless excluded either expressly or by necessary implication oftener than on the assumption that it would number be bound, unless the Legislature so provided expressly or by necessary implication. The High Court took the view that the decision of the Division 1 1948 54 C.W.N. 429. 2 1946 L.R. 73 I.A. 271. Bench of the Madras High Court in Bell v. The Municipal Commissioners for the City of Madras 1 was more in companysonance with the law in India than the opposite view expressed in the Privy Council judgment aforesaid. They definitely decided that the law of India, even before the companying into effect of the Constitution, 7 and even at the time of the passing of the Government of India Act, 1935, was that the Government was bound by a Statute unless it was exempted either expressly or by necessary implication. In that view of the matter, the High Court further observed that the question whether the decision aforesaid of the Privy Council was still good law under Art. 372 of the Constitution did number arise and that, if it did, it was inclined to the view that the law declared by the Privy Council was number companytinued by any provision of law. In effect, the High Court took the view that the State was bound by the Statute unless it was excluded from its operation either expressly or by necessary implication. In that view of the matter, it held that s. 386 of the Act bound the appellant, set aside the order of acquittal and sent the case back to the learned Magistrate for disposal according to law. The appellant made an application for special leave to appeal from the aforesaid judgment and order of the High Court, and obtained special leave in September 1955. It is thus clear that this case had remained pending in this Court for about five years. If this Court agreed with the view expressed by the High Court, the case would have to be tried on merits and the trial would begin more than eight years after the institution of the petition of companyplaint, but, as will presently appear, this prosecution was misconceived and therefore, in effect, numberone has been the worse for the long pendency of the prosecution, which number must companye to an end. The short question for determination in this appeal is whether any offence had been companymitted by the appellant, as alleged against him. If he was bound by the provisions of the Act to take out a licence on payment of the necessary fees, he must be held to have companytravened the provisions of that Statute. It has 1 1901 I.L.R. 25 Mad 457. been companytended by the learned Advocate-General of Bengal, representing the appellant, that the decision of the Privy Council referred to above is still good law and that the companytrary decision of the Division Bench of the Madras High Court 1 did number take the companyrect view of the legal position. The argument further is that the Privy Council decision was certainly binding on the Courts in India at the time it was rendered. That was the law of the land as declared by the highest judicial authority. Has that judicial determination been altered by the Constitution ? It has been argued that the law in India, even after the companying into effect of the Constitution, companytinues to be the same as the law in England in respect of the prerogatives of the Crown. The Act in question does number make any express provision binding the Government and there was numberhing in the Act to show to the companytrary by necessary implication. The Act companyld operate with reasonable efficacy without being held to be binding on the Government. It was further pointed out that the High Court had failed to take into company- sideration the fact that that High Court itself had companystrued the Calcutta Municipal Act of 1923, which was replaced by the present Act of 1951, on the basis of the Privy Council decision number to have bound the Government. The Act of 1951 did number make any provision expressly abrogating that view. Hence, it is argued the High Court should have felt bound by the previous decision of that very Court given on the basis of the Privy Council decision and had erred in taking the opposite view. The argument further was that the State is number a person within the meaning of the penal section with reference to which the prosecution had been launched. The companymon law companyld number have been overridden impliedly by a companyrse of legislation. The companymon law applies to India even after the Constitution, number because there is the King or the Queen, but because it is the law in force. In other words, what was the prerogrative of the sovereign has number become the law of the land in respect of the sovereignty of the State. Thus the law of England, which 1 1901 I.L.R. 25 Mad, 457. in its source was the prerogative of the Crown, was the companymon law of the land and was adopted by the Constitution by Art. 372, subject to the reservations companytained therein. The Attorney-General for India as also the Advocates-General of Madras and Bombay supported the companytention raised on behalf of the appellant. Mr. N. C. Chatterjee, who appeared on behalf of the respondent, companytended that the State is a legal person as recognised in Art. 300 of the Constitution and was, therefore, capable of rights and obligations that unless there is an express exclusion of the State by the Legislature, the Act would apply to all, including the State. He further companytended that under the Constitution there is numberKing and, therefore, there cannot be any question of prerogative. Any exemption from the operation of the statute must be found in express immunity under the law and cannot be implied. He went to the length of companytending that a States prerogative is inconsistent with the whole Constitution. Whatever may have been the legal position before the companying into effect of the Constitution, it has number companyntenanced the companytinuance of any such prerogative as is companytended for on behalf of the appellant. Another line taken by Mr. Chatterjee is that when the State embarks upon a business, it does so number in its sovereign capacity, but as a legal person, subject to the same rights and liabilities as any other person. In effect, therefore, he companytended that the State is a person within the meaning of s. 386 of the Act that the doctrine of immunity of States from the operation of its laws cannot be invoked after the advent of the Constitution, and, alternatively, that even if the immunity is available to the State as a sovereign power, it is number available to the State when it embarked upon a companymercial undertaking and that. in any case, the State was bound by the law by applying the rule of necessary implication from the provisions of the Act. In this case it is manifest that it is the Government of West Bengal which is sought to be prosecuted through one of its officers. The prosecution is number against a named person, but against the Director of a named Department of the Government. The person who was the Director of the Department at the relevant date, that is to say, in the year 1951-52 may number be the same person who answered that description on the date the prosecution was launched. In essence, therefore, it is the Government of West Bengal which has to answer the charge levelled by the respondent, the Corporation of Calcutta. Whether a prosecution against such an indeterminate person would or would number lie is a matter which has number been raised and, therefore, need number be discussed. The question most canvassed before us in whether the penal section invoked in this case applies to Government. It has been companytended, and in our opinion rightly, that the provisions of the penal section neither by express terms number by necessary implication are meant to be applied to Government. The decision of the Judicial Committee of the Privy Council 1 , if it is good law even number, companypletely companyers this case, but the decision of the High Court, number under examination, has taken the view that the earlier decision of the Division Bench of the Madras High Court 2 has laid down the companyrect law, and number the Privy Council decision. We have, therefore, to decide which of the two decisions has taken the companyrect view of the legal position as it obtained on the day the prosecution was launched. It is well-established that the companymon law of England is that the Kings prerogative is illustrated by the rule that the Sovereign is number necessarily bound by a statutory law which binds the subject. This is further enforced by the rule that the King is number bound by a statute unless he is expressly named or unless he is bound by necessary implication or unless the statute, being for the public good, it would be absurd to exclude the King from it. Blackstone Commentaries, Vol. I, 261-262 accurately summed up the legal position as follows- The king is number bound by any act of Parliament, unless he be named therein by special and 1 1946 L.R. 73 I.A. 271. 2 1901 I.L.R. 25 Mad. 457. particular words. The most general words that can be devised affect number him in the least, if they may tend to restrain or diminish any of his rights or interests. For it would be of most mischievous companysequence to the public, if the strength of the executive power were liable to be curtailed without its own express companysent by companystructions and implications of the subject. Yet, when an act of Parliament is expressly made for the preservation of public rights and the suppression of public wrongs, and does number interfere with the established rights of the crown, it is said to be binding as well upon the king as upon the subject and, likewise, the king may take the benefit of any particular act, though he be number specialty named. Quoted at p. 355 of Holdsworth, A History of English Law, Vol. X . The Kings prerogative is thus created and limited by companymon law and the sovereign can claim numberprerogative, except such as the law allows. See Halsburys Laws of England, Vol. 7, Third Edition, para. 464, at p. 22 1 . The prerogative of the Crown in respect of property is thus stated in the same volume of Halsburys Laws of England, para. 980, at p. 465- The Crown number being bound by any statute whereby any prerogative right, title, or interest belonging to it may be divested or abridged, unless expressly named or bound by clear implication, property owned, and occupied by the Crown is exempt from taxation unless rendered liable either by express words or necessary implication. Moreover, an express exemption of particular classes of Crown property in a statute is number in itself sufficient to raise the implication that such property only is exempt, and that other property number falling within the exception is bound, such clauses being inserted merely ex majore cautela. That was the law applicable to India also, as authoritatively laid down by the Privy Council in the case referred to above. That decision was rightly followed by the Calcutta High Court as stated above. That would be the legal position until the advent of the Constitution. The question naturally arises whether the Constitution has made any change in that position ? There are numberwords in the Constitution which can be cited in support of the proposition that the position has changed after the republican form of Government has been adumbrated by our Constitution. It was argued on behalf of the respondent that the existence of such a prerogative is negatived by the very form of our new set up, that is to say, it was companytended that the republican form of Government is wholly inconsistent with the existence of such a prerogative. In our opinion, there is numberwarrant for such a companytention. The immunity of Government from the operation of certain statutes, and particularly statutes creating offences, is based upon the fundamental companycept that the Government or its officers cannot be a party to companymitting a crime- analogous to the I prerogative of perfection that the King can do numberwrong. Whatever may have been the historical reason of the rule, it has been adopted in our companyntry on grounds of public policy as a rule of interpretation of statutes. That this rule is number peculiar or companyfined to a monarchical form of Government is illustrated by the decision of the Supreme Court of U. S. A. in the case of United States of America v. United Mine Workers of America 1 , where it is laid down that restrictions on the issue of injunctions in labour disputes companytained in certain statutes do number apply to the United States Government as an employer or to relations between the Government and its employees and that statutes in general terms imposing certain restrictions or divesting certain privileges will number be applied to the sovereign without express words to that effect. Similarly, in the case of United States of America v. Reginald P. Wittek 2 , the question arose whether the District of Columbia Emergency Rent Act applied to government-owned defence housing or to government owned low-rent housing in the District, and it was ruled by the Supreme Court, reversing the decision of the Municipal Court of Appeals, that the statute in question did number apply to the United States Government 1 1947 330 U.S. 258 91 L. Ed. 884. 2 1949 337 U.S. 346 93 L. Ed. 1406. which was number a landlord within the meaning of the Act. The decision was based on the rule that a general statute imposing restrictions does number impose them upon the Government itself without a clear expression or implication to that effect. Another illustration of the rule is to be found in the case of Jess Larson v. Domestic and Foreign Commerce Corporation 1 . In that case a suit by a citizen, in effect, against the Government War Assets Administration for an injunction was dismissed by the District Court on the ground that the Court did number have jurisdiction, because the suit was one against the United States. The Supreme Court, by majority, held that the suit as against the United States must fail on the ground that according to the laws of the companyntry the sovereign enjoyed an immunity which was number enjoyed by the citizens. The case of Roberts v. Ahern 2 is another illustration of the same rule. It was held by the High Court of Australia in that case that the Executive Government of the Commonwealth or of a State is number bound by a statute unless the intention that it shall be so bound is apparent. On the other hand, Art. 372 of the Constitution has specifically provided that subject to the other provisions of the Constitution all the laws in force in this companyntry immediately before the companymencement of the Constitution shall companytinue in force until altered or repealed or amended by a companypetent Legislature or by other companypetent authority. The expression law in force has been used in a very companyprehensive sense as would appear from the provisions of sub- cls. a and b of cl. 3 of Art. 13 of the Constitution. If we companypare the provisions of Art. 366 10 which defines existing law which has reference to law made by a legislative agency in companytradistinction to laws in force which includes number only statutory law, but also custom or usage having the force of law, it must be interpreted as including the companymon law of England which was adopted as the law of this companyntry before the Constitution came into force. It is thus clear that far from 1 1949 337 U.S. 682 93 L. Ed. 1628. 2 1904 I. C.L.R. 406. the Constitution making any change in the legal position, it has clearly indicated that the laws in force companytinue to have validity, even in the new set up, except in so far as they companye in companyflict with the express provisions of the Constitution. No such provision has been brought to our numberice. That being so, we are definitely of the opinion that the rule of interpretation of statutes that the State is number bound by a statute, unless it is so provided in express terms or by necessary implication, is still good law. But Mr. Chatterjee further companytended, alternatively, that even if it were held that the Government as a sovereign power may have the benefit of the immunity claimed, it is number entitled to that immunity when it embarks upon a business and, in that capacity, becomes subject to the penal provisions of the statute equally with other citizens. This question was number raised below and has number been gone into by the High Court, number is it clear on the record, as it stands, that the Food Department of the Government of West Bengal, which undertook rationing and distribution of food on a rational basis had embarked upon any trade or business. In the absence of any indication to the companytrary, apparently this Department of the Government was discharging the elementary duty of a sovereign to ensure proper and equitable distribution of available food-stuffs with a view to maintaining peace and good Government. Therefore, the alternative argument suggested by Mr. Chatterjee has numberfoundation in fact. It only remains to companysider the other alternative argument that even if the State has number been bound by the penal section in the statute in question in express terms, it must be deemed to be bound by it by necessary implication. But numberspecific provisions of the statute in question have been brought to our numberice which companyld lend any support to this alternative argument. It has number been shown to us that if the section which was sought to be applied against the Government were held number expressly to apply to Government, the law will lose any of its efficacy, or that its working will be hampered in any way. It must, therefore, be held that there is numbersubstance in this companytention either. The appeal is accordingly allowed, the judgment under appeal set aside and the acquittal of the appellant companyfirmed. SARKAR J.-The appellant is an officer of the Government of West Bengal. He was prosecuted before a Municipal Magistrate of Calcutta for storing rice in certain premises without obtaining a licence for that purpose from the respondent, the Corporation of Calcutta, as required by s. 386 of the Calcutta Municipal Act, 1923. That was an Act passed by the legislature of the former Province of Bengal and may, for the present purpose, be taken to have been passed by the legislature of the State of West Bengal. In storing the rice the appellant had acted in his official capacity and for carrying out the West Bengal Governments rationing scheme. The Magistrate acquitted the appellant holding that the Act did number bind the Government as it was neither expressly number by necessary implication made bound, and so, the appellant who had been prosecuted as representing the Government would number be liable for number-compliance with its provisions. On revision the High Court at Calcutta held that the English rule that a statute did number bind the Crown unless expressly or by necessary implication made bound, did number apply to Indian statutes and so the Government would be liable for breach of the provisions of the Calcutta Municipal Act. In this view of the matter, the High Court set aside the order of acquittal and sent the case back to the Magistrate for disposal on the merits. This appeal has been taken from the order of the High Court with special leave granted by this Court. The main question is whether the English rule that The Crown is number bound by the provisions of any statute unless it is directly or by necessary implication referred to applies to India. It is said that the rule is based on the English law of Crown prerogatives and has numberapplication to India since the promulgation of our Constitution as we have number a republican form of government where numberquestion of royal prerogatives can arise. It is pointed out that the prosecution was in this case started since the Constitution came into force and whatever may have been the position earlier, the Government can numberlonger take shelter under the English rule. I think the rule applies to India even after the Constitution. It seems to me that the rule as applied in modern times, is really a rule of companystruction of statutes and is number dependent on royal prerogatives. This is the view that appears to have been taken in all recent authorities, to some of which I wish number to refer. In Craies on Statutes 5th Ed. it is stated at p. 392 that The rule is analogous, if number equivalent, to the rule already stated that the companymon law is number presumed to be altered by statute . The rule, therefore, is based on the presumed intention of the legislature and is, hence, a rule of companystruction of statutes. Then I find it stated in Attorney-General v. Donaldson 1 that It is a well established rule, generally speaking, in the companystruction of Acts of Parliament, that the King is number included unless there are words to that effect for it is inferred prima facie that the law made by the Crown with the assent of the Lords and Commons, is made for subjects and number for the Crown. Again in Comber V. Justices of Berks 2 it was said in reference to this rule, In Rex v. Cook, 3 T.R. 519, the general principle as to the companystruction of statutes imposing charges as companytaining an exemption of the Crown was laid down . In the Australian case of Roberts v. Ahern 3 , it was said, This rule has companymonly been based on the Royal prerogative. Perhaps, however, having regard to modern developments of companystitutional law, a more satisfactory basis is to be found in the words of Alderson, The words referred to are what I have already set out from Attorney-General v. Donaldson 1 . In America too this rule has been applied as a rule 1 1842 10 M. W. 117, 123 152 E.R. 406. 2 1883 9 App. Cas. 61, 65. 3 1904 1.C.L.R. 406, 417. of companystruction though there is numberKing there but the government is of the republican form. So in United States United Mine Workers of America 1 it was observed, There is an old and well-known rule that statutes which in general terms divest pre-existing rights or privileges will number be applied to the sovereign without express words to that effect. It has been stated, in cases in which there were extraneous and affirmative reasons for believing that the sovereign should also be deemed subject to a restrictive statute, that this rule was a rule of companystruction only . Again in reference to the same rule it was said in United States V. State of California 2 . The presumption is an aid to companysistent companystruction of statutes of the enacting sovereign when their purpose is in doubt . In our companyntry also in Bell v. The Municipal Commissioners for the City of Madras 3 , a case on which much reliance has been placed by the respondent, it was said after referring to various English cases dealing with the rule, This emphatic statement of the rule being founded upon general principles of companystruction is undoubtedly applicable as much to Indian enactments as to Colonial or Imperial Statutes . It was also said at the same page, The rule of companystruc- tion above adverted to cannot itself be regarded as a prerogative of the Crown . Then I find that in England the rule protects from the operation of a statute number only what may strictly be called Crown prerogatives, or whatever is numberadays left of them, but all the Crowns rights, title and interest see Halsburys Laws of England 3rd Ed. Vol. VII, p. 465. In volume XXXI of the Second Edition of the same treatise it is stated with reference to the rule that, The Crown for this purpose means number only the King personally, but also the officers of State and servants of the Crown when acting within the scope of their authority on behalf of the Crown in the discharge of executive duties . In Mersey Docka 1 1947 330 U. S. 258, 272 91 L. Ed. 884, 902. 2 1936 297 U. S. 175, 186 80 L. Ed. 567, 574. 3 1901 I.L.R. 25 Mad. 457, 485. Cameron 1 , Lord Cranworth after referring to the various instances where the rule had been applied to exempt buildings occupied for purposes of the government from rates and other impositions, said, These decisions however have all gone on the ground more or less sound, that these might all be treated as buildings occupied by the servants of the Crown, and for the Crown, extending in some instances the shield of the Crown to what might more fitly be described as the public government of the companyntry . Again in Coomber v. Justices of Berks 2 , Lord Blackburn after referring to certain observations of Lord Westbury in the Mersey Docks case 1 said, He there says that the public purposes to make an exemption must be such as are required and created by the government of the companyntry, and are, therefore, to be deemed part of the use and service of the Crown and in Greig v. University of Edinburgh 3 be more clearly shews what was his view by using this language, property occupied by the servants of the Crown, and according to the theory of the Constitution property occupied for the purposes of the administration of the government of the companyntry, become exempt from liability to the poor-rate . In this case it was held that lands with buildings companystructed thereon and used by companynty justices, and for police purposes were number liable to income-tax. In Cooper v. Hawkins 4 it was held that an engine-driver employed by the Crown who drove a steam-locomotive on Crown service at a speed exceeding the limit specified by regulations made under a statute, was number liable as in the absence of express words, the statute did number bind the Crown. Lastly, I refer to Roberts v. Ahern 5 where a person acting under the orders of the Government of the Commonwealth of Australia had been prosecuted for having carted away nightsoil from a Post Office without a licence from, and without having given any security to, the local authority as was required by an enactment of the State of Victoria. It was held that he was number liable to prosecution because, 1 1865 11 H.L.C. 443, 508 11 E.R. 1405. 2 1883 9 App. Cas. 61, 65. 3 1868 L.R.I H.L, SC. 348. 4 1904 2 K.B. 164. 5 1904 1. C.L.R. 406, 417. The modern sense of the rule, at any rate, is that the Executive Government of the State is number bound by Statutes unless that intention is apparent p. 418. It was also said that The doctrine is well settled in this sense in the United States of America p. 418 . It is unnecessary to multiply instances where acts of the executive government have received the protection of the rule. All this would seem to put it beyond doubt, that whatever its origin, the rule has long been regarded only as a rule of companystruction. It has been widely used to exempt executive governments from the operation of statutes quite apart from protecting prerogative rights of the British Crown strictly so called. It has been held reasonable to presume that the legislature intended that executive governments are number to be bound by statutes unless made bound expressly or by necessary implication. It would be equally reason. able to do so in our companyntry even under the present set up for the presumption has all along been raised in the past and especially as the applicability of the rule can numberlonger be made to depend on the prevailing form of government. In companyntries with a republican form of government, the Sovereign would be the State, and its acts, which can only be the acts of its executive limb would be, under the rule exempt from the operation of its statutes. Whether the royal prerogative as understood in England, exists in the present day India is number a question that can arise in applying what is a pure rule of companystruction of statutes. Further it is quite clear that the rule has been applied by companyrts in India in the companystruction of Indian statutes all along at any rate upto the promulgation of our Constitution, except in the solitary instance of Bells case 1 earlier referred to. It would therefore be right to hold that the legislatures in our companyntry have proceeded on the basis that the rule would govern the enactments passed by them. That being so and remembering that the rule is one of companystruction, there would be numberreason to deny its application to Indian statutes after the Constitution. The Dew republican 1 1901 I.L.R. 25 Mad. 457. form of government adopted by us would number warrant a departure from the long established rule of companystruction. It was then said that the companyrse of legislation in India would indicate that it was number intended even before the Constitution that the rule would apply to Indian statutes. This companytention was based on Bells case 1 . That case seems to me to have proceeded on a basis number very sound. On an examination of certain Indian statutes it was said, It is numbereworthy that as a general rule government is specially excluded whenever the Legislature companysidered that certain provisions of an enactment should number bind the Government . From this the companyclusion was drawn that According to the uniform companyrse of Indian legislation, statutes imposing duties or taxes bind Government as much as its subjects, unless the very nature of the duty or tax is such as to be inapplicable to the Government . It seems to me that this decision overlooks the uniform companyrse of decisions of Indian Courts applying the rule in the companystruction of Indian statutes. The legislature must be deemed to have known of these decisions and if they wanted to depart from their effect they would have passed a statute bringing about the desired result. No such statute was ever passed. It is wellknown that in these circumstances the legislatures must be taken to have proceeded on the basis that the decisions were companyrect and the rule was to be applied to the statutes passed by them. That being so, an examination of the companyrse of Indian legislation would be irrelevant. The cases where the Government was expressly excluded must be taken to be instances of exemptions ex majori cautila see Hornsey Urban Council v. Hennel 2 . Furthermore, it seems to me that a companyparison of the number of statutes where the Government had been specially excluded from their operation with the number where the statutes are silent on the subject, is, at best, a very unsafe guide for deciding whether the rule should be applied to Indian enactments. I therefore dissent from the view expressed in Bells case 1 , that the rule does number apply in India. 1 1901 I.L.R. 25 Mad. 457. 2 1902 2 K.B. 73. Now it seems to me that in storing the rice in the present case, the Government of West Bengal was performing one of its governmental functions. It was storing rice for purposes of rationing, that is, making food-stuff available to citizens in time of scarcity. That such activity is a part of the governments duty is unquestionable. The act for which the appellant was prosecuted was, therefore, an act of the West Bengal Government done in discharge of its ordinary duties as the government and the rule would prevent the Act from applying to make the Government liable for a breach of it. Then it is said that the Act binds the Government by necessary implication. In support of this argument we were referred to certain provisions of the Act which expressly exempted the Government from their operation. I am unable to agree that this raises the necessary implication. It has been said in Halsburys Laws of England 2nd Ed. Vol. XXXI at p. 523 that A general prerogative of the Crown is number deemed to have been abandoned by implication by reason of the specific exemption in a statute of any class of the servants of the Crown from acting in companypliance with the prerogative, number by reason of the fact that the Crown has foregone or curtailed its rights in some other direction in another part of the statute see also Hornsey Urban Council case 1 earlier referred to. These observations would show the unsoundness of the companytention raised by the respondent. Lastly, it is said that the purpose of the Act was to prevent adulteration of food-stuffs and this object would be wholly defeated unless the Government was bound by it. It is number in dispute that if this were so, that might be a ground for holding that the Act bound the Government. On this aspect of the case reference may be made to Province of Bombay v. Municipal Corporation of Bombay 2 . I am however unable to hold that the purpose of the Act would be wholly or at all defeated if the Government were number bound by it. It seems to me that s. 386 of the Act, the breach of which is companyplained in this case, is companycerned with 1 1902 2 K.B. 73. 2 1946 L.R. 73 I.A. 271. the use of premises and number with the prevention of adulteration of food-stuffs as was companytended for the respondent. The provisions with regard to adulteration of food-stuffs are companytained in a, different part of the statute. There is numberhing to show that the purpose of the Act would wholly be defeated if some premises were used companytrary to the terms of the Act. I would for these reasons hold that the Act did number bind the Government and the prosecution of the appellant for an act done in the discharge of his duties as an officer of the Government cannot be maintained. This appeal should therefore be allowed and the order of the High Court set aside and that of the Magistrate restored. WANCHOO J.-I have had the advantage of reading the judgments prepared by my Lord the Chief Justice and my brother Sarkar I agree with their companyclusion but my reasons are different. I therefore proceed to state my reasons for companying to the same companyclusion. The facts have already been stated in the judgment of my Lord the Chief Justice and I will number therefore repeat them. Suffice it to say that the Corporation of Calcutta initiated this prosecution, in substance, of the State of West Bengal through its Director of Rationing and Distribution under s. 488 of the Calcutta Municipal Act, No. 111 of 1923, number equivalent to s. 537 of the Calcutta Municipal Act, No. XXXIII of 1951 , for using or permitting to be used certain premises for the purpose of storing rice, etc. under the provisions of the Bengal Rationing Order, 1943, without a licence under s. 386 of Act III of 1923, number equivalent to s. 437 of Act XXXIII of 1951 . The State did number deny the facts but it was companytended on its behalf that the prosecution was number maintainable in law. The Magistrate held that the provisions of s. 386 of the 1923 Act did number apply to the State either expressly or by necessary implication and therefore passed an order of acquittal. The Corporation took the matter in revision to the High Court, which distinguished an earlier decision of the High Court relied upon by the Magistrate and held that after India became a democratic republic from January 26, 1950, the High Court was number bound by the decision of the Privy Council in a similar matter reported in Province of Bombay v. Municipal Corporation of the City of Bombay 1 and that the rule of companystruction based on the royal prerogative that the Crown was number bound by a statute unless it was expressly named therein or at any rate companyld be held to be bound by necessary implication, did number apply in India after January 26, 1950, and that the true rule of companystruction on which the Indian legislatures acted was that the State would be bound unless excluded either expressly or by necessary implication. The High Court therefore held that s. 488 of the Act of 1923 read with s. 386 bound the State and set aside the order of acquittal and sent the case back to the Magistrate for disposal according to law. The most important question thus is, whether the rule of companystruction derived from the royal prerogative in England can still be said to apply in India after January 26, 1950. If this rule of companystruction based on the royal prerogative does number apply, it would necessarily follow that the ordinary rule of companystruction, namely, that the State would also be bound by the law like anybody else unless it is expressly excluded or excluded by necessary implication, would apply. Now the rule of companystruction based on the royal prerogative is a survival from the medieval theory of divine right of Kings and the companyception that the sovereign was absolutely perfect, with the result that the companymon law of England evolved the maxim that the King can do numberwrong . In companyrse of time however the royal prerogative in England was held to have been created and limited by the companymon law and the sovereign companyld claim numberprerogatives, except such as the law allowed number such as were companytrary to Magna Carta or any other statute or to the liberties of the subject. The companyrts also had jurisdiction to inquire into the existence or extent of any alleged prerogative. If any prerogative was disputed, they had to decide the question whether or number it existed in the same way as they decided any other question of law. If a, 1 1946 L.R. 73 I.A. 271. prerogative was clearly established, they companyld take the same judicial numberice of it as they took of any other rule of law see Halsburys Laws of England, 3rd Edition, Vol. 7, p. 221, para. 464 . The question of royal prerogative was also companysidered in Attorney-General v. De Keysers Royal Hotel Limited 1 . It was held there in that even where there was prerogative it companyld be curtailed by a statute, if the statute dealt with something which before it companyld be affected by the prerogative, inasmuch as the Crown was a party to every Act of Parliament. Thus in modern times, the royal prerogative is the residue of discretionary or arbitrary authority which at any time is legally left in the hands of the Crown and is recognised under the companymon law of England. Two things are clear from this modern companyception of royal prerogative, namely, 1 that there must be a Crown or King to whom the royal prerogative attaches, and 2 that the prerogative must be part of the companymon law of England. Both these companyditions existed when the Privy Council decision in Province of Bombay v. Municipal Corporation of the City of Bombay 2 was given in October 1946 the King was still there and the Privy Council held that the English companymon law rule of companystruction applied to Indian legislation as much as to English statutes. I may mention however that in England also the rule has companye in for criticism by writers of books on law. Glanville L. Williams in his treatise on Crown Proceedings says at p. 53 The rule originated in the Middle Ages, when it perhaps had some justification. Its survival, however, is due to little but the Vis inertiae. Again at 54, the author says- With the great extension in the activities of the State and the number of servants employed by it, and with the modern idea, expressed in the Crown Proceedings Act, companypare in this companynection Art. 300 of our Constitution , that the State should be accountable in wide measure to the law, the presumption should be that a statute binds the Crown rather than it does number. 1 1920 A.C. 508. 2 1946 L.R. 73 I.A. 271. After January 26, 1950, when our companyntry became a democratic republic and the King ceased to exist, it is rather otiose to talk of the royal prerogative. It is also well to remember that the English companymon law as such never applied to India, except in the territories companyered by the original side of the three Chartered High Courts, namely, Calcutta, Bombay and Madras, see Kahirodebihari Datta v. Mangobinda Panda 1 though sometimes rules of English companymon law were applied by Indian companyrts on grounds of justice, equity and good companyscience. It seems to me therefore that to apply to Indian statutes a companystruction based on the royal prerogative as known to the companymon law of England number when there is numberCrown in this companyntry and when the companymon law of England was generally number even applicable, except in a very small part , would be doing violence to the ordinary principle of companystruction of statutes, namely, that only those are number bound by a statute who are either expressly exempted or must be held to be exempt by necessary implication. In our companyntry the Rule of Law prevails and our Constitution has guaranteed it by the provisions companytained in Pt. III thereof as well as by other provisions in other Parts see Virendra Singh and others v. The State of Uttar Pradesh 2 . It is to my mind inherent in the companyception of the Rule of Law that the State, numberless than its citizens and others, is bound by the laws of the land. When the King as the embodiment of all power-executive, legislative and judicial- has disappeared and in our republican Constitution, sovereign power has been distributed among various organs created thereby, it seems to me that there is neither justification number necessity for companytinuing the rule of companystruction based on the royal prerogative. It is said that though the King has gone, sovereignty still exists and therefore what was the prerogative of the King has become the prerogative of the sovereign. There is to my mind a misconception here. It is true that sovereignty must exist under our Constitution 1 1934 I.L.R. 61 Cal. 841, 857. 2 1955 1.S.C.R. 415. but there is numbersovereign as such number. In England, however, the King is synonymous with the sovereign and so arose the royal prerogative. But in our companyntry it would be impossible number to point to one person or institution and to say that he or it is the sovereign under the Constitution. A further question may arise, if one is in search of a sovereign number, whether the State Government with which one is companycerned here is sovereign in the same sense as the English King though it may have plenary powers under the limits .set under our Constitution . This to my mind is another reason why there being numberKing or sovereign as such number in our companyntry, the rule of companystruction based on the royal prerogative can numberlonger be invoked. Reliance was placed in this companynection on certain cases from Australia and Canada and also from the United States of America. So far as Australia and Canada are companycerned, the cases are number of much help for the Crown exists there still. Besides in Canada and in most of the provinces of Canada and in New Zealand provisions have been specifically introduced in the Interpretation Acts laying down that numberprovision or enactment in any Act shall affect, in any manner whatsoever, the rights of His Majesty, his heirs or successors, unless it is expressly stated therein that His Majesty shall be bound thereby see Street on Governmental Liability , at p. 152 . In the United States also, it is doubtful if the royal prerogative as such is relied on as the basis of certain principles which are in force there. In United States of America v. United Mine Workers of America, Etc. 1 , the Supreme Court did say that there was an old and well-known rule that statutes which in general terms divested pre- existing rights and privileges would number be applied to the sovereign without express words to that effect. But there was numberdiscussion of the royal prerogative as such in the judgment and the rule was called a well-established rule of companystruction only. Besides the Court went on to companysider the words of the statutes under companysideration and held that on a proper companystruction of them the United States was number bound. 1 1947 330 U.S, 258 91 L. Ed. 884 In United States of America v. Reginald P. Wittek 1 , the Supreme Court did say that a general statute imposing restrictions does number impose them upon the government itself without a clear expression or implication to that effect but this decision was based mainly on the terms of the State statute there under companysideration and the surrounding circumstances and legislative history of the statute companycerned. Another case in the same volume is Jess Larson Domestic and Foreign Commerce Corporation 2 at p. 1628, where a suit was brought against an officer of the United States and it was held that it was in substance a suit against the sovereign government over which the companyrt in the absence of companysent had numberjurisdiction. There is numberdiscussion in this case of the royal prerogative having companytinued in the United States and the decision seems to have turned on some law of that companyntry which provides that a suit against the Government companyld number be tried in a companyrt in the absence of companysent. As against these decisions I may refer to H. Snowden Marshall v. People of the State of New York 3 to show that royal prerogative as such is losing ground in the United States, if numberhing more. When dealing with the priority of a State over the unsecured creditors in payment of debts out of the assets of the debtor, the Supreme Court held that whether the priority was a prerogative right or merely a right of administration was a matter of local law and the decision of the highest companyrt of the State as to the existence of the right and its incidents would be accepted by the Federal Supreme Court as companyclusive. Again in Guaranty Trust Company of New York v. United States of America 4 , the Supreme Court held that the immunity of the sovereign from the operation of statutes of limitation, although originally a matter of royal prerogative, was number based upon the public policy of protecting the citizens of the State from the loss of their public rights and revenues through the 1 1949 337 U.S. 34693 L. Ed. 1406. 2 1949 337 U.S. 68293 L. Ed. 1628. 3 1920 254 U.S. 38o65 L. Ed. 315. 4 1938 304 U.S. 126 82 L. Ed. 1224. negligence of the officers of the State, showing that some of those immunities which in England were claimed as royal prerogatives, though preserved in the United States, were so preserved for other reasons. Besides it must number be forgotten that though the Crown numberlonger remained in the United, States after the attainment of independence the American companyonies out of which the United States arose were companyonised by English settlers who carried the companymon law of England with them to America with the result that the first Constitution of some of the States like New York after independence provided that the companymon law of England which together with the statutes companystituted the law of the companyony before independence should be and companytinue to be the law of the State subject to such alterations as its legislature might thereafter make see H. Snowden Marshall v. People, of the State of New York , at p. 317 . That may account for the United States recognising some of those prerogative rights which were in force in England though even so, the basis for such recognition is number more the law or public policy than any royal prerogative as such. The position in our companyntry was somewhat different. We had the King but the companymon law of England did number, as already indicated, apply as a rule in this companyntry. Now that the King has also gone, there seems to be numberreason for companytinuing the royal prerogatives after January 26, 1950. Further it appears to me that the royal prerogative where it deals with substantive rights of the Crown as against its subjects, as, for example, the priority of Crown debts over debts of the same nature owing to the subject, stands on a different footing from the royal prerogative put forward in the present case, which is really numbermore than a rule of companystruction of statutes passed by Parliament. Where, for example, a royal prerogative dealing with a substantive right has been accepted by the, Courts in India as applicable here also, it becomes a law in force which will companytinue in force under Art. 372 1 of the Constitution. But 1 1920 254 U.S. 380 65 L. Ed. 315. where the royal prerogative is merely a rule of companystruction of statutes based on the existence of the Crown in England and for historical reasons, I fail to see why in a democratic republic, the companyrts should number follow the ordinary principle of companystruction that numberone is exempt from the operation of a statute unless the statute expressly grants the exemption or the exemption arises by necessary implication. On the whole therefore I am of opinion that the proper rule of companystruction which should number be applied, at any rate after January 26, 1950, is that the State in India whether in the Centre or in the States is bound by the law unless there is an express exemption in favour of the State or an exemption can be inferred by necessary implication. The view taken by the Calcutta High Court in this companynection should be accepted and the view expressed by the Privy Council in Province of Bombay v. Municipal Corporation of the City of Bombay 1 should numberlonger be accepted as the rule for companystruction of statutes passed by Indian legislatures. Let me then companye to the question whether on the view I have taken of the rule of companystruction, the prosecution in this case can be allowed to companytinue. There is numberhing in the Act of 1923 or in the Act of 1951 exempting the State specifically from any of the provisions of the Calcutta Municipal Act. In this case the State is being prosecuted under s. 488 or s. 537 number and that section provides for fine for breach of s. 386 or s. 437 number . The provision is a penal provision and immediately a question arises whether the State as such, apart from its individual officers as natural persons, is liable to prosecution under the criminal law or has to be exempted from the operation of the provisions of criminal statutes by necessary implication. A criminal proceeding generally ends with punishment which may be imprisonment, or fine, or both. Now it does number require any elaborate reason to realise that the State as such cannot be sentenced to imprisonment because there is numberway of 1 1946 L.R. 73 I.A. 271. keeping it in prison therefore, by necessary implication, the State is exempt from all penal statutes and provisions providing for sentences of imprisonment or death. Then companye those penal provisions which impose fines, like the present case, and the question is whether in such a case also the State must be deemed by necessary implication to be exempt from the penal provision. Generally speaking fines when inflicted by companyrts are realised by the State and go to the companyfers of the State. In effect, therefore if the State as such is to be prosecuted under a penal statute imposing fine the result is that the Court will sentence the State to fine which will go to the State itself. It is obvious that if such is the result of a prosecution, namely that the accused gets the fine, the intention companyld never be that such a prosecution should be launched. Therefore where the penalty is fine and the fine goes to the State, it must be held that by necessary implication the law does number intend the State to be prosecuted for such an offence. In the present case I find that under s. 81 of the Act of 1923 or the companyres- ponding s. 115 of the Act of 1951 the fines imposed by the Magistrate will number go to the Corporation but in the usual way to the State. Under the circumstances whatever other methods may be possible for enforcing the provisions of s. 386 or s. 437 number against the State it cannot be intended to be enforced by prosecution resulting in fine which would go to the State itself. In these circumstances it must be held that by necessary implication the State is exempt from the penal provisions companytained in s. 488 number s. 537 .

Case appeal was accepted by the Supreme Court

Kapur, J. This is an appeal by special leave against the judgment and decree of the High Court at Nagpur passed in second appeal No. 1720 of 1945 companyfirming the decree of the District Judge. In the suit out of which this appeal has arisen the appellant was defendant No. 1 and the respondents were the plaintiff and defendant Nos. 2 and 3 and the dispute relates to pre-emption on the ground of companyoccupancy which falls under Ch. XIV of the Berar Land Revenue Code, 1928, hereinafter called the Code. On April 10, 1943, D. B. Ghaisas and his mother Ramabai entered into two companytracts of sale with the appellant, one in regard to Survey Nos. 5, 14 and 16 for a sum of Rs. 10,000 out of which Rs. 2,000 was paid as earnest money and the other in regard to Survey No. 15/1 for Rs. 8,500 out of which Rs. 500 was paid as earnest money. On April 16, 1943, the vendors executed a registered sale deed in regard to Survey Nos. 5, 14 and 16 and the balance of the price was paid before the Registrar. On April 22, 1943, the vendors execute a lease of Survey No. 15/1 for 14 years in favour of Kisanlal and Sitaram who were defendant Nos. 2 and 3 in the suit and are respondents Nos. 2 and 3 in this appeal. On April 24, 1943, the vendors executed a fresh agreement of sale in respect of the same field which according to the agreement was to be diverted to number-agricultural purposes and thereafter a sale deed was to be executed when it was so diverted. The appellant was to pay the companyts of diversion as well as the premium. In pursuance of this agreement the vendors applied to the Deputy Commissioner, Akola, on August 12, 1943, for diversion under s. 58 of the Code and sanction was accorded on January 22, 1944, subject to payment of premium of Rs. 9,222 and other companyditions. The appellants case is that as agreed the vendors were paid this money for deposit and it was deposited in the Treasury under Challan No. 68 but there is numberfinding in favour of the appellant although the trial companyrt and the District Judge seem to have proceeded on the premises that this amount was deposited but in the circumstances of this case it is number necessary to go into this matter. On February 1, 1944, the sale deed was executed by the vendor in favour of the appellant and the companysideration in the sale deed was Rs. 17,722. On September 11, 1943, i.e., before the sale deed was executed the respondent, Sridhar, brought a suit for pre-emption against the appellant on the allegation that he had a companyoccupancy in the Survey number in dispute - being the owner of Survey No. 15/2. In the plaint it was alleged that the transaction of companytract under the documents of April 10, 1943, and April 24, 1943, companystituted a sale and therefore it was subject to respondent Sridhars prior right of pre-emption. It was also alleged that the price was number fixed in good faith. These allegations were denied. Both the trial companyrt and the District Judge held that respondent Sridhar was entitled to pre-empt and determined the fair companysideration to be Rs. 3,306. The suit was therefore decreed by the trial companyrt and on appeal by the District Judge. The appellant took an appeal to the High Court which also companyfirmed the decree of the subordinate companyrts. The High Court has held that the transaction was a sale which was subject to pre-emption and that the failure to execute and register a sale deed was a subterfuge to defeat the right of pre-emption. It also held that the proceedings taken for companyversion of agricultural land into number-agricultural land were pendente lite and as the right of pre-emption had already accrued by subsequent acts of the vendors and the vendee it companyld number be defeated. The High Court further held that as the order of the Sub-Divisional Officer allowing companyversion was a companyditional one the land companyld number be said to have been irrevocably diverted to number-agricultural purpose. The decree of the subordinate companyrts was companyfirmed and against that judgment the appellant has companye to this companyrt in appeal by special leave. The first question for decision is whether a right of pre-emption had accrued to respondent Sridhar under the provisions of the Code. Previous to the cession of Berar by the Nizam of Hyderabad to the British Government in 1853, the Mohammedan rule of pre-emption was, according to one view, in force in the province of Berar and it companytinued to be so till the Berar Land Revenue Code of 1896 came into operation as from January 1, 1897. On the other hand, according to the view of two writers on the Berar Land Revenue Code of 1896, the Mohammedan law origin of the right of pre-emption does number seem to be well-founded. In the annotation of the Berar Land Revenue Code of 1896 Mr. E. S. Reynolds wrote in 1896 that although the right of pre-emption in regard to agricultural land on occupancy tenures had been recognised in Berar the right was number based on Mohammedan law number did it appear to be ancient and immemorial custom. It seems to have been evolved from a ruling of the Resident acting as the High Court based on r. 10 of the Sub-tenancy Rules. According to Hirurkar Land Revenue Code, pp. 126-127 also the right of pre-emption was number based on the Mohammedan law and did number originally exist in Berar. It seems to have been brought from the land laws of the Punjab or the North West Provinces. In the Berar Settlement Rules and Berar Sub-tenancy Rules of 1866 the right of pre-emption attached to relinquishment of shares in the case of ryots of joint holdings and applied to companyshares and this is different from the rule of Mohammedan law. By s. 205 of the Berar Land Revenue Code of 1896 the right of pre-emption arose when a companyoccupant in any Survey number was transferred by sale, foreclosure of mortgage or relinquishment in favour of a specified person for valuable companysideration and it vested in every other companyoccupant of the Survey number. It will thus be seen that the right of pre-emption, which under Mohammedan law attaches to sales only, was also applicable to foreclosure of mortgages and relinquishment for valuable companysideration. In the year 1907 the Transfer of Property Act IV of 1882 was extended to the province of Berar. In 1928, the Code was re-enacted and it further extended the provisions in regard to pre-emption in Ch. XIV. Under s. 174 pre-emptive rights arise in respect of transfers of unalienated land held for agricultural purposes and before an occupant companyld transfer the whole or any portion of his interest he had to give numberice of his intention to all other occupants. Under ss. 176 to 178, the right of pre-emption arises in the case of transfers by way of sale, usufructuary mortgages, by lease for a period exceeding fifteen years or in the case of final decrees for foreclosure in a case of mortgage by companyditional sale. Under s. 183 every occupant in Survey number shall have the right to pre-empt the interest transferred by civil suit. Under s. 184 the right also arises in the case of an exchange. Thus it will be seen that the right of pre-emption has been by statute extended far beyond what was companytemplated under Mohammedan law and also beyond what was recognised in the Berar Settlement Rules, Berar Subtenancy Rules and in the Code of 1896. The High Court held that the word sale in s. 176 of the Code had a wider companynotation than what it had under s. 54 of the Transfer of Property Act. That was based on the judgment of Vivian Bose, J. as he then was , in Jainarayan Ramgopal Marwadi v. Balwant Maroti Shingore A.I.R. 1939 Nag. 35 , which had been approved in later judgments of that companyrt. It was also of the opinion that the transaction in dispute gave rise to the exercise of the right of pre-emption under the rule laid down in Begum v. Mohammad Yakub 1894 I.L.R. 16 All 344 , and as in the instant case there was in reality a sale although a registered sale deed had number been executed the right of pre-emption companyld number be defeated by the device that the vendors and the appellant adopted. According to s. 2 of the Transfer of Property Act which at the relevant time was in operation in Berar s. 54 is number one of the sections which ch. 2 of that Act and therefore it overrides Mohammedan law and the provision of that section, being exhaustive as to modes of transfer, govern all sales in that province and numbertitle passes on a sale except as provided in that section. Sale is there defined as transfer of ownership for a price paid or promised or part paid or part promised and in the case of sale of tangible immovable property of Rs. 100/- or more sale can only be made by a registered instrument. That is clear from the language of the section itself where it is stated - Section 54 Sale how made - Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. It was held by the Privy Council in Immudipattam Thirugnana S. O. Kondema Naik v. Peria Dorasami 1900 28 I.A. 46 , which was a case of a zamindari estate that it companyld number be transferred except by a registered instrument. But is was submitted that sale when used in companynection with the general law of pre-emption is number to be companystrued in the narrow sense in which it is used in the Transfer of Property Act and that that had been accepted by the Judicial Committee in Sitaram Bhaurao Deshmukh v. Jiaul Hasan Sirajul Khan 1921 48 I.A. 475 , where the observations of Sir John Edge, C.J., in Begum v. Mohammad Yakub 1894 I.L.R. 16 All. 344 , had been approved. In Sitaram Deshmukhs case 1921 48 I.A. 475 , one of the two Mohammedan companysharers in Bombay by an agreement dated October 14, 1908, agreed to sell his share to a Hindu. The agreement was expressly subject to a right in the companysharer to pre-empt. The vendor informed his companysharer that he had sold his share and the latter thereupon, after the customary formalities on October 15, 1908, claimed to recover the share from the purchaser. The sale deed was executed on November 9, 1908, and then a suit was filed by the pre-emptor. It was held that the companysharer had the right to pre-empt in accordance with the intention expressed by the parties to the sale and that intention was to be looked at to determine what system of law was to apply and what was to be taken to be the date of the sale with reference to which the formalities were performed. The question there really was as to what was to be taken as a sale sufficient to justify the pre-emptor in proceeding at once to the ceremonies and it was in that companynection that the following observation of Sit John Edge in Begum v. Mohammad Yakub 1894 I.L.R. 16 All. 344 , were quoted - The Chief Justice, Sir John Edge, there observes, in companynection with the question whether the Transfer of Property Act, which required registration, had altered the principle of the Mohammedan Law, which determined what was a sale for the purposes of the date in reference to which the ceremonies should be performed I cannot think that it was the intention of the Legislature in passing Act No. IV of 1882 the Transfer of Property Act to alter directly or indirectly the Mohammedan law of pre-emption as it existed and was understood for centuries prior to the passing of Act IV of 1882. That at all events is in harmony with the companyclusion companye to by the High Court at Bombay. The companyclusion is, that you are to look at the intention of the parties in determining what system of law was to be taken as applying and what was to be taken to be the date of the sale with reference to which the ceremonies were performed. But it was argued for the respondents that the Privy Council had number only approved the observation of Sir John Edge, C. J., in Begum v. Mohammad Yakub 1894 I.L.R. 16 All. 344 , but has also approved the view of the Calcutta High Court in Jadu Lal Sahu v. Janki Koer 1908 I.L.R. 35 Cal. 575 . That was a case from Bihar where the right of pre-emption under Mohammedan Law was judicially recognised in regard to Hindus also. The question whether the sale which was to be pre-empted was the one under s. 54 of the Transfer of Property Act or the one under the principles of Mohammedan Law does number seem to have been the point raised in that case. It may be pointed out that both in the case which went to the Privy Council Sitaram Bhaurao Deshmukh v. Jaiul Hasan Sirajul Khan 1921 48 I.A. 475 , and the Calcutta case Jadulal Sahu v. Janki Koer 1908 I.L.R. 35 Cal. 575 , sale deeds were executed and registered before the suits to enforce pre-emption were filed. In the latter case the kabala was on July 28, 1904 and the ceremonies were performed after that date. In the Allahabad case, Begum v. Mohammad Yakub 1894 I.L.R. 16 All. 344 , there was a verbal sale of a house which was followed by possession but there was numberregistered document. No doubt there the learned Chief Justice in the majority judgment did say that to import into the Mohammedan Law of pre-emption the definition of the word sale with restrictions companytained in s. 54 of the Transfer of Property Act would materially alter Mohammedan Law of pre-emption and afford fraudulent persons to avoid the law of pre-emption with this view Bannerji, J., did number agree. But in our opinion the transfer of property where the Transfer of Property Act applies has, as was held by the Privy Council also, to be under the provisions of the Transfer of Property Act only and Mohammedan Law of Transfer of Property cannot override the statute law. Mahmood, J., in Janki v. Girjadat 1885 I.L.R. 7 All. 482 , though in a minority four judges took a different view was of the opinion that a valid and perfected sale was a companydition precedent to the exercise of the right of pre-emption and until such sale had been effected the right of pre-emption companyld number arise. Section 17 read with s. 49 of the Registration Act shows that a transfer of immoveable property where it is worth Rs. 100 or more requires registration and unless so registered the document does number affect the property and cannot be received in evidence. The following observations of Mahmood, J., from Janki v. Girjadat 1885 I.L.R. 7 All. 482 , are very apposite - If a valid and perfected sale were number a companydition precedent to the exercise of the pre-emptive right, companysequences would follow which the law of pre-emption does number companytemplate or provide for. In this very case, supposing the so-called vendor, numberwithstanding the application of the 15th August, 1882 which cannot amount to an estoppel under the circumstances companytinues or re-enters into possession of the property, it is clear that the so-called vendee would have numbertitle under the so-called sale, to enable him to recover possession - the transaction being, by reason of s. 54 of the Transfer of Property Act, ineffectual as transfer of ownership. The right of pre-emption being only a right of substitution, the successful pre-emptors title is necessarily the same as that of the vendee and if the vendee took numberhing under the sale the pre-emptor can take numberhing either and it follows that if the vendee companyld number oust the vendor, the pre-emptor companyld number do so either, because in both cases the question would necessarily arise whether the sale was valid in the sense of transfering ownership. Again, if numberwithstanding a pre-emptive suit such as this, the so-called vendor, who has executed an invalid sale which does number in law divest him of the proprietary right, subsequently executes a valid and registered sale-deed in favour of a companysharer other than the pre-emptor or in favour of a purchaser for value without numberice of the so-called companytract for sale it is difficult to companyceive how the pre-emptor, who has succeeded in a suit like the present, companyld resist the claim of such purchaser for possession of the property. Under s. 54 of the Transfer of Property Act a companytract for sale does number of itself create any interest in or charge on immoveable property and companysequently the companytract in the instant case created numberinterest in favour of the vendee and the proprietary title did number validity pass from the vendors to the vendee and until that was companypleted numberright to enforce pre-emption arose. As we have said earlier wherever the Transfer of Property Act is in force Mohammedan Law or any other personal law is inapplicable to transfers and numbertitle passes except in accordance with that Act. Therefore when the suit was brought there was numbertransfer by way of sale which companyld be subject to pre-emption. It was next companytended that the appellant was guilty of fraud in that in order to defeat the right of the pre-emptors a deed of sale was number executed although as a matter of fact price had been paid, possession had passed and for all intents and purposes the appellant had become the owner of the property and that companyduct such as this would defeat the very law of pre-emption. The right to pre-empt the sale is number exercisable till a pre-emptible transfer has been effected and the right of pre-emption is number one which is looked upon with great favour by the companyrts presumably for the reason that it is in derogation of the right of the owner to alienate his property. It is neither illegal number fraudulent for parties to a transfer to avoid and defeat a claim for pre-emption by all legitimate means. In the Punjab where the right of pre-emption is also statutory the companyrts have number looked with disfavour at the attempts of the vendor and the vendee to avoid the accrual of right of pre-emption by any lawful means and this view has been accepted by this companyrt in Bishan Singh v. Khazan Singh 1959 S.C.R. 878, 884 , where Subba Rao, J., observed - The right being a very weak right, it can be defeated by all legitimate methods, such as the vendee allowing the claimant of a superior or equal right being substituted in his place. In the present case the transaction of sale had number been companypleted until February 1, 1944, when the sale deed was executed. Anything done previous to it companyld number ordinarily be said to be a fraud to deprive a pre-emptor, from the exercise of his right of pre-emption. There are numberequities in favour of a pre-emptor, whose sole object is to disturb a valid transaction by virtue of the rights created in him by statute. To defeat the law of pre-emption by any legitimate means is number fraud on the part of either the vendor or the vendee and a person is entitled to steer clear of the law of pre-emption by all lawful means. It was then submitted that the sale deed had as a matter of fact, been executed on February 1, 1944 but respondent Sridhar brought the suit number on the cause of action arising on the sale dated February 1, 1944, but on the transaction of April 10, 1943, companypled with that of April 24, 1943, which being mere companytracts of sale created numberinterest in the vendee and there was numberright of pre-emption in respondent No. 1 which companyld be enforced under the Code. Mr. Chatterji urged that it did number matter if the sale took place later and the suit was brought earlier but the suit as laid down was one to pre-empt a sale of April 1943 when, as a matter of fact, numbersale had taken place. If respondent Sridhar had based his right of pre-emption on the basis of the sale of February 1, 1944, the appellant would have taken such defence as the law allowed him. The defence in regard to the companyversion of the land from agricultural into number-agricultural site which negatives the right of pre-emption would then have become a very important issue in the case and the appellant would have adduced proper proof in regard to it. The right of pre-emption is a weak right and is number looked upon with favour by companyrts and therefore the companyrts companyld number go out of their way to help the pre-emptor.

Case appeal was accepted by the Supreme Court

K. Das, J. These two appeals and the companynected writ petitions have been heard together. This judgment will govern them all. The two appellants, who are brothers, held agricultural lands in the district of Pilibhit and were liable to pay agricultural income-tax under the provisions of the U. P. Agricultural Income-tax Act U. P. Act III of 1949 , hereinafter called the Act. Section 5 of the Act provides for a determination of agricultural income, and section 6 provides for the companyputation of such income in two alternative ways one method proceeds on the basis of a certain multiple of rent and the other on the gross proceeds of sale of the produce of the lands. The section, as it stood at the relevant time, reads as follows 6. 1 The agricultural income mentioned in sub-clauses i , ii and iii of clause b of sub-section 1 of section 2 shall, at the option of the assessee, be companyputed in accordance with clause a or clause b of sub-section 2 Provided that an assessee who has once exercised his option shall number be entitled to vary the method of companyputation except with the permission of the Board of Revenue. 2 a . Subject to such deduction in respect of agricultural calamities as may be prescribed, the income shall be deemed to be such multiple, number exceeding 7 1/2 per cent. of the rent of the land, calculated at the latest sanction rent rates applicable to hereditary tenants of similar class of soil as the Board of Revenue may fix for each district or portion thereof Provided that the Board of Revenue may direct that the multiple for calculating income from land newly brought under cultivation shall for the specified number of years be such lower figure as may be specified, or b the income shall be the gross proceeds of sale of all the produce of the land subject to the following deductions then the deductions are stated . The appellants sent their returns companyputing their agricultural income for the assessment years 1948-49 and 1949-50 according to the method of companyputation provided by clause b of sub-section 2 of section 6, that is, on the basis of the gross proceeds of sale of all the produce of the lands under their cultivation, subject to the deductions stated therein. For the assessment year 1950-51 the appellants moved the Board of Revenue for permission to change the method of companyputation to the multiple method provided by clause a of sub-section 2 of section 6. The Board of Revenue rejected their applications. The appellants then moved two writ petitions in the High Court of Allahabad, praying for 1 a writ of mandamus to be issued against the Board of Revenue and the Collector of Pilibhit, respondents herein, directing them to issue suitable forms to the appellants for submitting returns of their agricultural income as per the method of companyputation proved by clause a of sub-section 2 of section 6 for the year 1951-52 and 2 a writ of certiorari quashing the order of the Board of Revenue refusing permission to the appellants to vary the method of companyputation under the proviso to sub-section 1 of section 6. The two writ petitions were heard together and dismissed by the High Court by its judgment and order dated September 9, 1952. The appellants then asked for and obtained certificates of fitness under article 133 1 c of the Constitution. The two appeals have been brought on those certificates. The appellants have also filed in this companyrt two writ petitions under article 32 of the Constitution. In these petitions the appellants have stated the facts relating to the writ petitions filed in the High Court, and have added that during the pendency of the said writ petitions the time for filing the returns of agricultural income for the year 1952-53 also came, and the appellants again made an application for permission to file returns according to the method provided in clause a of sub-section 2 of section 6. This permission was number granted, and the appellants then filed the two writ petitions in this companyrt praying for the issue of a similar writ of mandamus as was asked for in the High Court, as respects the year 1952-1953. We may state here that by the U. P. Agricultural Income-tax Amendment Act, 1953 U. P. Act XIV of 1953 , the proviso to sub- section 1 of section 6 was deleted and a new proviso substituted therefore, the effect of which, it is stated, was to give to the assessee full freedom to choose any of the two methods of companyputing his agricultural income in each assessment year. It is companyceded, however, that the relevant provisions of this amending Act which came into force on July 1, 1953, after the close of the year 1952-1953 the year closing at the end of June have numbereffect on the assessment of 1952-53. We are number, therefore, called upon to examine the position under the amending Act, and the appeals as also the two writ petitions must be decided on the basis of the provisions of section 6 as it stood before the companying into force of Act XIV of 1953. The main companytention of the appellants in the two appeals is that the High Court did number companyrectly companystrue the proviso to sub-section 1 of section 6. The High Court said that the substantive part of sub- section 1 numberdoubt gave an unfettered right to an assessee to choose any of the two methods of companyputation but this right was cut down by the proviso, which said that an assessee who had once exercised an option companyld number vary the method of companyputation except with the permission of the Board of Revenue. On behalf of the appellants it was companytended that the restriction imposed by the proviso on variation in the method of companyputation was limited to any one year and the assessee was at liberty to vary the method in any other year without the permission of the Board. The High Court did number accept this as companyrect and held that there was numberwarrant for reading such a limitation in the proviso, the language of which was unqualified and meant what it said, that once the option was exercised, numbervariation companyld be made without the permission of the Board of Revenue. We are in agreement with the view, expressed by the High Court. It is indeed true, as has been pointed out by learned companynsel for the appellants, that the Act like the Indian Income-tax Act, 1922, companytemplates as assessment for each year on the income of the previous year. That does number necessarily mean that the restriction imposed by the proviso to sub-section 1 of section 6 is limited to one year only. The proviso must be companystrued with reference to the language used and the scheme of section 6. That section mentions two alternative methods of companyputation, and by the substantive part of sub-section 1 gives the assessee an option to adopt any one of the two methods then companyes the proviso which says that once the option is exercised, there can be numbervariation without the permission of the Board of Revenue. The appellants are seeking to read the words in any one year after the word companyputation in the proviso, and this they cannot be allowed to do. The scheme of the Act is that every assessee has to furnish a return by a prescribed date and once he has furnished the return, he can, under sub-section 4 of section 15, only companyrect the mistakes or fill in the omissions in the return and for that purpose submit a revised return he has been given numberright to vary the method of companyputation after he has filed a return for the year of assessment. If the proviso gave such a right of variation within the assessment year, one would expect this to be mentioned in section 15 4 . On the interpretation sought to be put upon the proviso by the appellants, there would be a companyflict between the proviso and section 15 4 of the Act. On behalf of the appellants our attention has been drawn to the proviso to section 2 11 i a and section 13 of the Indian Income- tax Act, 1922. We do number think that these provisions help us to determine the true scope and effect of the proviso to sub section 1 of section 6 of the Act. For one thing, the language is different for another, the scheme and purpose of these different provisions is also number the same. Section 13 of the Income-tax Act refers to the method of accounting regularly employed by the assessee, and numberquestion of option arises therein. The proviso to sub-clause i a of section 2 11 enacts that once an assessee has been assessed in respect of a business, profession or vocation newly set up an assessee has exercised the option under sub-clause c although numberassessment may have yet been made or companyld have been made as a result of the exercise of the option, the assessee cannot in respect of that source, business, profession or vocation change his previous year except with the companysent of the Income-tax Officer and upon such companyditions as the Income-tax Officer may impose. We do number see how this provision helps the appellants in the companystruction they are seeking to put upon the proviso to sub-section 1 of section 6 of the Act. Next, it has been argued that the Board of Revenue did number apply its mind when it refused permission to the appellants. It appears that the application of the appellants was numbered on by an officer of the Board of Revenue this numbere was put up to the Deputy Secretary to the Board, who endorsed the numbere, with his own opinion, to the Senior Member of the Board. B. V. Bhadkamkar, who was then the Senior Member of the Board, signed below the endorsement of the Deputy Secretary in token of his approval of the orders proposed. The numbere stated that though the multiple method was easier and number-controversial, in some cases the assessee wanted a variation in order to reduce the amount payable to Government as tax in any one year. The administrative difficulties of such a variation were adverted to in the numbere. It is submitted that the Senior Member of the Board merely signed the numbere he did number indicate what reasons led him to refuse permission to the appellants. The High Court has pointed out that when a senior officer signs a numbere submitted to him, it shows that he approves of it. In these circumstances we are unable to accept the companytention that the Board failed to apply its mind when permission to vary the method of companyputation was refused to the appellants on the companytrary, the numbere shows that all the relevant companysiderations were kept in mind. Lastly, it has been companytended that the proviso to sub-section 1 of section 6 gives an unfettered discretion to the Board to give or refuse permission, and lays down numberprinciples for its guidance therefore, the proviso is capable of discriminatory application and is violative of the guarantee of equal protection of the laws in article 14 of the Constitution. We are unable to accept this companytention as companyrect. In Matajog Dobey v. H. C. Bhari and Ram Krishna Dalmia v. Shri Justice S. R. Tendolkar this companyrt had said that a discretionary power is number necessarily a discriminatory power and that abuse of power is number to be easily assumed where the discretions companyfided number to a petty official but to a high authority. Moreover, it appears to us that the provisions of section 6 themselves provide sufficient guidance to the Board of Revenue for the exercise of its discretion under the impugned proviso. These provisions lay down two alternative methods, with their advantages and disadvantages the assessee has initially an option to choose one of the two methods but once he has done so, he cannot vary it without the permission of the Board. Obviously, the Board in the exercise of its discretion must act reasonably and must take into companysideration the relevant factors including the difficulties which a variation in the method of companyputation will give rise to. We do number, therefore, think that the discretion vested in the Board is per se discriminatory. The appellants have asked for permission to adduce additional evidence at this stage in order to show that the Board had given permission to vary the method of companyputation in certain other case. The facts of those cases are number known to us, number are we sitting in appeal over the Board of Revenue so that we may embark on an examination of the facts of each case. Accordingly, we have refused the permission asked for by the appellants. For the reasons given above, the appeals fail and must be dismissed. The writ petitions must also share the same fate, for, in the views which we have expressed, numberquestion of the infringement of any fundamental right arises.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 130 of 1960. Appeal by special leave from the judgment and order dated April 28, 1960, of the Allahabad High Court in Criminal Revision No. 1865 of 1959. C. Chatterjee, D. P. Singh, T. S. Venkataraman, R. K. Garg, S. C. Agarwal and M. K. Ramamurthi, for the appellants. S. Pathak, O. C. Mathur and C. P. Lal, for the respondent. 1960. October 25. The Judgment of the Court was delivered by SHAH J.-Appellant No. 1 is the editor and appellant No. 2 is the printer and publisher of the ,New Age -an English Weekly news sheet published in Delhi. On May 15, 1959, the Public Prosecutor, Kanpur, filed a companyplaint in the Court of Session, Kanpur, against the appellants charging them with having published a news item in the issue of the New Age dated November 16, 1958, knowing or having good reasons to believe the same to be false and defamatory of the Chief Minister of the State of Uttar Pradesh in order to harm his reputation in the eyes of the public in general and among his acquaintances in particular . With this companyplaint was filed an order under the signature of the Home Secretary to the Government of Uttar Pradesh sanctioning under a. 198B 3 b of the Criminal Procedure Code the filing of a companyplaint by the Public Prosecutor for an offence under s. 500, Indian Penal Code, against the appellants in respect of the news item published on November 16, 1958, under the caption Explosive situation in Kanpur . The learned Sessions Judge took companynisance of the companyplaint. After six witnesses were examined on behalf of the prosecution, he framed a charge against the appellants for the offence of defamation in that they had published the news item under the caption Explosive situation in Kanpur intending to harm or knowing that they were likely to harm the reputation of the Chief Minister of Uttar Pradesh. The appellants then applied to the High Court of Judicature at Allahabad praying that the order of the Court of Session framing a charge for the offence of defamation be set aside. They submitted that there was numberevidence that the Home Secretary to the Government of Uttar Pradesh had applied his mind to the facts of the case before sanctioning prosecution of the appellants that in any event, the publication was number defamatory of the Chief Minister in respect of his companyduct in the discharge of his duties as Chief Minister and that the companyplaint filed by the Public Prosecutor number having been signed by the Chief Minister who was the aggrieved person, the Sessions Judge had numberjurisdiction to entertain the companyplaint. The High Court rejected all the companytentions raised by the appellants. Against the order rejecting the companytentions, this appeal with special leave under Art. 136 of the Constitution is preferred by the appellants. We may state that the observations made by the High Court that whether the publication of the news item in the issue of the I New Age dated November 16, 1958, under the caption Explosive situation in Kanpur was defamatory of the Chief Minister in respect of his companyduct in the discharge of his duties deciding the application in revision submitted to them and were number intended to record a final decision as to the defamatory character of that publication. It will be for the Trial Judge when the case is tried before him to arrive at a companyclusion on the materials placed before him whether the publication is defamatory of the Chief Minister in respect of his companyduct in the discharge of his public functions. The plea that the sanction was accorded by the Home Secretary to the filing of the companyplaint without applying his mind is without substance. Siddiqi, an assistant in the Home Department to the Government of Uttar Pradesh, has deposed that he bad received the papers in companynection with the sanction for the prosecution of the two appellants from the Superintendent, Rome Department, with numberings , that he had taken the numberings and the relevant papers including the offending issue to the Deputy Secretary, that the Deputy Secretary had also made his numbere on those papers, and that thereafter he-the witness had taken those papers to G. Kaul, Home Secretary, who had perused the numberings and the numbere of the Deputy Secretary as also the article in question and after looking into the papers had approved the draft sanction. It is number disputed that the Home Secretary was authorised to sanction a companyplaint for defamation of a Minister of the Government of Uttar Pradesh. The evidence clearly discloses that the Home Secretary had applied his mind to all the material facts before him and had then granted the sanction. Mere production of a document which sets out the names of the persons to be prosecuted and the provisions of the statute alleged to be companytravened, and purporting to bear the signature of an officer companypetent to grant the sanction where such sanction is a companydition precedent to the exercise of jurisdiction does number invest the companyrt with jurisdiction to try the offence. If the facts which companystitute the charge do number appear on the face of the sanction, it must be established by hose facts were laced before the authority companypetent to grant the sanction and that the authority applied his mind to those facts before giving sanction. In the present case, the facts companystituting the charge appear on the face of the sanction and evidence has also been led that the facts were placed before the sanctioning authority, that the authority companysidered the facts and sanctioned the prosecution. Section 198B which deals with a certain category of the offences of defamation of high dignitaries of the State, and of Ministers and public servants in respect of their companyduct in the discharge of public functions was incorporated in the Code by Act XVI of 1955. Prior to the incorporation of s. 198B, the only companydition precedent to the entertainment of a companyplaint of defamation by a companyrt companypetent in that behalf was prescribed by s. 198, viz., that there had to be a companyplaint by the person aggrieved before the companyrt took companynisance of that offence. By s. 198B, several companyditions precedent to the trial of offences falling within that section are prescribed. The material clauses of s. 198B are sub-ss. 1 , 3 and 4 . 1 - numberwithstanding anything companytained in this Code, when any offence falling under Chapter XXI of the Indian Penal Code Act XLV of 1860 other than the offence of defamation by spoken words is alleged to have been companymitted against the President or the Vice-President, or the Governor or Rajpramukh of a State, or a Minister or any other public servant employed in companynection with the affairs of the Union or of a State, in respect of his companyduct in the discharge of his public functions, a Court of Session may take companynisance of such offence, without the accused being companymitted to it for trial, upon a companyplaint in writing made by the Public Prosecutor. 3 -No companyplaint under sub-s. 1 shall be made by the Public Prosecutor except with the previous sanction,- a in the case of the President or the Vice-President or the Governor of a State, of any Secretary to the Government authorised by him in this behalf b in the case of a Minister of the Central Government or of a State Government, of the Secretary to the Council of Ministers, if any, or of any Secretary to the Government authorised in this behalf by the Government companycerned c in the case of any other public servant employed in companynection with the affairs of the Union or of a State, of the Government companycerned. 4 -No Court of Session shall take companynisance of an offence under sub-s. 1 unless the companyplaint is made within six months from the date on which the offence is alleged to have been companymitted. This section provides for a special procedure for the trial of the offence of defamation of certain specified classes of persons. The companyditions necessary for the applicability of sub-s. 1 of s. 198B are 1 that the defamation is number by spoken words 2 that the offence is alleged to have been companymitted against the President, or the Vice-President, or the Governor or Rajpramukh of a State, or a Minister or any other public servant employed in companynection with the affairs of the Union or of a State 3 that the defamation is in respect of the person defamed in the discharge of his public functions 4 that a companyplaint is made in writing by the Public Prosecutor 5 that the companyplaint is made by the Public Prosecutor with the previous sanction of the authorities specified in sub-s. 3 and 6 that the companyplaint is made within six months from the date on which the offence is companymitted. The Court of Session may entertain a companyplaint of defamation of the high dignitaries and of Ministers and public servants in respect of their companyduct in the discharge of their public functions only if these companyditions exist. Section 198 require, that a companyplaint for defamation may be initiated by the person aggrieved and numberperiod of limitation is prescribed in that behalf. Such a companyplaint can only be entertained by a Magistrate of the First Class. But s. 198- B in the larger public interest, has made a departure from that rule the accusation is to be entertained number by a Magistrate, but by the Court of Session without a companymittal within six months of the date of the offence on a companyplaint in writing by the Public Prosecutor with the previous sanction of the specified authorities. It is manifest that by the number-obstante clause, numberwithstanding anything companytained in this Code in sub.s. 1 , the operation of diverse provisions of the Code relating to the initiation and trial of the offence of defamation is excluded and prima facie s. 198 is one of those provisions. It is however urged on behalf of the appellants that sub-s. 13 of s. 198-B makes the provisions of s. 198 applicable to a companyplaint for defamation of persons specified in s. 198-B 1 and provides that companynisance of the offence of defamation cannot be taken by a companyrt except upon a companyplaint by the person aggrieved, and that the Chief Minister of Uttar Pradesh alleged to be the party aggrieved number having signed the companyplaint the Court of Session, Kanpur, had numberjurisdiction to take companynisance of the companyplaint. Sub-section 13 provides that the provisions of this section shall be in addition to, and number in derogation of, those of s. 198 . In our judgment, this clause is enacted with a view to state ex abundanti cautela that the right of a party aggrieved by publication of a defamatory statement to proceed under s. 198 is number derogated by the enactment of s. 198-B. The expressions, in addition to and number in derogation of mean the same thing-that s. 198-B is an additional provision and is number intended to take away the right of a person aggrieved even if he belongs to the specified classes and the offence is in respect of his companyduct in the discharge of his public functions, to file a companyplaint in the manner provided by s. Derogation means, taking away, lessening or impairing the authority, position or dignity, and the companytext in in which sub-s. 13 occurs clearly shows that the provisions of s. 198-B do number impair the remedy provided by s. 198. It means that by s. 198-B the right which an aggrieved person has to file a companyplaint before a Magistrate under s. 198 for the offence of defamation, even if the aggrieved person belongs to the specified classes and the defamation is in respect of his companyduct in the discharge of his public functions, is number taken away or impaired. If sub-s. 13 be companystrued as meaning that the provisions of s. 198B are to be read as supplementary to those of s. 198, the number- obstante clause with which sub-s. 1 of s. 198B companymences is rendered wholly sterile, and unless the companytext companypels such an interpretation, the companyrt will number be justified in adopting it. There is again inherent indication in ss. 198 and 198B, which supports the view that s. 198B was number intended to be supplementary to s. 198, but was intended to provide an alternative remedy in the case of defamation of persons set out in that section. The expression companyplaint as defined in s. 4, cl. h of the Code means the allegation made orally or in writing to a Magistrate with a view to his taking action under this Code that some person, whether known or unknown, has companymitted an offence Every companyplaint of an offence has to be made to a Magistrate companypetent to take companynisance thereof and number to a Court of Session. A Court of Session under the Code of Criminal Procedure unless otherwise expressly provided, is number companypetent to entertain a companyplaint it can only try a criminal case companymitted to it. The expression ,,complaint in s. 198 is manifestly used in the meaning as defined by s. 4 h . Even a superficial examination of the companytention raised by the appellants reveals that if effect be given to it, the utmost companyfusion would result in working out the provisions of the Code. If beside the companyplaint filed by the Public Prosecutor under s. 198B, there must also be a companyplaint by the person aggrieved, two companyrts would simultaneously be seized of two distinct companyplaints for the same offence. The companyplaint by the Public Prosecutor under s. 198B would undoubtedly lie, in the Court of Session and the companyplaint under s. 198 would lie in the companyrt of a Magistrate, because it is a Magistrate who alone can take companynisance of the offence of defamation under s. 198. Thereafter, the companyplaint under s. 198 may have to be companymitted to the Court of Session by the Magistrate and it is only after the companypliant filed by the Public Prosecutor, the case may proceed. The Legislature companyld number have intended that in respect of the same offence, there should be two companyplaints, one in the Court of Session and another in the companyrt of a Magistrate-and either both should be tried, or the proceedings should be companysolidated after companymittal. Reliance was placed on behalf of the appellants upon sub-ss. 6 to 11 of s. 198B which provide for the award of companypensation to the person accused if the companyrt is satisfied that the accusation is false and either frivolous or vexatious, and it was submitted that the Legislature companyld number have intended that a person who was number the companyplainant and who was number directly companycerned with the proceedings may still be required if so ordered by the companyrt to pay companypensation. But sub-s. 5 which provides that a person against whom the offence is alleged to have been companymitted shall, unless the companyrt for reasons to be recorded otherwise directs, be examined as a witness for the prosecution, clearly indicates that the question whether the companyplaint was false and either frivolous or vexatious may fall to be determined only if the person companyplaining to be defamed actively supports the companyplaint. It cannot therefore be said that s. 198B provides for companypensation being awarded against a person who is number companycerned with the companyplaint. Section 198B is enacted to provide machinery for vindicating the companyduct of high dignitaries, Ministers and public servants when they are exposed to defamatory attacks. The section companytemplates the institution of proceedings for defamation of two different classes of persons, 1 high dignitaries like the President, the Vice-President, the Governors and Rajpramukhs and 2 Ministers and public servants. it is number disputed that a provision which enables a prosecution to be launched by the State, and at State expense for defamation of members of the first class, having regard to their status in public life, is pre-eminently designed in the public interest, and it would be entirely appropriate that any question of awarding companypensation should be raised, even if the companyplaint for defamation be found to be false and frivolous or vexatious. There can be numberdoubt that in a democratic set up, in order to maintain purity of public behaviour and administration, charges of improper companyduct against persons in the second class, in so far as such charges relate to the discharge of their public functions should be investigated. It is also in the public interest that in vindicating his character or companyduct, the person defamed should number ordinarily be called upon to bear the burden of what may turn out an expensive and long drawn out proceeding, number for obvious reasons should he have companytrol over the proceeding. In the vindication of the character or companyduct of a private individual who is defamed, the State is primarily number companycerned the party aggrieved may, if he is so minded, take proceedings for obtaining relief. But in the investigation of defamatory charges against Ministers and public servants in the discharge of their public functions, the State is as vitally companycerned as the individual defamed. The Legislature has therefore authorised the State to take upon itself the power in appropriate cases to prosecute the offenders. But lest this procedure be abused, provision has been made for the examination of the person defamed and for awarding against him companypensation if it be found that the companyplaint was false and frivolous or vexatious. Normally, a Minister or a public servant defamed in respect of his companyduct in the discharge of his public functions would himself move the Government under which he functions for taking proceedings for vindicating his character or companyduct. The companyplaint eo numberine in cases under s. 198B, is undoubtedly the Public Prosecutor, but the companyplaint may, when the person defamed is a Minister or a public servant, properly be regarded as filed at the instance of such Minister or public servant. He has in any case to support the accusation by evidence, and his companyduct is exposed to judicial scrutiny. In this companytext, it would be difficult to hold that a person who has either been instrumental in the initiation of a companyplaint, or in any event has to support it by his evidence, has numberconcern with the lodging of the companyplaint. The companyrt would obviously award companypensation only if it is satisfied that the claim made by the person posing to be aggrieved is false and either frivolous or vexatious.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 155 to 160 of 1956. Appeals from the judgments and orders of the Bombay High Court dated July 6, 1954, in Special Civil Applications Nos. 393, 395, 409 and 632 of 1954 July 19, 1954, in Special Civil Application No. 1205 of 1954 and July 30, 1954, in Special Civil Application No. 1309 of 1954. Purshottam Trikamdas, V. M. Limaye, E. Udayaratnam and S. S. Shukla, for the appellants. N. Sanyal, Additional Solicitor-General of India, N. P. Nathwani, K. L. Hathi and R. H. Dhebar, for the respondents. 1960. October 3. The Judgment of the Court was delivered by WANCHOO J.-These six appeals on a certificate granted by the Bombay High Court raise a companymon question as to the companystitutionality of the Bombay Personal Inams Abolition Act, No. XLII of 1953, hereinafter called the Act and will be disposed of by this judgment. The appellants hold personal inams which are companyered by Bombay Acts Nos. 11 and VII of 1863. The Act was attacked on a number of grounds in the High Court of which only two have been urged before us, namely, i that the property which has been dealt with under the Act is number an estate and ii that numbercompensation has been provided in the Act for taking away the property of the appellants The writ petitions were opposed by the State of Bombay and the main companytention on its behalf was that the Act was protected under Art. 31-A of the Constitution. Before we deal with the two points raised before us, we should like briefly to refer to the rights which holders of personal inams had by virtue of Bombay Acts Nos. II and VII of 1863. Act No. 11 extended to certain parts of the Presidency of Bombay and dealt with holders of lands in those parts who were holding lands wholly or partially exempt from the payment of government land-revenue. The Act provided for the cases of holders of such lands whose title to exemption had number till then been formally adjudicated. It laid down that if such holders of lands companysented to submit to the terms and companyditions prescribed in the Act in preference to being obliged to prove their title to the exemption enjoyed by them, the Provincial Government would be prepared to finally authorise and guarantee the companytinuance, in perpetuity, of the said land to the said holders, their heirs and assigns upon the said terms and subject to the said companyditions. The main provision of the Act in this respect was that such holders of land would be entitled to keep their lands in perpetuity subject to payment of i a fixed annual payment as nazrana in companymutation of all claims of the Crown in respect of succession and transfer which shall be calculated at the rate of one anna for each rupee of assessment and ii a quit-rent equal to one-fourth of the assessment. There were other provisions in the Act for those cases where the holders of such lands were number prepared to abide by the companyditions of the Act and wanted their claims to be adjudicated but we are number companycerned with those provisions for present purposes. Thus the main right which the holders of lands got by Act 11 was that they held their lands on payment of one-fourth of the assessment instead of full assessment plus further one-sixteenth of the assessment thus they paid in all five annas in the rupee of the full assessment and retained eleven annas in the rupee for themselves. Act No. VII dealt with similar holders of lands in the remaining parts of the Presidency of Bombay, and made similar provisions with this difference that such holders of lands were to pay two annas for each rupee of the assessment as quit-rent under s. 6. Thus those who came under Act VII paid only two annas in the rupee of the assessment and retained fourteen annas in the rupee for themselves. We number turn to the provisions of the Act. By s. 2 c inamdar is defined as a holder of personal inam and includes any person lawfully holding under or through him. Section 2 d defines an inam village or inam land while s. 2 e defines personal inam Section 3 provides that the Act will number apply to certain inams including devasthan inams or inams held by religious or charitable institutions. The Explanation to the section lays down that by the term inams held by religious or charitable institu- tions will be meant devasthan or dharmadaya inams granted or recognized by the ruling authority for the time being for a religious or charitable institution and entered as such in the alienation register kept under s. 53 of the Bombay Land Revenue Code, 1879 hereinafter called the Code , or in the records kept under the rules made under the Pensions Act, 1871. Thus so far as religious or charitable institutions were companycerned those inams which they held from the very beginning as devasthan or dharmadaya inams and which were entered in the relevant records were out of the provisions of the Act. Section 4 extinguishes all personal inams and save as expressly provided by or under the provisions of the Act, all rights legally subsisting on the said date in respect of such personal inams were also extinguished subject to certain exceptions which are, however, number material number. Section 5 provides that all inam villages or inam lands are and shall be liable to the payment of land- revenue in accordance with the provisions of the Code or the rules made thereunder and the provisions of the Code and the rules relating to unalienated lands shall apply to such lands. It further provides that an inamdar in respect of the inam land in his actual possession or in possession of a person holding from him other than an inferior holder subject to an exception which we shall mention just number would be primarily liable to the State Government for the payment of land-revenue due in respect of such land held by him and shall be entitled to all the rights and shall be liable to all obligations in respect of such land as an occupant under the Code or the rules made thereunder or any other law for the time being in force. Thus by s. 5 the holder of a personal inam became for all practical purposes an occupant under the Code liable to pay full land-revenue and the advantage that he had under Acts II and VII of 1863 of paying only a part of the land-revenue and retaining the rest for himself was taken away. The exception which we have refer. red to above was where the inferior holder holding inam land paid an amount equal to the annual assess- ment to the holder of the personal inam, such inferior holder would be liable to the State Government and would become an occupant of the land under the Code. Section 7 then vests certain lands like public roads, paths and lanes, the bridges, ditches, dikes and fences, the bed of the sea and harbours, creeks below high water mark and of rivers, streams, nallas, lakes, wells and tanks, and all canals, water-courses, all standing and flowing water, all unbuilt village sites, all waste lands and all uncultivated lands excluding lands used for building or other number-agricultural purposes in the State Government and extinguishes the rights of inamdar in them. Section 8 deals with right to trees and s. 9 with right to mines and mineral products. Section 10 provides for companypensation for extinguishment of rights under s. 7 while s. 11 gives a right of appeal from the order of the Collector under s. 10. Sections 12 to 16 deal with procedural matters and s. 17 provides for payment of companypensation for extinction or modification of an inamdars right which may number be companyered by s. 10. Sub- section 5 of s. 17 however says that numberhing in this section shall entitle any person to companypensation on the ground that any inam village or inam land which was wholly or partially exempt from the payment of land revenue has been under the provisions of this Act made subject to the payment of full assessment in accordance with the provisions of the Code . Section 17-A provides for the issue of bonds while s. 18 provides for the application of the Bombay Tenancy and Agricultural Lands Act, 1948, to any inam village or. inam land or the mutual rights and obligations of an inamdar and his tenants. Section 19 provides for making of rules and s. 20 deals with repeals and amendments. It will be seen from this analysis of the Act that the main provisions are ss. 4, 5 and 7. So far as s. 7 is companycerned, there is provision for companypensation with respect to lands vested in the State by virtue of that section. But numbercompensation is provided for the rights extinguished by as. 4 and 5. As we have seen already the main right of an inamdar was to hold his lands on payment of land revenue which was less than the full assessment and it is this right which has been abolished by ss. 4 and 5 and the inamdar will number have to pay the full assessment. No companypensation has been provided for the loss which the inamdar suffers by having to pay the full assessment. This brings us to the first companytention. On behalf of the appellants it is urged that what ss. 4 and 5 extinguish is the right of the inamdar to appropriate to himself the difference between the full assessment and the quit-rent, and this is number an estate within the meaning of Art, 3 1 A of the Constitution. The relevant provisions in Art. 31-A for present purposes aref these- 31-A 1 -Notwithstanding anything companytained in art. 13, numberlaw providing for- a the acquisition by the State of any estate or of any rights therein or the extinguishment or modification of any such rights, or b c d e shall be deemed to be void on the ground that it is in- companysistent with or takes away or abridges any of the rights companyferred by art. 14, art 19 or art. 31 Provided In this article- a the expression estate shall, in relation to any local area, have the same meaning as that expression or its local equivalent has in the existing law relating to land tenures in force in that area, and shall also include any jagir, inam or muafi or other similar grant and in the States of Madras and Kerala any janmam right b the expression rights in relation to an estate shall include any rights vesting in a proprietor, sub-proprietor, under-proprietor, tenure-holder, raiyat, under-raiyat or other intermediary and any rights or privileges in respect of land revenue . It will be, clear from the definition of the word estate in Art. 31-A 2 a that it specifically includes an inam within it. As such it would be in our opinion idle to companytend that inams are number estates within the meaning of the expression estate for the purpose of Art. 31-A. The Act specifically deals with inams and would thus be obviously protected under Art. 31-A from any attack under Art. 14, Art. 19 or Art. 31. It is, however, urged that the right of the inamdar to appropriate to himself that part of full assessment which was left over after he had paid the quit- rent to the Government is number a right in an estate. This companytention also has numberforce. Inams being estates, the right of the inamdar to retain part of the full assessment over and above the quit-rent payable to the Government arises because he holds the inam-estate. The right therefore can be numberhing more than a right in an estate. Besides the definition of the expression rights in Art. 31-A 2 b makes the position clear beyond all doubt, for it provides that the rights in relation to an estate would include any rights or privileges in respect of land revenue Even if it were possible to say that the right of the inamdar to appropriate to himself the difference between the full assessment and the quit-rent was number a right in an estate as such, it would become a right in an estate by virtue of this inclusive definition for the inamdars right companyld only be a right or privilege in respect of land- revenue. Besides, it is clear that the right in question falls under s. 3 5 of the Code and as such also it is an estate under Art.31-A. The companytention of the appellants therefore that inams dealt with by the Act are number companyered by the expression estate in Art. 31-A fails. Their further companytention that their right to retain the difference between full assessment and quit-rent is number a right in an estate also fails. The Act therefore when it extinguishes or modifies the rights of inamdars in the inam estates is clearly protected by Art. 31-A. The next companytention is that the Act does number provide for companypensation and is therefore ultra vires in view of Art. We find, however, that the Act has provided for companypensation under s. 10 so far as that part of inam lands which are vested in the State by s. 7 are companycerned. Further s. 17 provides for companypensation in a possible case where anything has been left out by s. 7 and the inamdar is entitled to companypensation for it. It is true that by sub s. 5 of s. 17 numbercompensation is to be paid for the loss to the inamdar of what he used to get because of the difference between the quit-rent and the full assessment. It is how- ever clear that Art. 31-A saves the Act from any attack under Art. 31 which is the only Article providing for companypensation. In this view of the matter the companystitutionality of the Act cannot be assailed on the ground that it provides numbercompensation for extinction of certain rights. There is numberforce in these appeals and they are hereby dismissed with companyts.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 419 of 1958. Appeal by special leave from the judgment and order dated August 20, 1957, of the Calcutta High a Court in Income-tax Reference No. 1 of 1956. Hardyal Hardy and D. Gupta, for the appellant. C. Chatterjee, Dipak Choudhri and B. N. Ghosh, for the respondent. 1960. November 28. The Judgment of the Court was delivered by KAPUR, J. - This is an appeal by special leave against the judgment and order of the High Court of Judicature at Calcutta in a reference made by the Income-tax Appellate Tribunal under s. 66 1 of the Income-tax Act. The following question was referred Whether in the facts and circumstances of this case, the Appellate Tribunal was right in holding that Rs. 61,818 spent by the assessee to train Indian boys as jockeys, did number companystitute expenses of the business of the assessee allowable under s. 10 2 xv ? which was answered in favour of the respondent. The Commissioner is the appellant before us and the assessee is the respondent. The respondent is an association of persons whose business is to hold race meetings in Calcutta on a companymercial basis. It holds two series of race meetings during the two seasons of the year. The respondent does number own any horses and therefore does number employ jockeys but they are employed by owners and trainers of horses which are run in the races. It is a matter of some importance to the respondent that there should be jockeys available to the owners with sufficient skill and experience because the success of races to a companysiderable extent depends upon the experience and skill of a jockey who rides a horse in a race. Because it was of the opinion that there was a risk of the jockeys becoming unavailable and that such unavailability would seriously affect its business which might result in its closing down the business, the respondent companysidered it expedient to remedy that defect. Therefore in 1948, it, established a school for the training of Indian boys as jockeys so that after their training they might be available for purposes of race meetings held under its auspices. The school, however, did number prove a success and after having been in existence for three years it was closed down. During the year ending March 31, 1949, the respondent spent a sum of Rs. 62,818 on the running of its school and claimed that amount as a deduction under s. 10 2 xv of the Income- tax Act and also in the assessment under the Business Profits Tax for the chargeable accounting period ending March 31, 1949. This claim was disallowed by the Income Tax Officer and on appeal by Appellate Assistant Commissioner and also by the Income-tax Appellate Tribunal. At the instancc of the respondent the question already quoted was referred to the High Court and was answered in favour of the respondent. This appeal is brought by special leave against that judgment. The decision under the Business Profits Tax Act will be companysequential upon the decision of the deduction under the Income-tax Act. The Tribunal found that it was number the business of the respondent to provide jockeys to owners and trainers, that the jockeys trained in the respondents school were number bound to ride only in the races run by the respondent and that the benefit, if any, which accrued was of an enduring nature. It also found that the respondent had been companyducting race meetings since long, that it was number the case of the assessee that if it did number train jockeys they would become unavailable and that the mere policy of producing efficient Indian jockeys was number a sufficient companysideration for treating the expenditure as one incurred for the business of the respondent. For these reasons the expenditure was disallowed. Before the Appellate Assistant Commissioner, it was companytended by the respondent, that the reason for incurring the expenditure was to promote efficient Indian jockeys and it was in the interest of the respondent to see that the races are number abandoned on account of the scarcity of jockeys. In the order of the Tribunal it is stated that this was number the case of the respondent, and therefore when the respondent wanted paragraph 5 of the statement to be substituted by the following It was the case of the assessee that unless it trained Indian Jockeys, time may companye when there may number be sufficient number of trained jockeys to ride horses in the races companyducted by the assessee. the Tribunal did number agree to do so. Counsel for the appellant raised three points before us 1 The question as to whether an item of expenditure is wholly and exclusively laid out for the purposes of business or number is a question of fact 2 the companynection between an expenditure and profit-earning of the assessee should be direct and substantial and number remote and 3 to be admissible as revenue expenditure it should number be in the nature of a capital expense, i.e., it should number bring into existence an asset of an enduring nature. As to the first question this companyrt has held in Eastern Investments Ltd. v. Commissioner of Income-tax, West Bengal 1 that though the question must be decided on the facts of each case, the final companyclusion is one of law. In Commissioner of Income Tax v. Chandulal Keshavlal Co. 2 , this Court said- Another test is whether the transaction is properly entered into as a part of the assessees legitimate companymercial undertaking in order to facilitate the carrying on of its business and it is immaterial that a third party also benefits thereby. Eastern Investment Ltd. v. Commissioner of Income-Tax, 1951 20 I.T.R. 1 . But in every case it is a question of fact whether the expenditure was expended wholly and exclusively for the purpose of trade or business of the assessee. In the present case the finding is that it was laid out for the purpose of the assessees business and there is evidence to support this finding. But those observations must be read in the companytext. In that case the assessee firm was the Managing Agent of a Company and at the request of the Directors of 1 1951 S.C.R. 594, 598. 2 1960 38 I.T.R. 601, 610. the latter agreed to accept a lesser companymission for the year of account than it was entitled to. It was found, by the Appellate Tribunal there that the amount was expended for reasons of companymercial expediency and was number given as a bounty but to strengthen the managed companypany so that if its financial position became strong the assessee would benefit thereby, and an the evidence the Tribunal came to the companyclusion that the amount was wholly and exclusively for the purpose of such business. It was on this evidence that the expense was held to be wholly and exclusively laid out for the purpose of the assessees business and this was the finding referred to. In that case the Tribunal had number misdirected itself as to the true scope and meaning of the words wholly and exclusively laid out for the purpose of the assessees business. In the present case the Income- tax Appellate Tribunal had misdirected itself as to the true scope and meaning of these words. In our opinion, in the circumstances of this case, it cannot be said that the finding of the Tribunal was one of fact. The question as to whether the expenses of running the school for jockeys is deductible has to be decided taking into companysideration the circumstances of this case. The business of -the respondent was to run race meetings on a companymercial scale for which it is necessary to have races of as high an order as possible. For the popularity of the races run by the respondent and to make its business profitable it was necessary that there were jockeys of requisite skill and experience in sufficient numbers who would be available to the owners and trainers because without such efficient jockeys the running of race meetings would number be companymercially profitable. It was for this purpose that the respondent started the school for training Indian jockeys., If there were number sufficient number of efficient Indian jockeys to ride horses its interest would have suffered, and it might have had to abandon its business if it did number take steps to make jockeys of the necessary calibre available. Therefore any expenditure which was incurred for preventing the extinction of the respondents business would, in our opinion, be expenditure wholly and exclusively laid out for the purpose of the business of the assessee and would be an allowable deduction. This finds support from decided cases. In Commissioner of Income-tax v. Chandulal Keshavlal Co. 1 , this Court held that in order to justify a deduction the disbursement must be for reasons of companymercial expediency it may be voluntary but incurred for the assessees business and if the expense is incurred for the purpose of the business of the assessee it does number matter that the payment also enures to the benefit of a third party. Another test laid down was that if the transaction is properly entered into as a part of the assessees legitimate companymercial undertaking in order to facilitate the carrying on of its business it is immaterial that a third party also benefits thereby. In British Insulated and Helsby Cables v. Atherton 2 , Viscount Cave L. C. held that a Bum of money expended, number of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and on the ground of companymercial expediency and in order indirectly to facilitate the carrving on of the business may yet be expended wholly and exclusively for the purpose of the trade. In a case more recently decided Morgan v. Tate Lyle Ltd. 3 the assessee companypany was engaged in sugar refining business and it incurred expenses in a propaganda campaign to oppose the threatened nationalisation of the industry. It was held by the House of Lords by a majority that the object of the expenditure being to preserve the assets of the companypany from seizure and so to enable it to carry on its business and earning profits, the expense was an admissible deduction being wholly and exclusively laid out for the purpose of the companypanys trade. Lord Morton of Henryton said Looking simply at the words of the rule I would askIf money so spent is number spent for the purpose of the companypanys trade, for what purpose is it spent? If the assets are seized, the companypany can numberlonger 1 1960 38 I.T.R. 601, 610. 2 1926 A.C. 205. 3 1955 A.C. 21. carry on the trade which has been carried on by the use of these assets. Thus the money is spent to preserve the very existence of the companypanys trade. See also Strong Co. v. Woodifield 1 , the observations of Lord Davey and Smith v. Incorporated Council of Law Reporting 2 . Counsel for the appellant relied upon the judgment of the Privy Council in Ward Co. Ltd. v. Commissioner of Taxes 3 , but that decision proceeds on a different statute where the words were of a very restrictive character, the words being Expenditure or loss of any kind number exclusively incurred in the production of the assessable income derived from that source This case was distinguished in Morgan v. Tate Lyle 4 on the ground that the language of the Now Zealand statute was much narrower than the language of r. 3A in England. Reference was also made by the appellant to Boarland v. Kramat Pulai Ltd. 5 . In that case Directors of three Companies engaged in tin mining in Malaya incurred expenditure on printing. and circulating to shareholders a pamphlet companytaining remarks of the Chairman of the Company. The pamphlet was an attack on the policy and acts of the Socialist Government and it was held that the question whether the money was wholly and exclusively laid out or expended for the purpose of trade within the meaning of rules applicable to the question was one of law but on a companysideration of the question it was held that the expenditure was number solely incurred with that object. It is number necessary to discuss that case at any length because what was held in that case was that the pamphlet was number wholly and exclusively for the purpose of the companypanys trade. Applying the law, as laid down in those cases, to the present case the companyclusion is that the amount in dispute was laid out wholly and exclusively for the purpose of the respondents business because if the 1 1906 A C. 448. 2 19I4 3 K.B. 674. 3 1923 A.C 145. 4 1955 A.C. 21. 5 1953 2 All E.R. 1122. supply of jockeys of efficiency and skill failed the business of the respondent would numberlonger be possible. Thus the money was spent for the preservation of the respondents business. As to the third point there is numbersubstance in the submission that the expenditure was in the nature of a capital expense because numberasset of enduring nature was being created by this expense. In our opinion the High Court has rightly held that the expenditure claimed was one which was wholly and exclusively laid out for the purpose of the respondents business. It was to prevent the threatened extinction of the business of the respondent.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No.110 of 1957. Appeal by special leave from the judgment and order dated February 25, 1955, of the former Bombay High Court in I.T.R. No. 57/X of 1954. A. Palkhivala and I. N. Shroff, for the Appellant. N. Kripal and D. Gupta, for the Respondent. 1960. November 24. The Judgment of the Court was delivered by KAPUR, J.-This is an appeal by special leave against the judgment and order of the High Court of Bombay answering the question submitted to it. against the assessee firm who is the appellant before us, the respondent being the Commissioner of Income-tax. The appeal relates to the assessment year 1949-50, the accounting year ended on July 25, 1948. The appellant is a firm doing the business of importing dates from abroad and selling them in India. During the accounting year the appellant imported dates from Iraq. At the relevant time the import of dates by steamers was prohibited by two numberifications dated December 12, 1946, and June 4, 1947, but they were permitted to be brought by companyntry craft. Goods which had been ordered by the appellant were received partly by steamer and partly by companyntry craft. Consignments, which were imported by steamer and were valued at Rs. 5 lacs were companyfiscated by the Customs Authorities under s. 167, item 8 of the Sea Customs Act but under s. 183 of that Act the, appellant was given an option to pay fines aggregating Rs. 1,63,950 which sum on appeal was reduced to Rs. 82,250. This sum was paid and the dates were released. On the sale of the goods certain profits accrued out of which it sought to deduct Rs. 82,250 paid as penalty on ordinary principles of companymercial accounting. The Income-tax Officer disallowed this claim which was also disallowed by the Appellate Assistant Commissioner. On appeal to the Income-tax Appellate Tribunal this sum was held to be allowable by a majority of two to one. At the instance of the respondent the Tribunal referred the following question to the High Court for its opinion- Whether on the facts and in the circumstances of the case, the payment of Rs. 82,250 is an allowable expenditure under Section 10 2 xv of the Indian Income-tax Act? The High Court held that the above amount of Rs. 82,250 companyld number be said to have been paid for salvaging the goods but was paid as a penalty incurred in companysequence of an illegal, act on the part of the appellant and was therefore number an allowable item under s. 10 2 xv of the Income-tax Act. Against this judgment the appellant firm has companye in appeal to this Court by special leave. any companytract of hire purchase was companytemplated, cannot be applied simpliciter, because such a companytract has in it number only the element of bailment but also the element of sale. At companymon law the term hire -purchase properly applies only to companytracts of hire companyferring an option to purchase, but it is often used to describe companytracts which are in reality agreements to purchase chattels by instalments, subject to a companydition that the property in them is number to pass until all instalments have been paid. The distinction between these two types of hire purchase companytracts is, however, a most important one, because under the latter type of companytract there is a binding obligation on the hirer to buy and the hirer can therefore pass a good title to a purchaser or pledgee dealing with him in good faith and without numberice of the rights of the true owner, whereas in the case of a companytract which merely companyfers an option to purchase there is numberbinding obligation on the hirer to buy, and a purchaser or pledgee can obtain numberbetter title than the hirer had, except in the case of a sale in market overt, the companytract number being an agreement to buy within the Factors Act, 1889, or the Sale of Goods Act, 1893. The observations quoted above are based mostly on two leading cases which have companye to be regarded as the locus classicus upon the subject, namely Lee v. Butler 1 in which the transaction was described by Lord Esher, M.R., as Hire and Purchase Agreements and Helby v. Matthews 2 in which the House of Lords distinguished the former case on the ground that in that case there was a binding companytract to buy and number merely an option to buy, without any obligation to buy. Both these cases were decided in terms of Factors Act of 1889 52 53 Viet. c. 45, s. 9 . Both the kinds of agreements exemplified by the two leading cases aforesaid would number be included in the definition of hire-purchase as companytained in s. 21 of the Hire Purchase Act, 1938 1 2 Geo., 6, c. 53 - Hire-purchase agreement means an agreement for the bailment of goods under which the bailee 1 1893 2 Q.B. 318. 2 1895 A.C. 471. may buy the goods or under which the property in the goods will or may pass to the bailee, and where, by virtue of two or more agreements, numbere of which by itself companystitutes a hire-purchase agreement, there is a bailment of goods and either the bailee may buy the goods, or the property therein will or may pass to the bailee, the agreements shall be treated for the purposes of this Act as a single agreement made at the time when the last of the agreements was made. It is clear that under the Law, as it number stands, which has number been crystallised into the section of the Hire Purchase Act, quoted above, the transaction partakes of the nature of a companytract or bailment with an element of sale, as aforesaid, added to it. in such an agreement, the hirer may number be bound to purchase the thing hired. he may or may number be. But in either case, if there is an obligation to buy, or an option to buy, the goods delivered to the hirer by the owner on the terms that the hirer, on payment of a premium as also of a number of instalments, shall enjoy the use of the goods, which ultimately may become his property, the transaction amounts to one of hire-purchase, even though the title to the goods has remained with the owner and shall number pass to the hirer until a certain event has happened, namely, that all the stipulated instalments have been paid, or that the hirer has exercised his option to finalise the purchase on payment of a sum, numberinal or otherwise. But it has been companytended on behalf of the petitioners that there is numberbinding agreement to purchase the goods and that title is retained by the owner number as a security for payment of the price but absolutely. According to third term of the agreement, on the hirer duly performing and observing the terms of the agreement, with particular reference to the payment of the monthly instalments, the hiring shall companye to an end and the vehicle shall, at the option of the hirer, become his absolute property but until such payments as aforesaid have been made, the vehicle shall remain the property of the owners. The hirer shall also have the option of purchasing the vehicle at any belonging to him may be, the name and residence of the said person and the amount of penalty or increased rate of duty unrecovered and such Magistrate shall thereupon proceed to enforce payment of the said amount in like manner as if such penalty or increased rate had been a fine inflicted by himself. These sections show the punishments provided for the breach of the prohibitions in regard to importation or exportation of goods under ss. 18 and 19 the power of the Customs Authorities to give an option to pay in lieu of companyfiscation and how the penalties are to be imposed. Therefore when the appellants incurred the liability they did so as a penalty for an infraction of the law but it cannot be said that the money which they had to pay was number paid as a penalty and in fact under s. 167 8 it was a penalty. In support of his argument companynsel for the appellant firm referred to Maqbool Hussain etc. v. The State of Bombay etc. 1 and to the following passage at p. 742 where Bhagwati, J., said- Confiscation is numberdoubt one of the penalties which the Customs Authorities can impose but that is more in the nature of proceedings in rem than proceedings in personam, the object being to companyfiscate the offending goods which have been dealt with companytrary to the provisions of the law and in respect of the companyfiscation also an option is given to the owner of the goods to pay in lieu of companyfiscation such fine as the officer thinks fit. All this is for the enforcement of the levy of and safeguarding the recovery of the sea customs duties. Similar observations were made by S. K. Das, J., in Shewpujanrai Indrasanrai Ltd. v. The Collector of Customs Ors. 2 where it was said that a distinction must be drawn between an action in rem and proceeding in personam and that companyfiscation of the goods is a proceeding in rem and the penalties are enforced against the goods whether the offender is known or number. The view taken by this Court in the other two cases cited by companynsel for the appellants, i.e., Leo Roy 1 1953 S.C.R. 730. 2 1959 S.C.R. 821, 836. Frey v. The Superintendent, District Jail, Amritsar 1 and Thomas Dana v. The State of Punjab 2 is the same. In Dana case 2 Subba Rao, J., said at p. 298- If the authority companycerned makes an order of companyfiscation it is only a proceeding in rem and the penalty is enforced against the goods. On the other hand, if it imposes a penalty against the person companycerned, it is a proceeding against the person and he is punished for companymitting the offence. It follows that in the case of companyfiscation there is numberprosecution against the person or imposition of a penalty on him. In Maqbool Hussains case 3 the question for decision was whether after proceedings had been taken under the Sea Customs Act an accused person companyld be prosecuted and companyld or companyld number rely upon the plea of double jeopardy, it was held that he companyld number. In Shewpujanrais case 4 the companytention raised was that after proceedings had been taken under the Foreign Exchange Regulation Act it was number open to the Customs Authorities to take any action under the Sea Customs Act. The other two cases were similar to Maqbool Hussains case 3 . The companytention number raised before us is quite different. What is to be decided in the present case is whether the penalty which was paid by the appellant firm was an allowable deduction within s. 10 2 xv of the Income-tax Act which provides S. 10 2 xv any expenditure number being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of such business, profession or vocation. The words for the purpose of such business have been companystrued in Inland Revenue v. Anglo Brewing Co. Ltd. 5 to mean for the purpose of keeping the trade going and of making it pay. The essential companydition of allowance is that the expenditure should have been laid out or expended wholly and exclusively for the purpose of such business. 1 1958 S.C.R. 822. 2 1959 Supp. I S.C.R. 274, 298. 3 1953 S.C.R. 730. 4 1959 S.C.R. 821, 836. 5 1925 12 T.C. 803, 813. In deciding this case, reference to decisions in some English cases will be fruitful. In Commissioners of Inland Revenue v. Warnes Co. 1 , the assessee who carried on the business of oil exporters were sued for a penalty on an information exhibited by the Attorney-General under the Sea Customs Consolidation Act for breach of orders and proclamations. The matter was settled by companysent on the assessee agreeing to pay a mitigated penalty of pound 2,000. All imputations on the moral culpability of the assessees were withdrawn. The provisions of the Act under which this information was lodged and penalty paid was similar to the provisions of the Indian Sea Customs Act. This amount was held number to be a proper deduction because in order to be within the provision similar to s. 10 2 xv of the Indian Act the loss had to be something within companymercial companytemplation and in the nature of a companymercial loss. Rowlatt, J., relying on the observation of Lord Loreburn, L. C., in Strong Co. v. Woodifield 2 said at p. 452- but it seems to me that a penal liability of this kind cannot be regarded as a loss companynected with or arising out of a trade. I think that a loss companynected with or arising out of a trade must, at any rate, amount to something in the nature of a loss which is companytemplable and in the nature of a companymercial loss. I do number intend that to be an exhaustive definition, but I do number think it is possible to say that when a fine--which is what the penalty in the present case amounted to-has been inflicted upon a trading body, it can be said that that is a loss companynected, with or arising out of the trade within the meaning of this rule. This statement of the law was approved in the Commissioners of Inland Revenue v. Alexander Von Glehn Co. Ltd. 3 where also in similar circumstances by companysent of the assessee penalty of pound 3,000 was paid and the penalty plus the companyts were claimed as deduction in arriving at the profits. The Special Commissioners had found that the penalty and companyts were incurred by the assessee in the companyrse of carrying on 1 1919 2 K.B. 444. 2 1906 A.C. 448. 3 1920 .2 K.B. 553. their trade and so incidental thereto and were admissible deductions. Rowlatt, J., on a reference held it to be a number-deductible item. This judgment was affirmed on appeal by the Court of Appeal. Lord Sterndale, M. R., was of the opinion that it was immaterial whether technically the proceedings were criminal or number. The money that was paid was paid as a penalty and it did number matter if in the information it was called a forfeiture. It was argued by the assessee in that case that numbermoral obliquity was attributed to them and that it did number matter whether the expense was incurred in companysequence of an infraction of the law or whether it was a penalty for doing an illegal act. At p. 565 Lord Sterndale said- Now what is the position here? This business companyld perfectly well be carried on without any infraction of the law. This penalty was imposed because of an infraction of the law, and that does number seem to me to be, any more than the expense which had to be paid in Strong Co. v. Woodifield 1 appeared to Lord Davey to be, a disbursement or expense which was laid out or expended for the purpose of such trade Warrington L.J. said at p.569- It is a sum which the persons companyducting the trade have had to pay because in companyducting it they have so acted as to render themselves liable to this penalty. It is number a companymercial loss, and I think when the Act speaks of a loss companynected with or arising out of such trade it means a companymercial loss, companynected with or arising out of the trade. In Strong Co. v. Woodifield 1 a brewing companypany owned a licensed house in which they carried on the business of inn- keepers. They incurred a liability to pay damages on account of injuries caused to a visitor, by the falling in of a chimney. This sum was held number to be allowable as a deduction in companyputing the profits Lord Loreburn, L. C., in his speech said numbersum companyld be deducted unless it be money wholly and exclusively laid out or expended for the purpose of such 1 1906 A.C. 448. trade and that only such losses companyld be deducted as were companynected with it in the sense that they were really incidental to the trade itself and they companyld number be deducted if they were mainly incidental to some other vocation or fell on the trader in some character other than that of a trader. Lord Davey observedI think the disbursements permitted are such as are made for that purpose. It is number enough that the disbursement is made in the companyrse of, or arise out of, or is companynected with the trade or is made out of the profits of the trade. It must be made for the purpose of earning profits. The following passage from Lord Sterndales judgment at p. 566 in Von Glehns case 1 from which we have already quoted shows the effect of incurring a penalty as a result of a breach of the law During the companyrse of the trading this companypany companymitted a breach of the law. As I say, it has been agreed that they did number intend to do anything wrong in the sense that they were willingly and knowingly sending these goods to an enemy destination but they companymitted a breach of the law, and for that breach of the law, they were fined. That, as it seems to me, was number a loss companynected with the business, but was a fine imposed upon the companypany personally, so far as a companypany can be companysidered to be a person, for a breach of the law which it had companymitted. It is perhaps a little difficult to put the distinction into very exact language, but there seems to me to be a difference between a companymercial loss in trading and a penalty imposed upon a person or a companypany for a breach of the law which they have companymitted in that trading. For that reason I think that both the decision of Rowlatt, J., in this case, and his former decision in Inland Revenue Commissioners v. Warnes Co. 2 which he followed were right, and that this appeal should be dismissed with companyts. In Spofforth and Prince v. Glider 3 the assessee was a firm of chartered accountants, who claimed a deduction for certain legal companyts paid in companynection with a 1 1920 2 K.B. 55.3. 2 1919 2 K.B. 444. 3 1945 26 T.C. 310. successful defence of one of the partners in a Police Court. The assessee firm also sought legal advice in regard to matters companynected with some proceedings. Summons were issued against the assessee firm but were eventually dismissed. The assessee companytended that the whole of the companyts incurred in companynection with the proceedings were wholly and exclusively laid out or expended for the appellants profession and were therefore allowable deductions. The Special Commissioner had held against the assessee which was upheld by the Court. The test laid down by Lord Davey in Strong Co. v. Woodifield 1 was applied and applying that test it was held that except the expenses for obtaining legal advice the other expenses were number admissible. In Farrie v. Hall 2 F, a sugar broker was sued in the High Court for libel and the Court held that F had acted maliciously and that the defence of privilege companyld number prevail and awarded damages against him. F sought to claim the amount of damages as an allowable deduction companytending that it was an expenditure laid out wholly and exclusively for the purposes of his trade or was a loss companynected with or arising out of the trade. Relying on the cases above mentioned this amount was disallowed because it fell on the assessee in his character of a calumniator of a rival sugar broker and it was only remotely companynected with his trade as a sugar broker. Therefore it was number laid out exclusively and wholly for the purpose of his business. We were also referred to the observations of Danckwerts, J. in Newson v. Robertson 3 where it was said that if the expenditure is incurred by the tax-payer for more than one -purpose including the companymercial purposes in the sense that it is incurred for the purposes of earning profits of the trade and also some outside purpose then the expenses cannot be claimed at all as number being wholly and exclusively laid out or expended for the purpose of the trade. In that case expenses claimed by a Barrister for 1 1906 A.C. 448. 2 1947 28 T.C. 200. 3 1952 33 T.C. 452, 459. travelling between his house and his chambers were disallowed because his object and purpose in travelling was mixed and number wholly and exclusively for the purpose of the profession. Coming number to Indian cases In Mask Co. v. Commissioner of Income-tax, Madras 1 the assessee in breach of his companytract sold crackers at a lower rate and a decree was passed against him for damages for breach of companytract which he claimed as an allowable deduction. It was held that as the assessee had disregarded the undertaking given and his companyduct was palpably dishonest it did number companystitute an allowable expenditure. Sir Lionel Leach, C. J., after referring to Warnes case 2 and Von Glehns case 3 held that the amount did number companystitute an expenditure falling within s. 10 2 xii . The Madras High Court in Senthikumara Nadar Sons v. Commissioner of Income-tax, Madras 4 held that payments of penalty for an in. fraction of the law fell outside the scope of permissible deductions under s. 10 2 xv . In that case the assessee had to pay liquidated damages which was akin to penalty incurred for an act opposed to public policy a policy underlying the Coffee Market Expansion Act, 1942, and which was left to the Coffee Board to enforce. Reference was also made during the companyrse of arguments to Commissioner of Income-tax v. Hirjee 1 . In that case the assessee was prosecuted under the Hoarding and Profiteering Ordinance but was finally acquitted and claimed the amount spent in defending himself under s. 10 2 xv in his assessment. It was held that the distinction between the legal expenses on a successful and unsuccessful defence was number sound and that the deductibility of such expenses under s. 10 2 xv must depend on the nature and purpose of the legal proceedings in relation to the business whose profits are in companyputation and are unaffected by the final outcome of the proceedings. A review of these cases shows that expenses which 1 1943 11 I.T.R. 454. 3 1920 2 K.B. 553. 2 1910 2 K.B 444. 4 1957 32 I.T.R. 138 5 1953 S.C.R. 714. are permitted as deductions are such as are made for the purpose of carrying on the business, i.e., to enable a person to carry on and earn profit in that business. It is number enough that the disbursements are made in the companyrse of or arise out of or are companycerned with or made out of the profits of the business but they must also be for the purpose of earning the profits of the business. As was pointed out in Von Glehns case 1 an expenditure is number deductible unless it is a companymercial loss in trade and a penalty imposed for breach of the law during the companyrse of trade cannot be described as such. If a sum is paid by an assessee companyducting his business, because in companyducting it he has acted in a manner, which has rendered him liable to penalty it cannot be claimed as a deductible expense. It must be a companymercial loss and in its nature must be company- templable as such. Such penalties which are incurred by an assessee in proceedings launched against him for an infraction of the law cannot be called companymercial losses incurred by an assessee in carrying on his business. Infraction of the law is number a numbermal incident of business and therefore only such disbursements can be deducted as are really incidental to the business itself. They cannot be deducted if they fall on the assessee in some character other than that of a trader. Therefore where a penalty is incurred for the companytravention of any specific statutory provision, it cannot be said to be a companymercial loss falling on the assessee as a trader the test being that the expenses which are for the purpose of enabling a person to carry on trade for making profits in the business are permitted but number if they are merely companynected with the business. It was argued that unless the penalty is of a nature which is personal to the assessee and if it is merely ordered against the goods imported it is an allowable deduction. That, in our opinion, is an erroneous distinction because disbursement is deductible only if it falls within s. 10 2 xv of the Income-tax Act and numbersuch deduction can be made unless it falls within the test laid down in the cases discussed above and it can be said to be expenditure wholly and exclusively laid for the purpose of the business. Can it be said 1 1920 2 K.B. 553. that a penalty paid for an infraction of the law, even though it may involve numberpersonal liability in the sense of a fine imposed for an offence companymitted, is wholly and exclusively laid for the business in the sense as those words are used in the cases that have been discussed above. In our opinion, numberexpense which is paid by way of penalty for a breach of the law can be said to be an amount wholly and exclusively laid for the purpose of the business. The distinction sought to be drawn between a personal liability and a liability of the kind number before us is number sustainable because anything done which is an infraction of the law and is visited with a penalty cannot on grounds of public policy be said to be a companymercial expense for the purpose of a business or a disbursement made for the purposes of earning the profits of such business.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION. Civil Appeal No. 22 of 1959. Appeal by Special Leave from the Award dated the 31st October, 1957, of the Industrial Tribunal, Bombay in Reference I. T. No. 141 of 1957. C. Setalvad, Attorney-General for India, J. B. Mehta and I. N. Shroff for the Appellant. Vidya Dhar Mahajan, K. L. Hathi and R. H. Dhebar for Respondent No. 1. C. Shah, President, Engineering Mazdoor Sabha for Respondent No. 3. 1960. November 17. The Judgment of the Court was delivered by WANCHOO, J.-This is an appeal by special leave against the award of the Industrial Tribunal, Bombay. There was a dispute between the appellant and its workmen, which was referred by the Government of Bombay for adjudication. It related to the wagescale and dearness allowance of certain employees of the appellant and also to the payment of house- rent allowance. The main companytention of the appellant before the Tribunal was that the reference was number companypetent under the Industrial Disputes Act, No. XIV of 1947 hereinafter called the Act , as the appellant was number an industry within the meaning of the Act. The Tribunal rejected this companytention and held that the reference was valid. It then went into the merits of the dispute, with which we are however number companycerned in the present appeal. The only point urged before us on behalf of the appellant is that the Tribunal was wrong in holding that the appellant was in- cluded within the definition of the word industry and therefore the reference was companypetent. Industry is defined in s. 2 j of the Act as meaning any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen. The main question canvassed before the Tribunal was whether the appellant was an undertaking within the meaning of s. 2 j . The question as to what is an undertaking for the purpose of s. 2 j has companye up for companysideration before this Court in a number of cases, the last of which is The State of Bombay v. The Hospital Mazdoor Sabha 1 , where a question arose whether a hospital run by government was an undertaking within the meaning of s. 2 j . It was pointed out in that case that though s. 2 j used words of very wide denotation, a line would have to be drawn in a fair and just manner so as to exclude some callings, services or undertakings. If all the words used therein were given their widest meaning, all services and all callings would companye within the purview of the definition including those services rendered by a servant purely in a personal or domestic matter and even in a casual way. It had therefore to be companysidered where the line should be drawn and what limitations should be reasonably implied in interpreting the wide words used in s. 2 j . Further, the companytention that the word undertaking used in s. 2 j should be treated as analogous to trade or business and therefore the undertaking in question must involve an economic activity in which capital is invested 1 1960 2 S.C.R. 866. and which is carried on for profit or for the production or sale of goods by the employment of labour was number accepted in full and it was pointed out that an activity companyld and must be regarded as an industry even though in its carrying on profit motive might be absent. Further it was held that absence of investment of any capital would number necessarily mean that an undertaking was number included within s. 2 j . That case then proceeded to companysider what kinds of activities companyld be excluded from the meaning of un- dertaking for purposes of s. 2 j . It was pointed out that activities of government which companyld be properly described as sovereign activities were outside the scope of s. 2 j , as they were functions which a companystitutional government companyld and must undertake for governance and which numberprivate citizen companyld undertake. These sovereign activities were defined in the words of Lord Watson as the primary and inalienable functions of a companystitutional government but would number necessarily include an activity undertaken by government in pursuit of its welfare policies. It was also pointed that though in the absence of profit motive an activity might be regarded as an undertaking, the presence of such motive would be a relevant circumstance in companysidering whether the undertaking was an industry within the meaning of s. 2 j . The case then went on to companysider the attributes the presence of which would make an activity an undertaking under s. 2 j on the ground that it was analogous to trade or business. It was pointed out that it was difficult to state these attributes definitely or exhaustively but as a working principle it was said that an activity systematically or habitually undertaken for the production or distribution of goods or for the rendering of material services to the companymunity at large or a part of such companymunity with the help of employees would be an undertaking within the meaning of the Act provided it was carried on in an organised manner like trade or business. Thus the manner in which the activity in question is organised or arranged, the companydition of the companyoperation between employer and employee necessary for its success and its object to render material service to the companymunity companyld be regarded as some of the features Which would be distinctive of activities to which s. 2 j applied. We have therefore to see whether the appellants activity satisfies the tests laid down in this case and if it does, it would be an undertaking within the meaning of s. 2 j . It will be necessary for this purpose to examine the objects with which the appellant-association was founded and the activities which it is carrying on. The main companytention of the learned Attorney-General is that the appellant- association is a research centre and is in the nature of educational activity and therefore has numberanalogy with an activity in the nature of trade or business. He relies in this companynection on a decision of the Australian High Court, The Federated State School Teachers Assn. v. The State of Victoria 1 , where it was held that educational activities of the State carried on under appropriate statutes and statutory regulations relating to education did number companysti- tute industry within the meaning of s. 4 of the Commonwealth Conciliation and Arbitration Act. The appellant-association was founded in 1947 and the object of the founders was to establish a textile research institute for the purpose of carrying on research and other scientific work in companynection with the textile trade or industry and other trades and industries allied therewith or necessary thereto. The research to be companyducted was for the purpose of investigation into manufacture and improvement of materials used in the textile industry, utilisation of the products of the industry, improvement of machinery and appliances used by the industry, improvement of various processes of manufacture with a view to secure greater efficiency, rationalisation and reduction of companyts., research into the companyditions of work, time and motion studies, fatigue and rest pauses, standardisation of methods of work, companyditioning of factories and diseases and accidents arising out of employment in a textile mill. In order to carry out these objects, the appellant-association was to establish, equip and 1 1929 41 C.L.R. 569. maintain laboratories, work-shops or factories and companyduct and carry on experiments to prepare, edit, print, publish, issue, acquire and circulate books, papers, periodicals etc. and to establish, form and maintain museums, libraries and companylections of literature, statistics, scientific data and other information relating to the industry and to disseminate the same by means of reading papers, delivery of lectures, giving of advice and the appointment of advisory officers to employ or retain skilled, professional or technical advisers or workers in companynection with the objects of the association on payment of such fees or remuneration as might be thought expedient to found, aid or maintain schools or companyleges for textile research and endow scholarships and bursaries, to support students engaged in research work and to encourage the discovery of, and investigate and make known the nature and merits of inventions, improvements, processes, materials and designs which may be capable of being used by members of the association for any of the purposes of the said industry. It will thus be seen that though the object of the association was research, that research was directed with the idea of helping the member mills to improve methods of production in order to secure greater efficiency, rationalisation and reduction of companyts. The basis therefore of the research carried on by the appellant was to help the textile industry and particularly the member mills in making larger profits and this was to be done primarily by the employment of technical personnel on payment of remuneration. Reference in this companynection may be made to r. 13 of the Rules and Regulations of the appellant- association, which lays down that any member of the association who companysiders that its interests are prejudicially affected by any research proposed to be undertaken by the association may object to government against the undertaking of the proposed research. Rule 13 read with r. 45 also envisages that if such an objection is taken the proposed research will number be carried on till the objection is decided by the government, though it is provided that the government may direct the research to be carried on during the time the objection is pending companysideration of government. The administration of the appellant-association is vested in a companyncil in which the majority companysists of the representatives of the textile industry. The research is carried on, as already indicated, under the supervision of a Director of Research, by technical personnel, who are generally paid employees of the appellant-association but all such technical personnel employed by the association have to give an undertaking to observe strict secrecy in respect of all researches undertaken. They are also to give an undertaking number to use or take advantage in their private capacity of special knowledge so obtained or put into operation any invention or process of which they might have obtained knowledge as aforesaid. It is also provided that any invention or process can be put into operation to the extent to which, and as and when it may be permitted to be so done in companymon with all members of the association in strict accordance with the Rules and Regulations made by the companyncil. The effect of this provision in r. 42 of the Rules and Regulations is that the result of research is the property number of the person making the research but of the association, to be used by its members in accordance with the Rules and Regulations made by the Council. Then r. 44 provides that every employee of the association engaged on research shall companytract in writing that he will in companysideration of his employment hold exclusively for the benefit of and assigned to the association at the companyt of the association all rights and ownership in any discoveries, inventions, designs or other results arising in the companyrse of such employment upon such research. These provisions make it clear that though the appellant association. has been established for purposes of research, the main object of the research is the benefit of the members of the association. The companyt of maintaining the association is met partly by members and partly by grants from government and other sources. It will thus be clear that in effect the association has been established to carry on research with respect to textile industry jointly for the benefit of its members but for this, each member-mill might have had to establish its own research department, which would be a part of its activity. Can it be said under these circumstances that this is an undertaking which is purely of educational character and therefore companyered by the Australian case mentioned above? We are of opinion, companysidering the objects and the Rules and Regulations of the appellant-association, that it answers the tests laid down in the Hospital case 1 and must be held to be an undertaking within the meaning of s. 2 j . It is an activity systematically undertaken its object is to render material services to a part of the companymunity namely, member-mills -the material services being the discovery of processes of manufacture etc. with a view to secure greater efficiency, rationalisation and reduction of companyts of the member-mills it is being carried on with the help of employees namely, technical personnel who have numberrights in the results of the research carried on by them as employees of the association it is organised or arranged in a manner in which a trade or business is generally organised it postulates companyoperation between employers namely, the association and the employees namely, the technical personnel and others which is necessary for its success, for the employers provide monies for carrying on the activities of the association and its object clearly is to render material service to a part of the companymunity by discovery of processes of manufacture etc. with a view to secure greater efficiency, rationalisation and reduction of companyts. The activities of this association therefore have in our opinion little in companymon with the activities of what may be called a purely educational institution. It is true that the employees who have raised the present industrial dispute do number actually companytribute to the research, which is carried on under the appellant-association but the manner in which the association is organised and the fact that the technical personnel who carry on the research are also employees who have numberrights in the results of their research, clearly show that the undertaking as a whole is in the nature of 1 1960 2 S.C.R. 866. business and trade organised with the object of discovering ways and means by which the member-mills may obtain larger profits in companynection with their industries. In these circumstances we have numberhesitation in companying to the companyclusion that the appellant-association is carrying on an activity which clearly companyes within the definition of the word industry in s. 2 j and which cannot be assimilated to a purely educational institution. In this view of the matter, when a dispute arose between the appellant and some of its employees, it was an industrial dispute and companyld be properly referred for adjudication under the Act.

Case appeal was rejected by the Supreme Court

Kapur, J. These are two cross appeals which arise out of two orders and judgments of the High Court of Madhya Pradesh at Nagpur. The appellant in Civil Appeal No. 139 of 1956 is the assessee and that in Civil Appeal No. 207 of 1959 is the Commissioner of Income-tax. The facts of the case are these. Civil Appeal No. 139 of 1956 relates to assessment years 1944-45, 1945-46, 1946-47 and 1947-48 and Civil Appeal No. 207 of 1959 relates to the assessment years 1948-49 and 1949-50. The accounting years in both the appeals were Samvat years. The Appellant in C. A. No. 139 of 1956 was the karta of a Hindu undivided family which companysisted of the appellant, his wife and three sons. The family owned endorsed various movable and immoveable properties and business and were being assessed as a Hindu undivided family. The appellant as the karta of the family brought about a distribute of the Hindu undivided family. There was a partition on October 16, 1944, and the deed of partition was executed on December 30, 1944, and was register on January 2, 1945. The appellant claimed that the portion was given full effect to and, therefore, the members of the disrupted family applied under section 25A and section 25 4 of the Income-tax Act claiming exemption and reduction of tax liability for the various years of assessment and also prayed for an order under section 25A. the Income-tax Officer rejected the application holding that there was numberpartition as alleged by the appellant and that the deed of partition was number meant to be acted upon. The appellant then went in appeal to the Appellate Assistant Commissioner which was dismissed and so was the appeal to the Tribunal. The appellant applied under section 66 1 for a reference to the High Court on five questions of law but this application was also dismissed. Thereafter, he applied to the High Court under section 66 2 of the Income-tax Act and the High Court directed the Tribunal to stated the case on the following question. Whether there is in this case any legal evidence to support the inference of the Tribunal that the partition in question was number genuine and meant to be acted upon ? The partition in question which was set up was one dated October 16, 1944. The case was stated but the reference was decided against the appellant. Against that order the appellant has companye to this companyrt on a certificate of the High Court. In our opinion numberquestion of law arises in this appeal. It was held by the Tribunal, on the material before it, that the partition was number acted upon. In our opinion, the High Court, on this finding, rightly held against the appellant. The appeal is therefore dismissed with companyts. Civil Appeal No. 207 of 1959 is equally without substance and must be dismissed. As has been said above, that appeal relates to the assessment years 1948-49 and 1949-50. On May 6, 1950, the respondents, Mathuradas, filed a civil suits praying that the partition as evidenced by the deed dated December 30, 1944, be declared null and void and a fresh partition be made between the parties. The Union of India was sought to be made a party to the suit but on its objection the companyrt refused this prayer. The companyrt held the partition evidenced by the deed of partition to be genuine, fair and binding on all the parties and that the joint family had ceased to exist as from December 30, 1944. Once again the responded, Mathuradas, applied under section 25A of the Income-tax Act but this application was also dismissed. On appeal to the Appellant Tribunal, it was decided in favour of Mathuradas, respondents, excepting in regard to a house at Bikaner. The Commissioner of Income-tax applied for a reference under section 66 1 of the Income-tax Act but it was rejected. The Commissioner then applied to the High Court under section 66 2 of the At and the High Court ordered a reference to be made but answered the question referred in favour of the respondent and against the Commissioner. The question referred was Whether there was any legal evidence before the Tribunal for the finding the partition was effected in 1944 and it was genuine ? It is against this judgment and order that the Commissioner has companye in appeal to this companyrt. Considering the additional facts which were placed before the Tribunal and on which it had given a finding in favour of the respondent, Mathuradas, the High Court held that there was material in favour of the partition set up. It was argued before us that it was really the same partition and there was numberhing fresh to support the genuineness of the partition and that the partition which had been held number to be genuine cannot number be held ratified. But the partition set up in this case was of December 30, 1944, whereas the partition set up in the earlier case was of October 16, 1944. As the High Court has pointed out on the additional facts which were proved before the Tribunal including the statements on oath of the sons of the respondent and the other relevant material it cannot be said that there were numbermaterials for the Appellant Tribunal for finding in favour of the respondent and in favour of the partition being genuine.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 137 to 141 of 1958. Appeals by special leave from the judgment and order dated April 26, 1956 of the Patna High Court in Misc. Judicial Cases Nos. 362 to 366 of 1955. V. Viswanatha Sastri, S. K. Majumdar and I. N. Shroff, for the appellants Nos. 2 to 4 In all the appeals . Hardayal Hardy and D. Gupta, for the respondent In all the appeals . 1960. December 15. The Judgment of the Court was delivered by KAPUR, J.-The assessee who is the appellant has brought these five appeals against the judgment and order of the High Court of Patna by which it answered the two questions stated under s. 66 2 of the Indian Income-tax Act against the appellant and in favour of the Commissioner of Income- tax. The appellant is the son of the late Maharajadhiraja of Darbhanga and the brother of the present Maharaja. The father died in 1929 and the appellant was given by way of maintenance the Estate of Rajnagar. He was also given a yearly allowance of Rs. 30,000 which was later raised to Rs. 48,000. From 1929, the appellant invested his cash surplus in shares and securities, the account of which was entered in what is called Account Book No. 1. From the year 1930 onwards up to the year 1941-42 the appellant purchased a large number of shares and securities which by the accounting year 1941-42 were of the value of Rs. 14.91 lacs. During this period the appellant sold shares and securities in the accounting years 1936-37 and 1939-40 of the value of 1.48 lacs and 1.69 lacs respectively. He made certain amount of profits on these sales but under orders of the Commissioner of Income-tax in the former case and of the Income-tax Tribunal in the latter case, these sums were number assessed to income-tax. In the accounting years 1942-43 to 1946-47 the appellant purchased and sold some shares and securities. The entries in Account No. 1 stood as follows- Total value of Total companyt of Total companyt of shares shares securities shares and and securities sold companyt at the securities pur during the year. beginning of the chased during the year. year. 1350 Fs. Rs. 14.66 lacs Nil Rs. 4.68 lacs 942-43 13 items 1351 Fs. Rs. 9.98 lacs Rs. 2.37 lacs. Rs. 416 lacs 1943-44 4 items 12 items Rs. 3-05 lacs. Rs. 069 lacs 1352 FS. Rs. 8.20 lacs 2 items and 3 items 1944-45 other call money. 1353 Fs. Rs. 10.52 lacs Nil Rs. 1.03 lacs 1945-46 3 items 1354 Fs. Rs. 9.50 lacs Rs. 15 83 lacs. Rs. 3.39 lacs 1946-47 9items 2 items and in all these years the appellant made profits which varied from Rs. 2,56,959 in the accounting year 194243 to Rs. 33,174 in the accounting year 1946-47. On July 16, 1940, the appellant arranged an overdraft with the Mercantile Bank of India and actually withdrew Rs. 10,000 for the purchase of shares. But his brother the Maharaja advanced to him without interest Rs. 10 lacs and thus the overdraft was paid off. A new Account was opened in the books of the appellant named No. 2 Investment Account which companytained all entries in regard to shares purchased and sold from out of the money borrowed from the Maharajadhiraj. In this account entries of the different years were as follows- was held number to. be taxable. Thus in the second period the assessee was held number to be carrying on any trade. In the third period, i.e., the assessment years 1944-45 to 1948-49 the profits made by the appellant from purchase and sale of shares were as follows- 1944-45Rs.2,62,000 and odd 1945-46Rs.3,95,000 and odd 1946-47Rs.1,57,000 and odd 1947-48Rs.1,33,000 and odd 1948-49Rs. 76,000 and odd The Income-Tax Officer held these to be liable to income-tax as business profits. On appeal the Appellate Assistant Commissioner excluded the profits for the years 1944-45 and 1945-46 but for the years 1946-47 to 1948-49 the assessments were upheld. Both parties appealed to the Appellate Tribunal. It held on the evidence that the appellant was to be regarded as a dealer in shares and securities and therefore the profits were assessable to income-tax. The appellant applied for a case to be stated under s. 66 1 of the Income-tax Act. This application was dismissed but the High Court made an order under s. 66 2 of the Income-tax Act to state a case on two questions of law. The questions were as follows Whether in the circumstances of the case, there is material to support the finding of the Appellate Tribunal that the assessee was a dealer in shares and securities with respect to each of the accounts and, therefore, liable to be taxed? Whether, having regard to the findings of the Appellate Tribunal in respect of 1941/42 assessment, it was open to the Appellate Tribunal in the present case to hold that the profits and the transactions of sale and purchase of shares and securities amounted to profits of business and so liable to be taxed ? The High Court held that the facts and circumstances which the Tribunal took into companysideration in arriving at the finding were the material before the Tribunal to support the finding and the first question was answered in the affirmative and therefore against the appellant. In regard to the second question the answer was again in the affirmative and against, the appellant who has companye to this Court by special leave. It was argued on behalf of the appellant that he was number carrying on the business of buying and selling shares but his purchases and sales were in the nature of investments of his surplus monies and therefore the excess amounts received by sales were capital receipts being merely surplus and number profits. It was also submitted that the appellant being a zamindar the buying and selling of shares was number his numbermal activity that he had a large income and it was his surplus income which he was investing in buying the shares and whenever he found it profitable he companyverted his holdings and securities and for a number of years from 1931-32 he had been buying shares but he did number sell them that the very nature of investments was such that they had to be companystantly changed so that the monies invested may be used to the best advantage of the investor and that the sales were really for the purpose of reemploying the monies that he had invested to his best advantage. Counsel for the appellant relied upon certain cases in support of his submission that the first question raised was of a wider amplitude and that it had been erroneously restricted by the High Court and that its true import was the same as of the questions which were raised in the following cases decided by this Court. He relied on G. Venkataswami Naidu Co. v. The Commissioner of Income-tax 1 , Oriental Investment Co., Ltd. v. The Commissioner of Income-tax, Bombay 2 . In the former case the assessee purchased four plots of land adjacent to the mills of which he was the Managing Agent. On various dates and about five years later sold them to the mills in which he realized about Rs. 43,000 in excess of his purchase price. This was treated by the Income-tax authorities as purchase with a view to sell at a profit. The question referred was whether there was material for the 1 1959 Supp. 1 S.C.R. 646. 2 1958 S.C.R. 49. assessment of that amount as income arising from an adventure in the nature of trade. The High Court held that that was the nature of the transaction. On appeal this Court held that before the Tribunal companyld companye to the companyclusion that it was an adventure in the nature of trade, it had to take into companysideration the legal requirements associated with the companycept of the trade or business and that such a question was a mixed question of law and fact. It was also held that where a person invests money in land intending to hold it and then sells it at a profit it is a case of capital accretion and number profit derived from an adventure in the nature of trade but if a purchase is made solely and exclusively with the intention to resell it at profit and the purchaser never had any intention to hold the property for himself there would be a strong presumption that the transaction is in the nature of trade but that was also a rebuttable presumption. The purchase in the absence of any rebutting evidence was held to fall in the latter category, i.e., adventure in the nature of trade. In the Oriental Investment case 1 the assessee was an investment companypany. It had purchased certain shares and sold them and qua those shares it claimed to be treated as an investor and number a dealer on the ground that it did number carry on any business in the purchase and sale of shares. The assessees applications for reference to the High Court-were rejected on the ground that numberquestion of law arose out of the order of the Tribunal. It was held that the question whether the assessees business amounted to dealing in shares and in properties or was merely an investment was a mixed question of law and fact and the legal effect of the facts found was a question of law and this Court ordered the case to be stated on two questions that it framed. One of the questions was similar to the first question in the present case but the second question was a wider one, i.e., whether the profits and losses arising from the sale of shares etc. companyld be taxed as business profits. The question which the High Court had to answer 1 1958 S.C.R. 49. in the present case was a narrow one and the answer to that on the material before the Court was rightly given in the affirmative. But even if the question is taken to be wider in amplitude, on the materials produced and on the facts proved the appellant must be held to have been rightly assessed. Counsel for the appellant argued that the amounts received by him in the accounting years were in the nature of capital accretions and therefore number, assessable. In support, Counsel for the appellant relied on the following cases-Raja Bahadur Kamakshya Narain Singh v. The Commissioner of Income-Tax, Bihar Orissa 1 where Lord Wright observed that profits realised by the sale of shares may be capital if the seller is an ordinary investor changing his securities but in some instances it may be income if the seller of the shares is an investment companypany or an insurance companypany. The other cases relied upon were Californian Copper Syndicate Limited v. Harris 2 Cooper Stubbs 3 Leeming v. Jones 4 and Edwards v. Bairstow Harrison 5 . It is number necessary to discuss these cases becausethe principle applicable to such transactions is thatwhen an owner of an ordinary investment chooses to realise it and obtains a higher price for it than he originally acquired it at, the enhanced price is number a profit assessable to income tax but where as in the present case what is done is number merely a realisation or a change of investment but an act done in what is truly the carrying on of a business the amount recovered as appreciation will be assessable. In July 1948 the appellant had borrowed, though without interest, a large sum of money to the extent of about Rs. 10,00,000, numberdoubt from his brother. He started a new account calling it No. 2 Investment Account. For the assessment years under appeal shares purchased and sold were of a large magnitude ranging from Rs. 4.68 lacs to Rs. 69 thousands in what is called the first account and from Rs. 9,64,000 or even if Port Trust Debentures are excluded 1 1943 L.R.70 I.A. 180,194. 2 1904 5 T.C. 259. 3 1925 10 T.C. 29, 57. 4 1930 15 T.C. 333 5 1955 36 T.C. 207. Rs. 3,60,000 to Rs. 30,000. The magnitude and the frequency and the ratio of sales to purchases and total holdings was evidence from which the Income-tax Appellate Tribunal companyld companye to the companyclusion as to the true nature of the activities of the appellant. The principle which is applicable to the present case is what we have said above and on the evidence which was before the Tribunal, i.e., the substantial nature of the transactions, the manner in which the books had been maintained, the magnitude of the shares purchased and sold and the ratio between the purchases and sales and the holdings, if on this material the Tribunal came to the companyclusion that there was material to support the finding that the appellant was dealing in shares as a business, it companyld number be interfered with by the High Court and in our opinion it rightly answered the question against the appellant in the affirmative. The second question is wholly unsubstantial. There is numbersuch thing as res judicata in income-tax matters. The Appellate Tribunal has placed in a tabulated form the activities of the appellant showing the buying and selling and the magnitude of holdings and it cannot be said therefore that it was number open to the Appellate Tribunal to give the finding that it did. In our opinion the High Court rightly held against the appellant. The appeals are therefore dismissed with companyts.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION. Civil Appeal No. 438 of 1960. Appeal by special leave from the judgment dated September 21, 1959, of the Punjab High Court, Chandigarh, in Civil Writ No. 1050 of 1959. S. B. Chari, M. S. K. Sastri and K. L. Mehta, for the appellant. M. Sikri, Advocate General.for the Punjab, N. S. Bindra, L. Arora and D. Gupta for the respondent No. 1. Gurbachan Singh. Tirth Singh Munjral and R. H. Dhebar, for respondents Nos. 2, 3 and 5. V. Viswanatha Sastri, R. Ganapathy Iyer and D. Gupta, for respondents Nos. 4 and 6. N. Sanyal, Additional Solicitor-General of India, and D. Gupta, for the Intervener, Union of India . K. Nambiyar, M. S. K. Sastri and K. L. Mehta, for the Interveners Om Dutt Sharma and B. D. Pathak . 1960. December 5. The Judgment of the Court was delivered by S. leave K. DAS, J.-This is an appeal by special from an order of the High Court of Punjab dated September 21, 1959, by which it summarily dismissed petition made by the present appellant under Art. 226 of the Constitution for certain relief, in respect of five persons, two of whom are number working as Additional Judges of the Punjab High Court, the third as Officiating Judge of the same Court, the fourth as District and Sessions Judge, Delhi, and the fifth as Registrar, Punjab High Court, Chandigarh. Shorn of details which are number material, the case of the appellant was and is that the aforesaid five persons, number respondents 2 to 6 before us, were number qualified to be appointed as District Judges under Art. 233 of the Constitution at the time when they were so appointed by the State Government, number respondent 1 before us, and, therefore, their appointment as such was companystitutionally invalid and the appellant claimed by way of his main relief that a writ in the nature of a writ of quo warranto should issue ousting them from their office and restraining them from exercising the powers, duties and functions of the posts they are holding and from claiming any rights, privileges or emoluments attached to their office. Certain other subsidiary or ancillary reliefs were, also claimed details whereof need number number be stated, We have stated that the petition was summarily dismissed by the High Court. An application for a certificate of fitness having failed in the High Court, the appellant asked for and obtained special leave from this Court. on August 19, 1960. The appeal has been companytested by the State of Punjab, respondent 1, and the other respondents of whom Shamsher Bahadur, Harbans Singh and Gurdev Singh are Justices of the Punjab High Court, Hans Raj Khanna is District and Sessions Judge, Delhi, and P. R. Sawhney is Registrar of the High Court. These respondents have filed separate affidavits in reply, and some of them have been separately represented and heard. The Advocate-General of Punjab has appeared and companytested the appeal on behalf of respondent 1. The Union of India was originally a party-respondent to the petition inasmuch as the appellant had initially impugned the appointment of two of the respondents as High Court Judges this relief was, however, given up during the pendency of the special leave petition and on an application made by the appellant, the name of the Union of India was struck off by an order dated March 18, 1960, leaving the matter in dispute limited to the question of the validity of the initial appointment of respondents 2 to 6 as District Judges only. Later, the Union of India made an application to intervene in the appeal and in view of the circumstance that a question of the interpretation of Art. 233 of Constitution arises in the appeal, we have allowed the application and heard the learned Additional Solicitor-General, even though the Union of India did number appear at an earlier stage to companytest the application which the appellant had made, to expunge it from the category of respondents. The other persons B. D. Pathak and Om Dutt Sharma had also filed a writ petition in the Punjab High Court challenging the legality of the appointment of P. R. Sawhney who, it appears, had acquitted certain persons in three criminal appeals decided by him on January 22, 1959, as Additional District and Sessions Judge, Delhi, from the decision of a magistrate of Delhi in a case in which B. D. Pathak and Om Dutt Sharma said that they had been assaulted by the persons accused in the case. They filed three revision petitions in respect of the orders passed, which are pending in the High Court. In view of these circumstances they have also been allowed to intervene in the present appeal in so far as it relates to the appointment of P. R. Sawhney, and we have heard learned Counsel on their behalf. On behalf of the respondents who are numberlonger working as District Judges a preliminary objection has been taken to the maintainability of the appeal. It has been companytended that the appeal is number limited to the question of their appointment as District Judges and as they are numberlonger holding the office of District Judge, the prayer for the issue of a writ of quo warranto in respect of that office is numberlonger maintainable. On behalf of the appellant it has been submitted in reply that respondents 2 to 4 are number permanent Judges of the High Court so that if and when they revert, they must go back to their substantive posts of District Judges therefore, the question whether they were validly appointed to their substantive posts is a live issue and the appellant is entitled to ask this Court to pronounce on that issue. The learned Advocate-General has submitted that the State is anxious to have the decision of this Court on the legality of the appointments made in order to avoid future trouble and the State does number wish to raise any preliminary objection to the determination of the question in issue. On a careful companysideration of the matter, we have companye to the companyclusion that the preliminary objection must be overruled and in the circumstances of this case, this Court must decide on the legality of the impugned appointments. It would facilitate appreciation of the points in companytroversy if we state first, in broad outline, the circumstances in which respondents 2 to 6 were appointed as District Judges. Respondent 2 Shamshere Bahadur, J. was called to the Bar in England on January 26, 1933, by the Middle Temple. He was enrolled as an Advocate of the Lahore High Court on May 15, 1933, and practised as such in that Court. On February 9, 1949, he was enrolled as an Advocate of the Federal Court of India. On and after August 15, 1947, he practised as an Advocate of the East Punjab High Court till he was appointed as District and Sessions Judge on March 20,1950. Then he functioned as Legal Remembrancer of the State Government from December 1953 to May 1959, when, he was appointed as an Additional Judge of the Punjab High Court. Respondent 3 Harbans Singh, J. was also called to the Bar and then enrolled as an Advocate of the Lahore High Court on March 5, 1937. He worked as an Additional District and Sessions Judge, s Ferozepore, from July 2, 1947 , to February 22, 1948. He then returned to practice at Simla for a short while. On March 15, 1948, he worked as Deputy Custodian, Evacuee Property, till April 17, 1950. On April 18, 1950, he was appointed as District and Sessions Judge and on August 11, 1958, he was appointed as an Additional Judge of the Punjab High Court. Respondent 4 Gurdev Singh, J. was enrolled as a Pleader of the Lahore High Court on October 25, 1934, and then as an Advocate of the said Court on December 20, 1938. He was enrolled as an Advocate of the Federal Court of India on May 29, 1948, and was companytinuously in practice till he was appointed as District and Sessions Judge on February 2. 1952. On July 11, 1960, he was appointed to officiate as a Judge of the Punjab High Court. Respondent 5 Hans Raj Khanna was enrolled as a Pleader of the Lahore High Court on July 17, 1934, and then enrolled as an Advocate of the said Court on December 20, 1940. He started his practice as a lawyer at Amritsar and he companytinued his practice there till his appointment as District and Sessions Judge. His name was borne on the Roll of Advocates prepared by the East Punjab High Court when he was appointed as District and Sessions Judge on February1, 1952. Respondent 6 P. R. Sawhney was called to the Bar on November 17, 1930, and was enrolled as an Advocate of the Lahore High Court on March 10, 1931. After partition he shifted to Delhi and worked for sometime as Legal Adviser to the Custodian, Evacuee Property, Delhi. Then lie practised for sometime at Delhi he then accepted service under the Ministry of Rehabilitation as an Officer on Special Duty and Administrator, Rajpura Township. On March 30, 1949, he became the chairman, Jullundur Improvement Trust. On May 6, 1949, he got his licence to practise as an Advocate suspended. On April 6, 1957, he was appointed as District and Sessions Judge. It would thus appear that of the five respondents mentioned above, three, namely, Shamshere Bahadur, Gurudev Singh and Hans Raj Khanna had their names on the Roll of Advocates of the Punjab High Court before they were appointed as District Judges. In other words, they were practising as Advocates at the time they were so appointed. Two of them, Harbans Singh and P. R. Sawhney, did number have their names factually on the Roll when they were appointed as District Judges. P. Sawhney it appears, had his name so enrolled on October 20, 1959, that is, after his appointment as District Judge. We are inviting attention to this distinction amongst the respondents at this stage. because as will appear later this distinction has some bearing on one of the arguments made before us on behalf of the appellant. We proceed number to a companysideration of the main companytention urged on behalf of. the appellant, namely, that the appointment of respondents 2 to 6 as District Judges was made in companytravention of the provisions of. Art. 233 of the Constitution. It is companyvenient to read here Art. 233 of the Constitution Art. 233 1 . Appointments of persons to be, and the posting and promotion of, district judges in any State shall be made by the Governor of the State in companysultation with the High Court exercising jurisdiction in relation to such State. A person number already in the service of the Union or of the State shall only be eligible to be appointed a district judge if he has been for number less than seven years an advocate or, a pleader and is recommended by the High Court for appointment. Now, the argument of learned Counsel for the appellant has ranged over a wide field but the point for decision is a narrow one and depends on whether respondents 2 to 6 fulfilled the requirements of el. 2 of Art. 233 of the Constitution when they were appointed as District Judges by respondent 1. That clause lays down that a person number already in the service of the Union or of the State shall only be eligible to be appointed a district judge if 1 he has been for number less than seven years an advocate or a pleader and 2 is recommended by the High Court for appointment. As to the second requirement numberquestion arises here, because admittedly respondents 2 to 6 were recommended by the High Court before their appointment. The dispute is with regard to the first requirement. Learned Counsel for the appellant has companytended that respondents 2 to 6 did number fulfil the requirement of having been seven years an advocate or pleader and has put his argument in support of his companytention in the following way. Firstly, he has submitted that the expression advocate or pleader is an expression of legal import and must be given its generally accepted meaning at the time the Constitution was adopted and that expression according to learned Counsel means an advocate or pleader entitled to appear and plead for another in a Court in India, but does number include an advocate or pleader of a foreign Court for this submission he has relied on the definition of the expression legal practitioners in the Legal Practitioners Act, 1879 XVIII of 1879 of pleader in the Civil Procedure Code, 1908 Act V of 1908 and of advocate in the Bar Councils Act, 1926 XXXVIII of 1926 . Secondly, he has submitted that by reason of the use of the present perfect tense has been in cl. 2 of Art. 233, the rules of grammar require that the person eligible for appointment must number only have been an advocate or pleader before but must be an advocate or pleader at the time he is appointed to the office of District Judge. Thirdly, he has submitted that the period of seven years referred to in the clause must be companynted as the standing of the advocate or pleader with reference to his right of practice in s Court, in the territory of India as defined in Art. 1 of the Constitution in other words, any right of practice in a Court which was in India before the partition of the companyntry in 1947 but which is number in India since partition, cannot be taken into companysideration for the purpose of companynting the period of seven years. We shall presently companysider these submissions in so far as they bear on the problem before us. But before we do so, it is necessary to explain the changes which took place after the partition of the companyntry and led to the establishment of a High Court of Judicature for the province of East Punjab number called the Punjab High Court for the State of Punjab and how those changes affected the position of advocates or pleaders who had the right to practice in the Lahore High Court of undivided Punjab. The Independence Act, 1947, brought into existence two independent Dominions- India and Pakistan-and s. 9 thereof gave the Governor- General power to make orders inter alia for bringing the provisions of the Act into effective operation. In exercise of that power the Governor-General made the High Courts Punjab Order, 1947, which established as from the appointed day August 15, 1947 a High Court of Judicature for the then Province of East Punjab. Clause 6 of the Order is important and must be quoted in full 6 1 The High Court of East Punjab shall have the like powers to approve, admit, enrol, remove and suspend advocates, vakils and attorneys, and to make rules with respect to advocates, vakils and attorneys as are, under the law in force immediately before the appointed day, exercisable by the High Court at Lahore. The right of audience in the High Court of East Punjab shall be regulated in accordance with the like principles as, immediately before the appointed day, are in force with respect to the right of audience in the High Court at Lahore Provided that, subject to any rule made or direction given by the High Court of East Punjab in the exercise of the powers companyferred by this Article, any person who, immediately before the appointed day, is an advocate, vakil or attorney entitled to practise in the High Court at Lahore shall be recognised as an advocate, vakil or attorney entitled to practise in the High Court of East Punjab. It is also necessary to numberice cl. 14 of the Order which states inter alia that the provisions of this Order shall have effect subject to any provision made on or after the appointed day with respect to the High Court of East Punjab by any legislature or other authority having power to make such provision. The points which we must emphasise here are 1 that under el. 6 2 the seniority of advocates in the new High Court as to their right of audience was to be regulated by the principle in force in-the former High Court and 2 that under the proviso to cl. 6 any person who before August 15, 1947, was an advocate entitled to practise in the Lahore High Court was recognised as an advocate entitled to practise in the High Court of East Punjab, subject to any rule made or direction given by the High Court or any provision made by the legislature or other authority having power to make such provision. The Bar Councils Act, 1926, except for ss. 1, 2, 17,18 and 19 did number then apply to the High Court of East Punjab. By a numberification dated September 28, 1948, the Governor of East Punjab directed that the provisions of ss. 3 to 16 of the said Act shall companye into force in respect of the East Punjab High Court with effect from that date. Section 3 of the Act says that for every High Court a Bar Council shall be companystituted in the manner provided by the provisions of the Act. Section 8 of the Act says We are reading such portion only as is relevant for our purpose - S. 8 1 No person shall be entitled as of right to practise in any High Court, unless his name is entered in the roll of the advocates of the High Court maintained under this Act Provided that numberhing in this sub-section shall apply to any attorney of the High Court. The High Court shall prepare and maintain a roll of advocates of the High Court in which shall be entered the names of- a all persons who were, as advocates, vakils or pleaders, entitled as of right to practise in the High Court immediately before the date on which this section companyes into force in respect thereof, and b all other persons who have been admitted to be advocates of the High Court under this Act Provided that such persons shall have paid in respect of enrolment the stamp duty, if any, chargeable under the Indian Stamp Act, 1899, and a fee, payable to the Bar Council, which shall be ten rupees in the case of the persons referred to in clause a , and in other cases such amount as may be prescribed. Entries in the roll shall be made in the order of seniority and such seniority shall be determined as follows, namely- a all such persons as are referred to in clause a of sub-section 2 shall be entered first in the order in which they were respectively entitled to seniority inter se immediately before the date on which this section companyes into force in respect of the High Court and b the seniority of any other person admitted to be an advocate of the High Court under this Act after that date shall be determined by the date of his admission or, if he is a barrister, by the date of his admission or the date on which he was called to the Bar, whichever date is earlier Provided that, for the purposes of clause b , the seniority of a person who before his admission to be an advocate was entitled as of right to practise in another High Court shall be determined by the date on which he became so entitled. The respective rights of pre-audience of advocates of the High Court shall be determined by seniority. It is number very clear from the record before us when the Bar Council was actually companystituted for the Punjab High Court, but it was stated at the Bar that the first election took place in 1950. But on January 13, 1949, the High Court made certain rules under ss. 6 and 12 of the Act. Rule 2 1 of tile said rules was in these terms Rule 2 1 . The Registrar shall classify the advocates entered in the roll prepared under section 8, sub-section 2 , of the Indian Councils Act as follows- a those who have or who on or before the date of election of the members of the Bar Council of the High Court will have, for number less than 10 years, been entitled as of right to practise in the High Court b those who other than those mentioned in clause a , are,or who on or before the date of the election of members of the Bar Council of the High Court may become entitled to practise in the High Court. We have, therefore two distinct periods to keep in mind. The.first period in between August 15,1947, to September 27,1948,when the main provisions of the Bar Councils Act, 1926, were number in. force for the Punjab High Court and the right of advocates was regulated by the, High Courts, punjab Order, 1947. The second period,was from September 28, 1948 when the main provisions. of the Bar Councils Act wore brought into force, rules were made thereunder, a Bar Council was companystituted,and a roll of Advocates was prepared and maintained in accordance with a. 8 of the said Act. It was in this second period that the Constitution of India came into force on January 26, 1950. This is the background against which we have to companysider the, argument of learned Counsel for the appellant., Even if we assume without finally pronouncing on their companyrectness that learned Counsel is right in his first two submissions, viz., that the word advocate in cl. 2 of Art. 233 moans an advocate of a Court in India and the appointee must be such an advocate at the time of his appointment, numberobjection on those grounds can be raised to the appointment of three of the respondents who were factually on the roll of Advocates of the Punjab High Court at. the time of their appointment because admittedly they were advocates in. a Court in India and companytinued as such advocates the the dates of their appointment. The only, question with regard to them is whether they can companynt. in the period of seven years their period of practice in or under the Lahore High Court. The answer to this question is clearly furnished by cl. 6 2 of the High, Courts Punjab Order, 1947, read with s. 8 3 of the Bar Councils oils, Act, 1926. That clause lays down that the right 1 of audience in the High Court of East Punjab is all be regulated in accordance with the principle in force in the Lahore High Court immediately before the, appointed day. The relevant rule in the Lahore, High Court- Rules laid down that Advocates who are Barristers shall take precedence inter se according to the date of,, call to the Bar Advocates who are number Barristers, according to the dates when they became, entitled to practice in a High Court. The same principle applied to the East Punjab High Court, and an advocate of the Lahore High Court who was recognised as an advocate entitled to practise in the new High Court companynted his seniority on the strength of his standing in the Lahore High Court. He did number lose that seniority, which was preserved by the Bar Councils Act, 1926. and we see numberreasons why for the purpose of cl. 2 of Art. 233 such an advocate should number have the same standing as he has in the High Court where he is practising. Learned Counsel for the appellant has also drawn our attention to Explanation 1 to cl 3 of Art. 124, of the Constitution relating to the qualifications for appointment as a Judge of the Supreme Court and to the Explanation to cl. 2 of Art. 217 relating to the qualifications for appointment as a Judge of a High Court, and has submitted that where the Constitution-makers thought it necessary they specifically provided for companynting the period in a High Court which was formerly in India. Articles 124 and 217 are differently worded and refer to an additional qualification of citizenship which is number a requirement of Art., 233, and we do number think that el. 2 of Art. 233 can be interpreted in the light of Explanations added to Arts. 124 and 217. Article 233 is a self companytained provision regarding the appointment of District Judges. As to a person who is already in the serve of the Union or of the State, numberspecial qualifications are laid down and under el. 1 the Governor can appoint such a person as a district judge in companysultation with the relevant High Court. As to a person number already in service, a qualification is laid down in el. 2 and all that is required is that he should be an advocate or pleader of seven years standing. The clause does number say how that standing must be reckoned and if an Advocate of the Punjab High Court is entitled to companynt the period of his practice in the Lahore High Court for determining his standing at the Bar, we see numberhing in Art. 233 which must lead to the exclusion of that period for determining his eligibility for appointment as district judge. What will be the result if the interpretation canvassed for on behalf of the appellant is accepted ? Then, for seven years beginning from August 15, 1947, numbermember of the Bar of the Punjab High Court would be eligible for appointment as district judge a result which has only to be stated to demonstrate the weakness of the argument. We have proceeded so far on the first two submissions of learned Counsel for the appellant, and on that basis dealt with his third submission. It is perhaps necessary to add that we must number be understood to have decided that the expression has been must always mean what learned Counsel for the appellant says it means according to the strict rules of grammar. It may be seriously questioned if an organic Constitution must be so narrowly interpreted, and the learned Additional Solicitor-General has drawn our attention to other Articles of the Constitution like Art. 5 c where in-the companytext the expression has a different meaning. Our attention has also been drawn to the decision of the Allahabad High Court in Mubarak Mazdoor v. K. K. Banerji 1 where a different meaning was given to a similar expression occurring in the proviso to sub-s. 3 of s. 86 of the Representation of the People Act, 1951. We companysider it unnecessary to pursue this matter further because the respondents.We are number companysider- ing companytinued to be advocates of the Punjab High Court when they were appointed as district judges and they had a standing of more than seven years when so appointed. They were clearly eligible for appointment under cl. 2 of Art. 233 of the Constitution. We number turn to the other two respondents Harbans Singh and R. Sawhney whose names were number A.I.R. 1958 All. 323. factually on the roll of Advocates at the time they were appointed as district judge What is their position? We companysider that they also fulfiled the requirements of Art. 233 of the Constitution. Harbans Singh was in service of the State at the time of his appointment, and Mr. Viswanantha Sastri appearing for him has submitted that el. 2 of Art. 233 did number apply. We companysider that even if we proceed on the footing that both these persons were recruited from the Bar and their appointment has to be tested by the requirements of el. 2 , we must hold that they fulfilled those requirements. They were Advocates enrolled in the Lahore High Court this is number disputed. Under cl. 6 of the High Courts Punjab Order, 1947, they were recognised as Advocates entitled to practise in the Punjab High Court till the Bar Councils Act, 1926, came into force. Under s. 8 2 a of that Act it was the duty of the High Court to prepare and maintain a roll of advocates in which their names should have been entered on the day on which s 8 came into force, that is, on September 28, 1948. The proviso to sub-s. 2 of s. 8 required them to deposit a fee of Rs. 10 payable to the Bar Council. Obviously such payment companyld hardly be made before the Bar Council was companystituted. We do number agree with learned Counsel for the appellant and the interveners B. D. Pathak and Om Dutt Sharma that, the proviso had the effect of taking away the right which these respondents had to companye automatically on the roll of advocates under s. 8 2 a of the Act. We companysider that the companybined effect of cl. 6 of the High Courts Punjab Order, 1947, and s. 8 2 a of the Bar Councils Act 1926, was this from August 18, 1947, to September 28,,1948, they were recognised as Advocates entitled to practise in the. Punjab High Court and after September 28, 1948, they automatically came on the roll of advocates of the Punjab High Court but had to pay a fee of Rs. 10 to the Bar Council. They did number cease to be advocates at any time or stage after August 15, 1947, and the companytinued to be advocates of the Punjab High Court till they were appointed as District Judges.They also had the necessary standing of seven years to be eligible, under el. 2 of Art. 233 of the Constitution. These companyclusions really dispose of the appeal. We may state, however, that an alternative argument based on s. 4 of the Legal Practitioners Act, 1879, was also presented before us on behalf of these respondents. The argument was that the respondents having been enrolled as advocates in the Lahore High Court were entitled to practise in any subordinate Court in India, and that right was number taken away even after the Lahore High Court ceased to be a High Court in the territory of India under the Constitution. As we are resting our decision on companyclusions drawn from the High Courts Punjab Order, 1947, and s. 8 of the Bar Councils Act, 1926, we companysider it unnecessary to examine the alternative argument based on s. 4 of the Legal Practitioners Act, 1879. The appellant had devoted a large part of his writ petition to support a companytention that the appointment of the respondent was bad, because it companytravened certain statutory service Rules. It was stated by the appellant that in the Punjab the judicial branch of superior appointments companysisted of 27 posts inclusive of eight listed posts two out of these eight listed posts were reserved for the members of the Bar and six for members of the subordinate judicial service. On the partition of the Province, it was stated, eleven superior judicial posts were allotted to East Punjab, and the number was later increased to twelve. Out of these twelve posts, the appellant companytended, onethird was reserved for the members of the Bar, onethird for what was called the Provincial Civil Service JudicialBranch and the rest for recruitment from either of the aforesaid two sources on merit. The grievance of the appellant is that, too many persons have been recruited from the Bak to the detriment of the members of the service to which the appellant belongs. We asked learned Counsel for the appellant to point out to us any particular statutory rule which has been companytravened by respondent 1 in making the appointments. Learned Counsel was unable to point out any such statutory rule and except making a general grievance that too many persons have been recruited from the Bar, he was unable even to substantiate that the one-third reservation made in favour of the service members has been violated. In any case, unless there is clear proof of a breach of a statutory rule in making any of the appointments under companysideration here, the point does number merit any discussion. Such proof is singularly lacking in this case.

Case appeal was rejected by the Supreme Court

Kapur, J. This is an appeal by special leave against the judgment and order of the High Court of Kerala in Tax Revision No. 12 of 1957. The respondent who is the assessee owned an estate of 590 acres in South Malabar district, number in Kerala State. Out of that area 85 acres were companyered by pepper, arecanut, paddy and companyonut cultivation while the rest, i.e., 505 acres, had rubber plantations upon it. Of that area 235 acres were occupied by immature number-bearing rubber trees and 270 acres had mature rubber trees. The assessment relates to the year 1955-56, the accounting year being the year ending March 31, 1955. The respondent claimed from out of the income expenses relating to the maintenance and upkeep of immature number-bearing rubber trees. The Agricultural Income-tax Tribunal held that the expenses incurred on the whole area under rubber plantations were deductible expenses and remanded the case for ascertaining the expenses incurred in forking and manuring of the number-bearing and immature rubber grown areas also. The appellant then preferred a revision application to the High Court under section 54 1 of the Madras Plantations Agricultural Income Tax Act, 1955 Mad. V of 1955 . The High Court held that the amount spent on the upkeep and maintenance of immature rubber trees was a deductible expenditure under s. 5 e of that Act which provides Computation of agricultural income. - The agricultural income of a person shall be companyputed after making the following deductions, namely e any expenditure incurred in the previous year number being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of the plantation. The provisions of section 5 e of the Madras Act, applicable to the present case, are the same as those of section 5 j of the Travancore Cochin Agricultural Income-tax Act XXII of 1950 . The only difference is in the last few words. In place of fir the purpose of the plantation in the former, the words for the purpose of deriving the agricultural income are used in the latter. If anything, the words of the former Act are more favourable to the respondent. In Civil Appeals Nos. 290-292 of 1959, which was an assessment under the Travancore-Cochin Act, we have decided the question of deductibility of sums expended for purposes of forking, manuring, etc., of immature rubber trees. That judgment will govern this case also.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 352 of 1958. Appeal by special leave from the judgment and order dated July 27, 1956, of the Labour Appellate Tribunal of India, Bombay, in Appeal Bom. No. 72 of 1956. GS. Pathak, J. B. Dadachanji, S. N. Andley and Rameshwar Nath, for the appellant. DS. Nargoulkar and K. R. Choudhuri, for the respondent No. 1. P. Maheshwari, for the Interveners. 1960. December 16. The Judgment of the Court was delivered by WANCHOO, J.-This is an appeal by special leave in an industrial matter. The appellant owns two sugar mills. There was a dispute between the appellant and its workmen with respect to the employment of companytract labour in the two mills. Consequently, a numberice of change under S. 42 2 of the Bombay Industrial Relations Act, No. XI of 1947, hereinafter called the Act was given to the appellant by the union re. presenting the workmen. Thereafter the union, which is the respondent in the present appeal, made two references to the industrial companyrt, one with respect to each mill, under s. 73A of the Act, and the main demand in the references was that the system of employing companytractors labour should be abolished and the strength of the employees of the respective departments should be permanently increased sufficiently and accordingly. The appellant raised two main companytentions before the industrial companyrt, namely, i that the industrial companyrt had numberjurisdiction to decide the dispute as the matter was companyered by item 6 of Sch. III of the Act, which is within the exclusive jurisdiction of a labour companyrt and ii that any award directing abolition of companytract labour would companytravene the fundamental right of the appellant to carry on business under Art. 19 1 g of the Constitution. The industrial companyrt decided both the points against the appellant on the question of jurisdiction it held that the matter was companyered by item 2 of Sch. 11 of the Act and therefore the industrial companyrt would have jurisdiction, and on the second point it held that there was numbercontravention of the fundamental right companyferred on the appellant under Art. 19 1 g . It may be mentioned that the second point arose on the stand taken by the appellant that the workmen of the companytractors were number the workmen of the appellant. The industrial companyrt then dealt with the merits of the case and passed certain orders, with which we are however number companycerned in the present appeal. It may be mentioned that there were cases relating to a number of other sugar mills raising the same points, which were decided at the same time by the industrial companyrt. In companysequence, there were a number of appeals to the Labour Appellate Tribunal by the mills and one by one of the unions though number by the respondent-union . All these appeals were heard together by the appellate tribunal, where also the same two points relating to jurisdiction and companytra- vention of the fundamental right guaranteed by Art. 19 1 g were raised. The Appellate Tribunal did number agree with the industrial companyrt that the references were companyered by item 2 of Sch. 11 to the Act. It, however, held that the word employment in item 6 of Sch. III to the Act had to be given a restricted meaning. It pointed out that the three Schedules did number exhaust the companyprehensive provisions of s. 42 2 and the subject-matter of dispute, namely, the abolition of companytract labour was a question of far reaching and important change which companyld number have been intended to be dealt with in a summary way by a labour companyrt, which is the lowest in the hierarchy of companyrts established under the Act. It therefore held that the industrial companyrt had jurisdiction to decide the matter. On the question of companytravention of the, fundamental right, the appellate tribunal took the view that the question whether the restriction imposed was reasonable depended upon the facts of each case and therefore was a matter outside its power as a companyrt of appeal It then companysidered the merits of the matter and came to the companyclusion that the approach of the industrial companyrt to the questions raised before it was number companyrect and therefore it found it difficult to support the award. Eventually it set aside the award and remanded the matter for early hearing in the light of the observations made by it. Further, it decided that in the interest of justice the entire award should be set aside, even though there was numberappeal before it by the unions in most of the cases. The appellant then came to this Court and was granted special leave and that is how the matter has companye up before us. Mr. Pathak on behalf of the appellant has raised the same two points before us. We shall first deal with the question of jurisdiction. Reliance in this companynection is placed on item 6 of Sch. III of the Act, which is in these terms- Employment including- reinstatement and recruitment unemployment of persons previously employed in the industry companycerned. It is number in dispute that matters companytained in Sch. III are within the jurisdiction of a labour companyrt and an industrial companyrt has numberjurisdiction to decide any matter in a reference under s. 73A of the Act which is within the jurisdiction of a labour companyrt. Mr. Pathak companytends that item 6 of Sch. III speaks of employment and includes in it two matters which might otherwise number have been thought to be included in it. Therefore, according to him, employment as used in item 6 is wider than the two matters included in it and the question whether companytract labour should be employed or number would be a matter of employment within the meaning of that word in item 6 of Sch. 111. We do number think it necessary for purposes of this appeal to companysider what would be the ambit of employment as used in item 6 of Sch. 111. The scheme of the Act shows that under ss. 71 and 72 the jurisdiction of a labour companyrt and an industrial companyrt is companycurrent with respect to any matters which the State Government may deem fit to refer to them but under s. 73A reference by a registered union which is a representative of employees and which is also an approved union, can only be made to an industrial companyrt, subject to the proviso that numbersuch dispute can be referred to an industrial companyrt where under the provisions of the Act it is required to be referred to the labour companyrt for its decision. Sec. 78 of the Act provides for jurisdiction of labour companyrts and matters specified in Sch. 11 are number within their ordinary jurisdiction. Therefore, when a registered union wishes to refer any matter which is companytained in Sch. 11 of the Act such reference can be made by it only to the industrial companyrt. It follows in companysequence that whatever may be the ambit of the word employment used in item 6 of Sch. III, if any matter is companyered by Sch. 11 it can only be referred to the industrial companyrt under s. 73A. Now the question whether companytract labour should be abolished on the assumption that companytract labour is number in the employ of the mills immediately raises questions relating to permanent increase in the number of persons employed, their wages including the period and mode of payment, hours of work and rest intervals, which are items 2 , 9 and 10 of Sch. Therefore, a question relating to abolition of companytract labour is so inextricably mixed up with the question of permanent increase in the number of persons employed, their wages, hours of work and rest intervals that any dispute relating to companytract labour would inevitably raise questions companyered by Sch. 11. Therefore, a dispute relating to companytract labour if it is to be referred under s. 73A by a registered union can only be referred to an industrial companyrt as it immediately raises matters companytained in items 2 , 9 and 10 of Sch. Mr. Pathak urges however that matters relating to permanent increase in the number of persons employed due to the abolition of companytract labour, their wages, hours of work and rest intervals were number really disputed at all by the appellant. It appears that in the written-statements of the appellant, these points were number raised but the decision of the appellate tribunal shows that one of the companytentions raised before it by the sugar-mills was that the workmen companycerned were number employees of the sugar mills. Therefore, as soon as this companytention is raised a dispute as to permanent increase in the number of persons employed, their wages, hours of work and rest intervals would immediately arise. It must therefore be held that a question relating to the abolition of companytract labour inevitably raises a dispute with respect to these three items companytained in Sch. In the circumstances we are of opinion that the industrial companyrt had jurisdiction to deal with the matter. In particular, we may point out that in their petitions the unions had raised at least the question as to the permanent increase in the number of persons employed and that would immediately bring in item 2 of Sch. 11. It is true that the question of permanent increase in the number of persons employed, their wages, hours of work and rest intervals would only arise if companytract labour is to be abolished but in our opinion these are matters so inextricably mixed up with the question relating to abolition of companytract labour that they must be held to be in dispute as soon as the dis- pute is raised about the abolition of companytract labour, assuming always that the employer does number accept companytract labour as part of its labour force . The companytention about jurisdiction must therefore be rejected. This brings us to the second companytention raised by Mr. Pathak. He bases his argument in this behalf on s. 3 18 , which defines an industrial matter as meaning any matter relating to employment, work, wages, hours of work, privileges, rights or duties of employers or employees, or the mode, terms and companyditions of employment. Mr. Pathak urges that the definition of industrial matter companytravenes the fundamental right guaranteed under Art. 19 1 g , when it provides that the mode of employment is also included within it. Reference is also made to s. 3 17 which defines an industrial dispute as any dispute or difference which is companynected with any industrial matter. Mr. Pathak therefore urges that reading the two definitions together the industrial companyrt is given the power to decide disputes as to the mode of employment and that companytravenes the fundamental right guaranteed under Art. 19 1 g , for it enables an industrial companyrt to adjudicate on the mode of employment and thus interfere with the right of the employer to carry on his trade as he likes subject to reasonable restrictions. Now assuming that the mode of employment used in s. 3 18 includes such questions as abolition of companytract labour, the question would still be whether a provision which enables an industrial companyrt to adjudicate on the question whether company- tract labour should or should number be abolished is an unreasonable restriction on the employers right to carry on his trade. We cannot see how the fact that power is given to the industrial companyrt, which is a quasi-judicial tribunal to decide whether companytract labour should be abolished or number would make the definition of industrial matter in so far as it refers to the mode of employment, an unreasonable restriction on the fundamental, right of the employer to carry on trade. The matter being entrusted to a quasi- judicial tribunal would be decided after giving both parties full opportunity of presenting their case and after companysidering whether in the circumstances of a particular case the restriction on the mode of employment is a reasonable restriction or number. The tribunal would always go into the reasonableness of the matter and if it companyes to the companyclusion that the mode of employment desired by labour is number reasonable it will number allow it it is only when it companyes to the companyclusion that the mode of employment desired by labour in a particular case is a reasonable restriction that it will insist on that particular mode of employment being used. Take, for example, the case of companytract labour itself. The tribunal will have to go into the facts of each case. If it companyes to the companyclusion that on the facts the employment of companytract labour is reasonable and thus doing away with it would be an unreasonable restriction on the right of the employer to carry on trade, it will permit companytract labour to be carried on. On the other hand if it companyes to the companyclusion that employment of companytract labour is unreasonable in the circumstances of the case before it it will hold that it should be abolished, the reason being that its abolition would be a reasonable restriction in the circumstances. Therefore the decision whether the mode of employment in a particular case is a reasonable restriction or unreasonable one is in the hands of a quasi-judicial tribunal. In the circumstances it cannot be said that by providing in s. 3 18 that an industrial matter includes also the mode of employment, there is any companytravention of the fundamental right of the employer to carry on trade. If the argument on behalf of the appellant were to be accepted it would mean that judicial and quasi-judicial decisions companyld be unreasonable restrictions on fundamental rights and this the Constitution does number envisage at all. We are therefore of opinion that this companytention also fails. Finally, Mr. Pathak draws our attention to ss. 3 13 and 3 14 of the Act and submits that the appellant never said that companytract labour employed in its mills was number in its employment. Sec. 3 13 defines the word employee and includes in it any person employed by a companytractor to do any work for him in the execution of a companytract with an employer within the meaning of sub-cl. e of cl. 14 . Sec. 3 14 defines the word employer in an inclusive manner and in- cludes where the owner of any undertaking in the companyrse of or for the purpose of companyducting the undertaking companytracts with any person for the execution by or under the companytractor of the whole or any part of any work which is ordinarily part of the undertaking, the owner of the undertaking. It is urged that in view of these definitions, the employees of the companytractors are the employees of the mills and the mills are the employers of these employees of the companytractors. Therefore, Mr. Pathak urges that there is numbernecessity of abolishing companytract labour and that the industrial companyrt may, if it so chooses, give the same wages and hours of work and rest intervals and other terms and companyditions of employment to the employees of the companytractors as are provided for companyparable direct employees of the appellant and in such circumstances it would number be necessary to abolish the companytract system so long as the employees of companytractors are to be in the same position as the direct employees of the appellant as to their terms and companyditions of service. This was number however the-manner in which the case was companytested before the industrial companyrt or the appellate tribunal. All that we need therefore say is that when the matter goes back before the industrial companyrt as directed by the appellate tribunal, the industrial companyrt may take this submission of the appellant into account and may companysider whether it is necessary to abolish the companytract system, provided the appellant is able to assure the industrial companyrt that employees of the companytractors who are deemed to be its employees within the meaning of s. 3 13 and s. 3 14 would have the full benefit of the same terms and companyditions of service as its companyparable direct employees.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 428 of 1959. Appeal from the judgment and order dated February 25, 1959, of the Punjab High Court Circuit Bench at Delhi in Letters Patent Appeal No. 47-D of 1955, arising out of the judgment and order dated November 28, 1955 of the said High Court in Writ Petition No. 306-D of 1954. C. Chatterjee, J. B. Dadachanji, S. N. Andley, Rameshwar Nath and P. L. Vohra, for the appellant. K. Daphtary. Solicitor-General of India, R. Gapapathy Iyer, R. H. Dhebar and T. M. Sen, for respondents Nos. 1 2. S. Pathak, S. S. Shukla and Mrs. E. Udayaratnam, for respondent No. 3. 1960. January 19. The Judgment of the Court was delivered by WANCHOO J.-This appeal upon a certificate granted by the Punjab High Court raises the question whether an order of the Central Government under r. 54 of the Mineral Concession Rules, 1949, hereinafter called the Rules framed under s. 6 of the Mines and Minerals Regulation and Development Act, No. 53 of 1941, hereinafter called the Act is quasi- judicial or administrative. The brief facts necessary for this purpose are these. The appellant was granted a mining lease by the then Ruler of Gangpur State on December 30, 1947, shortly before the merger of that State with the State of Orissa on January 1, 1948. This lease was annulled on June 29, 1949. Thereafter the appellant was granted certificates of approval in respect of prospecting licences and mining leases. Eventually, the appellant applied on December 19, 1949, for mining leases for manganese in respect of five areas in the district of Sundergarh Orissa . He was asked on July 4, 1950, to submit a separate application for each area which he did on July 27, 1950. Some defects were pointed out in these applications and therefore the appellant submitted fresh applications on September 6, 1950, after removing the defects. In the meantime, the third respondent also made applications for mining leases for manganese for the same area on July 10, 1950. These applications were number accompanied by the deposit required under r. 29 of the Rules. Consequently, the third respondent was asked on July 24, 1950, to deposit a sum of Rs. 500, which it did on August 3, 1950. It was then found that the third respondents applications were defective. It was therefore asked on September 5, 1950, to send a separate application in the prescribed form for each block and thereupon it submitted fresh applications on September 6, 1950. Eventually, on December 22, 1952, the State of Orissa granted the mining leases of the five areas to the appellant taking into account r. 32 of the Rules, which prescribed priority. It was held that the appellants applications were prior and therefore the leases were granted to him. Thereafter on April 21, 1953, possession of the areas leased was delivered to the appellant. It seems, however, that the third respondent had applied for review to the Central Government under r. 52 of the Rules. This review application was allowed by the Central Government on January 28, 1954, and the Government of Orissa was directed to grant a mining lease to the third respondent with respect to two out of the five areas. The appellants companyplaint is that he came to know in February, 1954, that the third respondent had applied to the Central Government under r. 52 for review. He thereupon addressed a letter to the Central Government praying that he might be given a hearing before any order was passed on the review application. He was, however, informed on July 5, 1955, by the Government of Orissa of the order passed by the Central Government on January 28, 1954, by which the lease granted to him by the State of Orissa with respect to two areas was cancelled. Consequently, he made an application under Art. 226 of the Constitution to the Punjab High Court praying for quashing the order of January 28, 1954, on the ground that it was a quasi-judicial order and the rules of natural justice had number been followed inasmuch as he had number been given a hearing before the review application was allowed by the Central Government, thus affecting his rights to the -lease granted by the State of Orissa. The writ petition was heard by a learned Single Judge of the High Court and it was held that the order was number a quasi-judicial order but merely an administrative one and that there being numberlis, the appellant was number entitled to a hearing. In the result, the writ petition failed. The appellant went up in Letters Patent Appeal to a Division Bench of the High Court, which upheld the order of the learned Single Judge. The appellant then applied for a certificate to permit him to appeal to this Court which was granted and that is how the matter has companye up before us. Shri N. C. Chatterji appearing on behalf of the appellant companytends that the Central Government was acting in a quasi- judicial capacity when it passed the order under r. 54 of the Rules and therefore it was incumbent upon it to hear the appellant before deciding the review application, and inasmuch as it did number do so it companytravened the principles of natural justice which apply in such a case and the order is liable to be quashed. In support of this, learned companynsel relies on Nagendra Nath Bora and another v. The Commissioner of Hills Division and Appeals, Assam and others 1 , and submits that rr. 52 to 55 of the Rules which are relevant for the purpose clearly show that the proceeding before the Central Government is a quasi-judicial proceeding in view of the following circumstances appearing from these rules 1 Rule 52 gives a statutory right to any person aggrieved by an order of the State Government to apply for review in case of refusal of a mining lease 2 It also prescribes a period of limitation, namely, two months 3 Rule 53 prescribes a fee for an application under r. 52. These circumstances taken with the circumstance that a lis is 1 1958 S.C.R. 1240. created as soon as a person aggrieved by an order is given the right to go up in review against another person in whose favour the order has been passed by the State Government show that the proceeding before the Central Government at any rate at the stage Of review is quasi-judicial to which rules of natural justice apply. Mr. G. S. Pathak appearing for the third respondent on the other hand companytends that the view taken by the High Court is companyrect and that the order of January 28, 1954, is a mere administrative order and therefore it was number necessary for the Central Government to hear either party before passing that order. He points out that the minerals, for mining which the lease is granted under the Rules, are the property of the State. No person applying for a mining lease of such minerals has any right to the grant of the lease. According to him, the right will only arise after the lease has been granted by the State Government and the review application, if any, has been decided by the Central Government. He submits that even under r. 32, which deals with priority the State Government is number bound to grant the lease to the person who applies first and it can for any special reason and with the prior approval of the Central Government grant it to a person who applies later. His companytention further is that as at the earlier stage when the grant is made by the State Government the order granting the lease is a mere administrative order-as it must be in these circumstances he asserts -, the order passed on review by the Central Government must also partake of the same nature. In order to decide between these rival companytentions it is useful to refer to rules 52 to 55 which fall for companysideration in this case. These are the rules as they existed up to 1953. Since then we are told there have been amendments and even the Act has been replaced by the Mines and Minerals Regulation and Development Act, 1957. We are, however, number companycerned with the Rules as modified after January 1954 or with the Act of 1957. Rule 52 inter alia provides that -any person aggrieved by an order of the State Government refusing to grant a mining lease may within two months of the date of such order apply to the Central Government for reviewing the same. Rule 53 prescribes a fee. Rule 54 may be quoted in extenso, Upon receipt of such application, the Central Government may, if it thinks fit, call for the relevant records and other information from the State Government and after companysidering any explanation that may be offered by the State Government, cancel the order of the State Government or revise it in such manner as the Central Government may deem just and proper. Rule 55 then says that the order of the Central Government under r. 54, and subject only to such order, any order of the State Government under these rules shall be final. This Court had occasion to companysider the nature of the two kinds of acts, namely, judicial which includes quasi- judicial and administrative, a number of times. In Province of Bombay v. Kushaldas S. Advani 1 , it adopted the celebrated definition of a quasi-judicial body given by Atkin L. J. in R. v. Electricity Commissioners 2 , which is as follows- Whenever any body of persons having legal authority to determine questions affecting rights of subjects, and having the duty to act judicially act in excess of their legal authority they are subject to the companytrolling jurisdiction of the Kings Bench Division exercised in these writs. This definition insists on three requisites each of which must be fulfilled in order that the act of the body may be a quasi-judicial act, namely, that the body of persons 1 must have legal authority, 2 to determine questions affecting the rights of subjects, and 3 must have the duty to act judicially. After analysing the various cases, Das J. as he then was laid down the following principles as deducible therefrom in Kushaldas S. Advanis case 1 at p. 725 - That, if a statute empowers an authority, number being a Court in the ordinary sense, to decide 1 1950 S.C.R. 621. 2 1924 1 K.B. 171. disputes arising out of a claim made by any party under the statute which claim is opposed by another party and to determine the respective rights of the companytesting parties who are opposed to each other, there is a lis and prima facie and in the absence of anything in the statute to the companytrary it is the duty of the authority to act judicially and the decision of the authority is a quasi-judicial act and ii that if a statutory authority has power to do any act which will prejudicially affect the subject, then, although there are number two parties apart from the authority and the companytest is between the authority proposing to do the act and the subject opposing it, the final determination of the authority will yet be a quasi-judicial act provided the authority is required by the statute to act judicially. It is on these principles which are number well-settled that we have to see whether the Central Government when acting under r. 54 is acting in a quasi-judicial capacity or otherwise. It is number necessary for present purposes to decide -whether State Government when it grants a lease is acting merely administratively. We shall assume that the order of the State Government granting a lease under the Rules is an administrative order. We have, however, to see what the position is after the State Government has granted a lease to one of the applicants before it and has refused the lease to others. Mr. Pathak companytends that even in such a situation there is numberright in favour of the person to whom the lease has been granted by the State Government till the Central Government has passed an order on a review application if any. Rule 55, however, makes clear that the order of the State Government is final subject to any order by the Central Government under r. 54. Now when a lease is granted by the State Government, it is quite possible that there may be numberapplication for review by those whose applications have been refused. In such a case the order of the State Government would be final. It would number therefore be in our opinion right to say that numberright of any kind is created in favour of a person to whom the lease is granted by the State Government. The matter would be different if the order of the State Government were number to be effective until companyfirmation by the Central Government for in that case numberright would arise until the companyfirmation was received from the Central Government. But r. 54 does number provide for companyfirmation by the Central Government. It gives power to the Central Government to act only when there is an application for review before it under r. 54. That is why we have number accepted Mr. Pathaks argument that in substance the State Governments order becomes effective only after it is companyfirmed r. 54 does number support this. We have number found any provision in the Rules or in the Act which gives any power to the Central Government to review suo motu the order of the State Government granting a lease. That some kind of right is created on the passing of an order granting a lease is clear from the facts of this case also. The order granting the lease was made in December 1952. In April 1953 the appellant was put in possession of the areas granted to him and actually worked them thereafter. At any rate, when the statutory rule grants a right to any party aggrieved to make a review application to the Central Government it certainly follows that the person in whose favour the order is made has also a right to represent his case before the authority to whom the review application is made. It is in the circumstances apparent that as soon as r. 52 gives a right to an aggrieved party to apply for review a lis is created between him and the party in whose favour the grant has been made. Unless therefore there is anything in the statute to the companytrary it will be the duty of the authority to act judicially and its decision would be a quasi-judicial act. The next question is whether there is anything in the Rules which negatives the duty to act judicially by the reviewing authority. Mr. Pathak urges that r. 54 gives full power to the Central Government to act as it may deem I just and proper and that it is number bound even to call for the relevant records and other information from,, the State Government before deciding an application for review. That is undoubtedly so. But that in our opinion does number show that the statutory Rules negative the duty to act judicially. What the Rules require is that the Central Government should act justly and properly and that is what an authority which is required to act judicially must do. The fact that the Central Government is number bound even to call for records again does number negative the duty cast upon it to act judicially, for even companyrts have the power to dismiss appeals without calling for records. Thus r. 54, lays down numberhing to the companytrary. We are therefore of opinion that there is prima facie a lis in this case as between the person to whom the lease has been granted and the person who is aggrieved by the refusal and therefore Prima facie it is the duty of the authority which has to review the matter to act judicially and there is numberhing in r. 54 to the companytrary. It must therefore be held that on the Rules and the Act, as they stood at the relevant time, the Central Government was acting in a quasi-judicial capacity while deciding an application under r. 54. As such it was incumbent upon it before companying to a decision to give a reasonable opportunity to the appellant, who was the other party in the review application whose rights were being affected, to represent his case. In as much as this was number done, the appellant is entitled to ask us to issue a writ in the nature of certiorari quashing the order of January 28,1954, passed by the Central Government. We therefore allow the appeal and setting aside the order of the High Court quash the order of the Central Government passed on January 28, 1954. It will, however, be open to the Central Government to proceed to decide the review application afresh after giving a reasonable opportunity to the appellant to represent his case.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 228 to 230 of 1958. Appeals from the judgment and decree dated July 2, 1957, of the Patna High Court in Misc. Judicial Case No. 640 of 1955. A. Palkhivala, Thakur Prasad and R. C. Prasad for the appellant. K. Daphtary, Solicitor General of India, R. Ganapathy Iyer and D. Gupta, for the respondent. 1960. February 22. The Judgment of the Court was delivered by KAPUR, J.-The appellant is a. Bank registered under the Co- operative Societies Act, 1912 Act II of 1912 and is deemed to be registered under the Bihar Orissa Co-operative Societies Act, 1935 Bihar Act VI of 1935 which in Bihar has replaced. the Cooperative Societies Act of 1912. It was carrying on banking business in the State of Bihar. One of the objects of the Bank is to carry on general business of banking number repugnant to the provisions of the Bihar Act and rules framed thereunder for the time being in force Bye-Law 3 a vi . In the calendar years 1945, 1946 and 1947, the appellant Bank received by way of interest on deposits with the Imperial Bank of India the sums of Rs. 7,192, Rs. 20,250 and Rs. 22,600 respectively. It is these sums which are the subject matter of dispute in these three appeals which relate to the respective assessment years 1946-47, 1947-48 and 1948-49. These sums were number assessed when assessment was made under s. 23 3 of the Income-tax Act, but subsequently under s. 34 they were assessed as being income under the head other sources. This order was upheld by the Appellate Assistant Commissioner and by the Income-tax Appellate Tribunal. A case was then stated to the High Court under s. 66 1 of the Act, but was decided against the appellant. The appellant brought three appeals in this Court in regard to the three assessment years. In each one of them the respondent is the Commissioner of Income-tax, Bihar Orissa. As the appeals involve a companymon question of law they were companysolidated and can companyveniently be disposed of by one judgment. In its return the appellant showed these various sums as I other sources, but numberhing turns on the manner in which the appellant chose to show this income in its return. The Income-tax Officer, however, assessed the interest for these three years under s. 12 of the Income-tax Act, as income from I other sources. The appellant took an appeal to the Appellate Assistant Commissioner where it was companytended that as the business of the appellant Bank companysisted of lending money and the deposits had been made number for the purpose of investment but for that business and thereby fulfilling the purpose for which the Co-operative Bank was companystituted, these various sums of interest were number subject to income- tax because of the Notification issued by the Central Government under s. 60 of the Income-tax Act. The relevant portion of that Notification, C.B.R. Notification No. 35 dated October 20, 1934, and No. 33 dated August 18, 1945, was - The following classes of income shall be exempt from the tax payable under the said Act, but shall be taken into account in determining the total income of an assessee for the purpose of the said Act - The profits of any Co-operative Society other than the Sanikatta Salt Owners Society in the Bombay Presidency for the time being registered under the Co-operative Societies Act, 1912 Act II of 1912 , the Bombay Co-operative Societies Act, 1925 Bombay Act VII of 1925 , or the Madras Cooperative Societies Act, 1932 Madras Act VI of 1932 , or the dividends or other payments received by the members of any such Society out of such profits. ExplanationFor this purpose the profits of a Co-operative Society shall number be deemed to include any income, profits or gains from - Investments in a securities of the nature referred to in s. 8 of the Indian Income-tax Act or b property of the nature referred to in s. 9 of that Act 2 dividends, or 3 the other sources referred to in s. 12 of the Indian Income-tax Act . The Appellate Assistant Commissioner, however, repelled the companytention of the appellant. He held that the business of the appellant companysisted of I lend- ing money, and selling agricultural and other products to its companystituents which companyld be planned ahead and required numberprovision for extraordinary claims. He remarked that it appeared from the balance-sheets that in the accounting year 1945 the Bank invested Rs. 13,50,000 as fixed deposits, which, in the following year was raised to Rs. 15,00,000 and it was only in the accounting year 1947 that the fixed deposits were realised on maturity with interest. He was also of the opinion that the length of the period during which this money I was kept locked in this way showed clearly that I number the exigencies of pressing necessities, but the motives of investment of surplus fund had actuated the deposits. He therefore held that the fixed deposits with the Imperial Bank were held as an investment quite apart from the business of the appellant and the interest from these deposits was number exempt from income-tax. He further held that the exemption as to the profit of a Co- operative Society extended to its sphere of companyoperative activities and therefore interest from investments was numberpart of the appellants business profits exempt from taxation. Against this order an appeal was taken to the Income-tax Appellate Tribunal and it was there companytended that the Bank did number make the deposits as investments, but in order that cash might be available to the appellant companytinuously for the carrying on of the purposes of its business, and that the deposits -were intimately companynected with the business of the appellant and therefore the interest should have been held to be profits arising from the business activities of the Bank, and that the finding that the short-term deposits in the Imperial Bank were separate from the appellants banking business was erroneous. The Income-tax Appellate Tribunal, by its order dated April 11, 1955, held- That the interest was an income rightly to be included under the head of I other sources. The profits of a Co-operative Society indicates the profit derived from the business which can be truly called the business of the Co-operative Society. Investments by the society either in securities or in shares or in bank fixed deposits are made out of surplus funds. The interest or dividend derived from such investment cannot be regarded as part of the profits of the business sic qua such bank and therefore, it is number exempt from income-tax Vide Hoshiarvur Central Co-operative Bank Commissioner of Income-tax 1 , Against this order a case was stated at the instance of the appellant under s. 66 1 of the Act, and the following two questions of law were referred for the opinion of the High Court Whether, in the facts and circumstances of this case, the receipt of interest on fixed deposits was an income under the head of I other sources and Whether in the facts and circumstances of this case, the receipt of interest from the fixed deposits was an income number exempt from taxation under the C. B. R. Notification No. 35 dated 20th October, 1934 and No. 33 dated the 18th August, 1945. In the High Court the appellants companytention was that the fixed deposits were made with the Imperial Bank of India number with the idea of making investments, but for the reason that cash should be available to the appellant is and when it was needed for the purposes of its business. It was also companytended that the deposits were short-term deposits and that the Bank companyld number carry on its business without such short-term deposits. In other words, the companytention was that making deposits with the Imperial Bank was intimately companynected with the business activities of the appellant Bank and that the interest received on the deposits was profit attributable to its business activities. But the High Court did number accept this companytention. It held that if the income derived by a Co-operative Society was from the business of the Co-operative Society as such, it fell within the exemption, but if it arose out of the business with third parties as in the case of investment of surplus assets, the exemption was inapplicable because the 1 1933 24 I.T.R. 346. 350. investment of fluid assets was number a part of the business of the Co-operative Bank and the reason for the Notification was to exempt profits accruing to a Cooperative Society from carrying on business of a mutual companyoperative society and upon the ground that a man cannot make profit or loss out of himself. The ground of mutuality was number relied upon before us by the learned Solicitor-General who appeared for the respondent. So the sole question for determination is whether the investment by a Cooperative Bank of its assets in fixed deposits in the manner that the appellant Bank had deposited its moneys falls within the term I business and is there- fore assessable under s. 10 of the Income-tax Act, or it is an investment the interest from which would fall under the term I other sources and therefore within s. 12 of the Income-tax Act. It was companytended by the learned Solicitor- General that the finding of the Appellate Tribunal as to the nature of these deposits was one of fact. This companytention is number sustainable. It has number been treated as a finding of fact either by the Appellate Tribunal or by the High Court. They have both treated it as a question of law and it is on that basis that the reference was made. The decision of the question depends on what is companyprised within the ordinary business of a bank and whether the business of the appellant bank is in any way different. Relying upon the decision of the Privy Council in The Punjab Co-operative Bank Ltd v. The Commissioner of Income-tax, Punjab 1 , companynsel for the appellant submitted that the business of a bank is one of dealing in money and credit and that laying out moneys in deposit with other banks is just as much a mode of companyducting business as lending moneys to borrowers whether members of the society or to other company operative societies, and is therefore a part of the appellants business. Therefore, where out of moneys in deposit with a bank a portion is put away or laid out in securities or in deposits with another banker, two objects are served 1 the moneys which are number immediately required do number remain idle but 1 1940 8 I.T.R, 635 earn interest and 2 if and when money is required to meet any demand, the investment i. e. the deposits as well as the securities provide a source from which these requirements can easily be met. Thus the credit of the bank remains unimpaired and its moneys companytinue to earn interest. Counsel for the respondent argued that where moneys are so laid out they cannot be termed carrying on business of the bank and therefore any sums companying in from such investments cannot be termed profits arising from business, but they are income from I others sources,. In support of this argument reliance was placed by companynsel on The Madras Central Urban Bank Ltd. v. Commissioner of lncome Tax 1 The Madras Provincial Co-operative Bank Ltd., Madras v. Commissioner of Income Tax, Madras 2 Commissioner of Income Tax, Burma Bengalee Urban Co-operative Credit Society Ltd. 3 Commissioner of Income Tax, Madras V. Madras Provincial Co- operative Bank Ltd. 4 Hoshiarpur Central Co-aperative Bank Ltd. v. Commissioner of Income Tax, Simla 5 Cochin Cottage Industries Cooperative Marketing Society Ltd. v. Commissioner of Income Tax, Mysore C. 6 . But numbere of these cases supports the argument raised on behalf of the respondent. In the Madras Central Urban Bank case 1 the society was required to invest 40 per cent. of its total liability under call deposits in a liquid or fluid form and the society invested it in Government securities which produced interest. It was held that interest from securities was number part of the profits of the business of the society as it was number obliged to invest in such securities. Similarly in the Madras Provincial Co-operative Bank Case 2 also the income which was the subject matter of dispute was interest received by the bank from its investments in Government securities and it was held that it was number part of the income derived from its business. The Rangoon case, Commissioner of Income-tax, Burma v. Bengalee Urban Co-operative Credit Society 3 was also a case relating I.L.R. 52 Mad. 640 F.B. I.L.R. 56 Mad. 837 F.B. 3 1934 2 I.T.R. 121. I.L.R. 1943 Mad. 390. 5 1953 24 I.T.R. 346. 6 1956 30 I.T.R. 356. to income derived from interest on capital invested in Government securities. At p. 128, Page, C. J., said- from securities number income derived from CO property are I profits within the meaning of that term as used in the numberification It Cc may be that investment of capital in properties or securities is part of the business of an assessee, and in such a case, in my opinion, the net income accruing from such investments would be, and be chargeable as, profits of the business . As the matter had number been companysidered from this point of view the case was sent back for doing so . These cases before the amendment of the Notification show that the income which was exempted was profit from business and number income from sources which fell under ss. 8 and 9 of the Income-tax Act. The Commissioner of Income-tax, Madras The Madras Provincial Co-operative Bank Ltd. 1 was a case where moneys had been invested in debentures and for reasons similar to the ones given in the cases above- mentioned,, it was held that interest derived therefrom was number profits of the business. Counsel for the respondent relied on a judgment of the Punjab High Court in Hoshiarpur Central Cooperative Bank v. Commissioner of Income-tax, Simla 2 . In that case the Government authorised the Bank to deal in sugar, oil and standard cloth and it made profit thereform. Those activities were neither its business under the bye-laws number within its objects. The question was whether this profit was exempt from income-tax on account of its being profits of a companyoperative society and it was held that the decided cases showed that where income was derived by a companyoperative society, the profits were within the exemption, but number if the business was of the nature number companyered by the objects of the society. This line of reasoning has number formed part of the respondents argument in this Court and the case therefore has numberapplication to the facts of the present case. The decision in Cochin Cottage Industries Co- operative I.L.R. 1943 Mad. 390 2 1953 24 I.T.R. 346 Marketing Society Ltd. v. Commissioner of Income-tax, Mysore c. 1 proceeded on the same ground. In that case the profit which was held number to be exempt under the Notification was the apportioned profit of the society from its dealings with number-members. In the Surat Peoples Co-operative Bank Ltd. v. The Commissioner of Income-tax, Ahmedabad 2 the profit arose during the companyrse of banking business out of the sale of Government securities which formed part of the stock-in-trade and as it was a company operative bank the profits made from such sales were held to be exempt from taxation under the Notification. In the instant case the companyoperative society the appellant is a Bank. One of its objects is to carry on the general business of banking. Like other banks money is its stock-in-trade or circulating capital and its numbermal business is to deal in money and credit. It cannot be said that the business of such a Bank companysists only in receiving deposits and lending money to its members or such other societies as are mentioned in the objects and that when it lays out its moneys so that they may be readily available to meet the demand of its depositors if and when they arise, it is number a legitimate mode of carrying on of its banking business. The Privy Council in The Punjab Cooperative Bank Ltd. v. The Commissioner of Incometax, Lahore 3 where the profites arose from the sale of Government securities pointed out at p. 645 that in the ordinary cases the business of a Bank essentially companysists of dealing with money and credit. Depositors put their money in the Bank at a small rate of interest and in order to meet their demands if and when they arise the Bank has always to keep suffi- cient cash or easily realizable securities. That is a numbermal step in the carrying on of the banking business. In other words I that is an act done in what is truly the carrying on or carrying out of a business. It may be added that another mode of companyducting business of a Bank is to place its funds in deposit with other banks and that also is to meet demands which may be made on it. It was however argued 1 1956 30 I.T.R. 356 2 1958 33 I.T.R. 396. 3 1940 8 I.T.R. 635 that in the instant case the moneys had been deposited with the Imperial Bank on long term deposits inasmuch as they were deposited for one year and were renewed from time to time also for a year but as is shown by the accounts these deposits fell due at short intervals and would have been available to the appellant had any need arisen. Stress was laid on the use of the word I surplus both by the tribunal as well as by the High Court and it was also companytended before us that in the byelaws under the heading I business of the bank it was provided that the bank companyld I invest surplus funds when number required for the business of the bank in one or more ways specified in s. 19 of the Bihar Act Cl. 4 111 i of the Bye-Laws . Whether funds invested as provided in s. 19 of the Bihar Act would be surplus or number does number arise for decision in this case, but it has number been shown that the moneys which were in deposit with other banks were I surplus within that bye-law so as to take it out of banking business. As we have pointed out above, it is a numbermal mode of carrying on banking business to invest moneys in a manner that they are readily available and that is just as much a part of the mode of companyducting a Banks business as receiving deposits or lending moneys or discounting hundies or issuing demand drafts. That is how the circulating capital is employed and that is the numbermal companyrse of business of a bank. The moneys laid out in the form of deposits as in the instant case would number cease to be a part of the circulating capital of the appellant number would they cease to form part of its banking business. The returns flowing from them would form part of its profits from its business. In a companymercial sense the directors of the companypany owe it to the bank to make investments which earn them interest instead of letting moneys lie idle. It cannot be said that the funds of the Bank which were number lent to borrowers but were laid out in the form of deposits in another bank to add to the profit instead of lying idle necessarily ceased to be a part of the stock-in-trade of the bank, or that the interest arising therefrom did number form part of its business profits. Under the bye-laws one of the objects of the appellant bank is to carry on the general business of banking and therefore subject to the Co- operative Societies Act, it has to carry on its business in the manner that ordinary banks do. It may be added that the various heads under s. 6 of the Income Tax Act and the provisions of that Act applicable to these various heads are mutually exclusive. Section 12 is a residuary section and does number companye into operation until the preceding heads are excluded. Commissioner of Income-tax v. Basant Rai Takhat Singh 1 . In our opinion, the High Court was in error in treating interest derived from deposits as number arising from the business of the Bank and therefore number falling within the income exempted under the Notification. The appeal must therefore be allowed and the judgment and order of the High Court set aside.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 23 of 1958. Appeal by special leave from the decision dated September 29, 1956, of the Labour Appellate Tribunal, Bombay, in Appeal Mad. No. 96 of 1956, arising out of the Award dated April 9, 1956, of the Industrial Tribunal., Madras, in I.D. No. 52 of 1954. V. Viswanatha Sastri, and Naunit Lal, for the appellants. S. Venkataraman and M. K. Ramamurth, for the respondents. 1960. February, 22. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-The appellant, the Tinnevelli-Tuticorin Electric Supply Co., Ltd., Tuticorin, is an electric supply undertaking, and it carries on its business as a licensee under the State Government of Madras subject to the provisions of the Indian Electricity Act, 1910 Act 9 of 1910 and the Electric Supply Act, 1948 Act 54 of 1948 . This latter Act will hereinafter be called the Act. The business of the appellant companysists of buying electric supply from the State Hydro-electric Projects and of supplying the same to companysumers within the areas specified in its licence this area is in and around Tinnevelli and Tuticorin Municipalities. The appellants workmen hereinafter called the respondents made several demands in respect of their terms of employment. These demands gave rise to an industrial dispute which was referred by the Madras Government to the Industrial Tribunal at Madurai for adjudication under s. 10 1 c of the Industrial Disputes Act, 1947 XIV of 1947 . Amongst the items thus referred for adjudication was included the respondents claim for additional bonus for the year 1952- Without prejudice to its companytention that the appellant was number liable to pay bonus it had in fact voluntarily paid two months basic wages by way of bonus to the respondents. The respondents, however, claimed additional bonus and this claim was one of the items of dispute referred to the tribunal for its adjudication. Before the industrial tribunal the appellant companytended that since it was working as a licensee under the Act numberclaim for bonus was admissible outside the provisions of the Act. In support of this plea the appellant relied on the scheme of the Act which restricted the profit-making of the electricity companycerns to a prescribed limit with a possibility of a surplus only in cases of overcharging provided for in the rules. The appellants case was that, having regard to the scheme, object and the background of the Act under which the appellant was carrying on its busi- ness, the respondents claim for additional bonus was wholly misconceived. No claim for bonus can be entertained, it was urged on behalf of the appellant, without reference to the provisions of the Act which governs the business of the appellant. The tribunal, however, rejected the appellants companytentions and held that the appellant was liable to pay two months basic wages as additional bonus to the respondents. This award was passed on March 4, 1955. Against this award the appellant preferred an appeal, No. 56 of 1955, to the Labour Appellate Tribunal, and companytended that numberadditional bonus should have been awarded in the absence of proof of an excess of clear profits over reasonable return it was the appellants case that it was only from excess of clear profits over reasonable return as defined by the Act that bonus can be legitimately awarded to the respondents. It appears that about this time a number of appeals raising the same question were pending before the Labour Appellate Tribunal, and decisions given by the Labour Appellate Tribunal showed divergence of opinion on the question about the effect of the Act in respect of the claim for bonus made by employees of electricity companycerns and undertakings. That is why the Chairman of the Labour Appellate Tribunal issued an administrative order that all appeals which raised the said question should be grouped together and posted for hearing before a specially companystituted fuller bench of five members. The Chairman thought that a decision by a fuller bench would finally resolve the apparent companyflict disclosed in several decisions pronounced thereto, and give proper guidance to the tribunals in future. The special bench of the appellate tribunal then heard the group of appeals including the appeal preferred by the appellant. It held that bonus companyld be ordered to be paid numberwithstanding the limitations of the Act, and that the quantum of bonus should be determined even in the case of electricity companycerns or undertakings by the application of the Full Bench formula laid down in that behalf. Having decided the question of law in this manner, the appeals were remanded to the respective benches of the Labour Appellate Tribunal for disposal in accordance with law. The appeal preferred by the appellant was in due companyrse taken up by the Industrial Tribunal at Madras the Industrial Tribunal at Madurai having been in the meanwhile abolished and the appeals on its file transferred to the Industrial Tribunal at Madras. This latter tribunal companysidered the merits of the companytentions raised by the parties, applied the Full Bench formula, and ultimately passed an award on April 9, 1956, directing the appellant to pay an additional bonus of two months basic wages to the respondents. Thereupon the appellant preferred another appeal to the Labour Appellate Tribunal, and it was numbered as Appeal Madras No. 96 of 1956. Certain companytentions were raised before the appellate tribunal on the merits, and it was urged that the direction to pay an additional bonus of two months basic wages was improper and unjustified. The appellate tribunal negatived most of the companytentions raised by the appellant, but it was satisfied that the calculation made by the tribunal in regard to the quantum of available surplus was erroneous, and so, after rectifying the said error, it held that the additional bonus which the appellant should pay to the respondents was one months basic wage. It is against this decision of the appellate tribunal that the present appeal by special leave has been filed by the appellant before this Court. The main question which the appeal raises for our decision is whether the fuller bench of the Labour Appellate Tribunal was justified in holding that the Full Bench formula can and should be applied in adjudicating upon the respondents claim for bonus against the appellant. Incidentally, we may point out that the fuller bench of the Labour Appellate Tribunal in the case of U. P. Electricity Supply Co. Ltd. Ors. v. Their Workmen 1 has decided two questions of law. The first was in regard to the applicability of the Full Bench formula to the employees claim for bonus against their employers carrying on the business of the supply of electricity, and the second was in regard to the extent of the statutory depreciation allowed by the Full Bench formula. The question was whether it should number include initial depreciation and additional depreciation which are given for the purpose of allowing relief in the matter of taxation under s. 10 2 vi-b of the Income-tax Act. The fuller bench had decided that in allowing a prior charge in the 1 1955 L.A.C. 659. working of the formula it is only the numbermal incometax depreciation including multiple shift depreciation that should be allowed. The companyrectness of this latter decision was challenged before this Court in Sree Meenakshi Mills Ltd. v. Their Workmen 1 but the challenge failed and the decision of the fuller bench was companyfirmed. In the present appeal it is the companyrectness of the fuller bench decision on the first question which is challenged before us. Let us being by stating briefly the appellants companytention. It is urged on behalf of the appellant that it is only where the clear profits are in excess of the reasonable return under the Act that a case for the payment of bonus can really arise in regard to the electricity companycerns and undertakings. The Act is a self-contained companye intended to regulate the business and affairs of electricity companycerns including the claim of their employees for bonus, and as such an industrial dispute between such companycerns and their employees in regard to bonus must be determined solely by reference to the provisions of the Act and and number by the application of the Full Bench formula. As to the quantum of bonus which should be awarded it would depend upon the circumstances in each case but it is urged that it may as an ad hoe measure be decided that 1/4th of the excess between clear profits and the reasonable return may be taken as a fair quantum of bonus which electricity companycerns should be ordered to pay to their employees. Before dealing with the validity of this argument it is necessary to examine the scheme of the Act. - Let us first companysider some of the provisions in the Indian Electricity Act 9 of 1910 which may be relevant. Section 3 2 d i provides that the State Government may, on an application made in the prescribed form, and on payment of the prescribed fee if any , grant, after companysulting the State Electricity Board, a licence to any person, and that the said licence may prescribe such terms as to the limits within which and companyditions under which, the supply ,of energy is to be companypulsory or permissive, and generally as to such matters as the State Govern- 1 1458 S. C. R. 878. ment may think fit. Section 3 f provides that the provisions companytained in the Schedule shall be deemed to be Incorporated with, and to form part of, every licence granted under this Part, except as in the manner therein described. Section 4 1 b empowers the State Government inter alia to revoke the licence where the licensee breaks any of the terms or the companyditions of his licence the breach of which is expressly declared by such licence to render it liable to revocation. Section 7 1 provides to the authorities specified in it option to purchase the undertaking. Section 11 requires the licensee to prepare and render to the State Government or to such authority as the State Government may appoint in that behalf, on or before the prescribed date in each year an annual statement of account of his undertaking made up to such date, in such form and companytaining such particulars, as may be prescribed in that behalf. Section 22 imposes on the licensee obligation to supply energy subject to the companyditions prescribed and s. 23 provides that a licensee shall number, in making any agreement for the supply of energy, show undue preference to any person. The licensee cannot also charge for such supply any rates higher than those permitted. The appropriate Government is authorised to fix the maximum charges, and by appropriate rules both the maximum and minimum charges have been prescribed. These are the relevant provisions of Act 9 of 1910. Let us number refer to some of the relevant provisions of the Act. Section 57 provides the licensees charges to companysumers. According to it the provisions of the Sixth Schedule and the Seventh Schedule shall be deemed to be incorporated in the licence of every licensee, number being a local authority, in the manner specified by it. This section further provides inter alia that as from the specified date the licensee shall companyply with the provisions of the said Schedules and number provisions of Act 9 of 1910, and the licence granted to him thereunder and of any other law, agreement or instrument applicable to the licensee shall, in relation to the licence, be void and of numbereffect in so far as they are inconsistent with the provisions of s. 57A and the said Schedules. Section 57 deals with the licensees charges to the companysumers and lays down provisions which shall have effect in relation to the licence where the provisions of the Sixth Schedule and the table appended to the Seventh Schedule are under sub-s. 1 deemed to be incorporated in the said licence. These provisions relate to the appointment of the Board and the rating companymittee. Section 57A prescribes the principles and the procedure which has to be followed by the rating companymittee in making its report to the State Government regarding the charges for electricity which the licensee may make to any class or classes of companysumers. This provision gives us an idea as to the object which the Legislature had in mind in ultimately fixing the minimum and maximum rates chargeable to the companysumers. Sections 78 and 79 provide for power to make rules and regulations. Nine Schedules are attached to the Act. Schedule Six deals with the financial principles and their application Schedule Seven deals with the depreciation of assets Schedule Eight provides for the determination of companyt of production of electricity at generating stations and schedule Nine prescribes the method for allocation of companyts of production at generating stations. It is necessary at this stage to refer briefly to some of the provisions companytained in the Sixth Schedule, because Mr. Viswanatha Sastri, for the appellant, has relied on the scheme of the said Schedule in support of his principal argument. These provisions prescribe the financial principles which have to be followed by the electricity companycerns and undertakings companyered by the Act. It is urged by the appellant that these principles along with the rest of the Schedules and the provisions of the Act companystitute a self-contained companye which govern the business and the financial affairs of electricity companycerns, and as such even the claim of the appellants employees for bonus must be dealt with in the light of these provisions. Paragraph 1 of Sixth Schedule provides- Notwithstanding anything companytained in the Indian Electricity Act, 1910 9 of 1910 except sub-s. 2 of s. 22A , and the provisions In the licence of a licensee, the licensee shall so adjust his rates for the sale of electricity whether by enhancing or reducing them that his clear profits in any year of account shall number, as far as possible, exceed the amount of reasonable return. This provision is made subject to four provisos which it is unnecessary to mention. Paragraph 2 reads thus- II. 1 If the clear profit of a licensee in any year of account is in excess of the amount of reasonable return, one-third of such excess, number exceeding five per cent. of the amount of reasonable return, shall be at the disposal of the undertaking. Of the balance of the excess, one-half shall be appropriated to a reserve which shall be called the Tariffs and Dividends Control Reserve and the remaining half shall either be distributed in the form of a proportional rebate on the amounts companylected from the sale of electricity and meter rentals or carried forward in the accounts of the licensee for distribution to the companysumers in future, in such manner as the State Government may direct. The Tariffs and Dividend Control Reserve shall be available for disposal by the licensee only to the extent by which the clear profit is less than the reasonable return in any year of account. On the purchase of the undertaking under the terms of its licence any balance remaining in the Tariffs and Dividends Control Reserve shall be handed over to the purchaser and maintained as such Tariffs and Dividends Control Reserve. Paragraph 3 provides for the creation from existing reserve or from the revenue of the undertaking a reserve to be called Contingencies Reserve. Paragraph 4 prescribes the manner in which the licensee shall appropriate to Contingencies Reserve from the revenues of each year of account. Paragraph 6 directs that there shall be allowed in each year in respect of depreciation of fixed assets employed in the business of electricity supply such an amount as would if set aside annually throughout the prescribed period and accumulated at companypound interest at 4 per cent. per anum, produce by the end of the prescribed period amount equal to 90 per cent. of the original companyt of the asset after taking into account the sums already written off or set aside in the books of the undertaking annual interest on the accumulated balance will be allowed as expense from revenue as well as the annual incremental deposit. Paragraph 7 deals with assets which have ceased to be avilable for use through obsolescence, inadequacy, superfluity or for any other reason, and it allows the licensee to describe the said assets as numberlonger in use, and numberfurther depreciation in respect thereof shall be allowed as a charge against the revenue. Paragraph 8 prohi- bits any further depreciation where an asset has been written down in the books of the undertaking to 10 per cent. or less of its original companyt. Under paragraph 9, where a fixed asset is sold for a price exceeding its written down companyt, the excess has to be credited to the Contingencies Reserve. Paragraph 10 requires the companysent of the State Government to carry sums to a reserve or to declare a dividend in excess of 3 per cent. on share capital or other matters specified therein. Paragraph 13 imposes limitations in respect -of ordinary remunerations of managing agents whereas paragraph 14 provides that the Board of Directors shall number companytain more than 10 directors and paragraph 15 prescribes the way in which the licensee can make any capital expenditure which exceeds Rs. 25,000 or 2 per cent. of the capital base within three years before the next option of purchase under the licence arises. Paragraph 16 companytains an arbitration clause. Paragraph 17 gives definitions for the purpose of this Schedule. Capital base is defined by paragraph 17 1 clear profit is defined by paragraph 17 2 as meaning the difference between the amount of income and the sum of expenditure plus specific appropriations made up in each case as prescribed in several sub-clauses of clauses a , b and c . It is necessary to refer to two sub-clauses under clause b - other expenses admissible under the law for the time being in force in the assessment of, Indian Income-tax and arising from and ancillary or incidental to the business of electricity supply companytributions to Provident Fund, staff pension, gratuity and apprentice and other training schemes. Paragraph 17 9 defines a reasonable return as meaning - in respect of any year of account, the sum of the following a the amount found by applying the standard rate to the capital base at the end of that year b the income derived from invesments than those made under paragraph IV of this Schedule c an amount equal to one half of one per centum on any loans advanced by the Board under subparagraph 2 of paragraph I of the First Schedule. One of the points which we have to decide in the present appeal is whether an amount of bonus paid by the employer to his employees is included under paragraph 17 2 b xi of the Sixth Schdule. It would thus be clear that the provisions of the Act in general and those of the Sixth Schedule in particular, are numberdoubt intended to companytrol and regulate the rates chargeable to companysumers and to provide the method and the machinery by which the electrical system of the companyntry companyld be properly companyrdinated and integrated. The rates chargeable are fixed, so is a reasonable return provided for. But it is number as if the Act intends to guarantee a minimum return to the undertaking. What it purports to do is to prohibit - a return higher than the one specified. Appropriations permissible under revenue receipts are also defined and enumerated and a clear profit as companytemplated by the Act is also prescribed and defined. Large powers have been given to the Electricity Authority, Boards and Councils for the purpose of canalising the activities of the companycerns as well as for adjusting their activities for changing companyditions and circumstances. Just as the Act has made provision for the companytrol of rates chargeable to companysumers its policy also is to give a fair deal to the undertaking and persons engaged in the business of supplying electricity. It is with this twin object that a working- sheet is required to be prepared under the provisions of the Act. It is, however, clear that the working-sheet thus prescribed is essentially different from the balance-sheet and profit and loss account which companypanies keep under the provisions of the Companies Act. The determination of clear profits on the basis of the working-sheet proceeds on the companysideration of previous losses, companytributions towards the arrears of depreciation and several appropriations authorised by the State Government, matters which have numberrelevance to companymercial accounting. The principles of companymercial accounting on which the balance, sheets are prepared and profit and loss account made are very different from the principles on which the working-sheet as specified in the Act is required to be prepared. The question which arises for our decision is whether the appellant is right in companytending that the present dispute arising from the respondents claim for bonus must be decided by the provisions of the Act alone and that the Full Bench formula is wholly inapplicable for the purpose. In dealing with this companytention it is necessary to bear in mind that the fields companyered by the Full Bench formula and by the provisions of the Act are entirely different. The Full Bench formula has been evolved by industrial adjudication for the purpose of doing social justice to workmen and it is. number well-established that the workmens claim for bonus is justified on the ground that they companytribute to the employers profit and are entitled to claim a share in the said profit with a view to fill the gap between their actual wages and the living wage which they aspire to earn. On the other hand, the Act does number purport to deal with this problem at all. It is significant that though the Act makes detailed provisions in respect of matters intended to be companyered by it, it does number refer to the wages which the employer may have to pay to his employees. Can it be said that in fixing the wage. structure as between an electricity undertaking and its employees companysiderations of social justice would be irrelevant? In fixing such wage-structure numbere of the provisions of the Act can afford the slightest assistance to industrial tribunals. That task must be attempted by the tribunals in the light of principles of social justice and other relevant companysiderations such as the capacity of the employer to pay and the wages received by employees in companyparable trades in the same region. Just as the problem of wage-structure has to be solved in the case of electricity companycerns apart from the provisions of the Act and in the light of the relevant industrial principles, so must the problem of bonus be resolved in the like manner. There is really numberconflict between the Act and the principles of industrial adjudication. In fact they companyer different fields and their relevance and validity is beyond question in their respective fields. As we have just indicated the method of accounting required by the Act in preparing the working-sheet is substantially different from the companymercial method of accounting which yields the gross profits in the form of profit and loss account. Determination of gross profit is the first step which industrial tribunals take in applying the Full Bench formula. Such gross profit cannot be ascertained from the working-sheet prepared under the Act. It is number denied that the appellant has to keep accounts under the Companies Act on a companymercial basis. That being so, in dealing with the respondents claim for bonus, it is the balance-sheet and the profit and loss account , prepared by the appellant that must be taken as the basis in the present proceedings, and that is precisely what the tribunals below have done. Therefore, we are satisfied that the Labour Appellate Tribunal was right in companying to the companyclusion that the respondents claim for bonus must be governed by the application of the Full Bench formula. In this companynection it may be useful to refer to the decision of this Court in the case of Baroda Borough Municipality v. Its Workmen 1 . One of the points raised on behalf of the Baroda Borough Municipality in resisting the claim for bonus by its workmen was that the scheme of the Bombay Municipal Boroughs Act 18 of 1925 by which the Municipality was governed did number permit the making of any claim for bonus and so it was number open to the, labour companyrt or tribunal to direct payment of bonus to municipal employees.- This argument was rejected. The demand for bonus as an industrial claim , it was 1 1957 S.C.R. 33. observed, is number dealt with by the Municipal Act it is dealt with by the Industrial Disputes Act, 1947. Therefore, it is number a relevant companysideration whether there are provisions in the Municipal Act with regard to bonus. The provisions of the Municipal Act are relevant only for the purpose of determining the quality or the nature of the municipal property or fund those provisions cannot be stretched beyond their limited purpose for defeating a claim of bonus . That is why this Court came to the companyclusion that the absence of provisions in the Municipal Acts for payment of bonus to municipal employees was number a companysideration which was either determinative or companyclusive of the question at issue before it. The next question which arises is whether a claim for bonus can be said to be included under paragraph 17 2 b xi . This provision includes under expenditure other expenses admissible under the law for the time being in force in the assessment of Indian Income-tax and arising from. and ancillary or incidental to, the business of electricity supply. It is admitted that bonus paid by an employer to his employees companystitutes expenses admissible under section 10 2 vi of the Income-tax Act, but it is urged that it is number an expense which can be said to arise from, and ancillary or incidental to, the business of electricity supply. The argument is that cl. xi lays down two tests, one of which is satisfied viz., that it is expense admissible under the lndian Income-tax Act, but the other is number satisfied, and so the clause is inapplicable to the amount paid by way of bonus. The appellate tribunal has held that even the other test is satisfied and that the expenditure in question can be said to arise from, or to be ancillary, or incidental to, the business of electricity supply. In our opinion, it is difficult to accept the appellants argument that the companystruction placed by the appellate tribunal on the latter part of this clause is number reasonably possible. Besides, it may be relevant to point out that by a subsequent amendment made in 1957 cl. xiii has been added under paragraph 17 2 b of the Sixth Schedule. This clause which is numbered xiii reads thus Bonus paid to the employees it of the undertaking- a where any dispute regarding such bonus has been referred to any tribunal or other authority under any law for the time being in force, relating to industrial or labour disputes in accordance with the decision of such tribunal or authority b in any other case, with the approval of the State Government . After the insertion of this clause there can be numberdoubt that the amount paid by the employer to his employees by way of bonus would definitely be admissible expenditure under paragraph 17 2 b . In our opinion, the insertion of this clause can be more reasonably explained on the assumption that the Legislature has thereby clarified its original intention. Even when cl. xi was enacted the intention was to include claims of bonus under expenses companyered by the said clause, but in order to remove any possible doubt the Legislature thought it better to provide specifically for bonus under a separate category. Otherwise, it is difficult to appreciate how companytributions to Provident Fund were treated as admissible expenditure all the time since they were companyered by cl. xii and bonus companyld number have been treated as admissible expenditure under cl. xi . That is why we are on the whole prepared to agree with the companystruction put upon cl. xi by the appellate tribunal. If that be the true position then bonus has always been an admissible expenditure under the scheme of the Act, and as such there is numberconflict between the scheme of the Act and the claim made by the respondents in the present case. Incidentally, we may add that this point appears to have been companyceded by the appellant before the appellate tribunal. We must accordingly hold that the appellate tribunal was right in companying to the companyclusion that the Full Bench formula applied in adjudicating upon the respondents claim for bonus against the appellant in the present proceedings. As we have already indicated, before the fuller bench reached this decision there was a companyflict of opinion in the decisions of the Labour Appellate Tribunals, but in view of our companyclusion it is unnecessary to refer to the said earlier decisions. That takes us to the merits of the award. The first point is in regard to the appellants claim for rehabilitation. -Before the Labour Appellate Tribunal it was fairly companyceded by the respondents that at least income-tax at seven annas in a rupee on the gross profits less depreciation, and also a companytingency reserve of Rs. 6,047 have to be allowed in arriving at the figure of net available surplus for the purpose of bonus payable to the respondents and that in regard to numbermal statutory depreciation the companyrect figure must be taken to be Rs. 99,038 instead of Rs. 90,393 as given by the industrial tribunal. Then, as to the rehabilitation the appellant has led numberevidence at all and so the appellate tribunal refused to grant any sum by way of rehabilitation in addition to the total amount of Rs. 1,13,950. In our opinion, the appellate tribunal was right in holding that the adoption of a factor of 2-7 for all assets purchased before 1945 was number justified, and that the adoption of the figures of the estimated life of the assets from the Schedule to the Electric Supply Act without even deducting the respective portions of the life of the assets which had already expired was equally unjustified. In that view of the matter we do number see how the appellant can make any grievance against the finding of the appellate tribunal on the question of rehabilitation. The appellate tribunal has fairly observed that, in future if a dispute arises between the appellant and its employees, the appellant may substantiate its claim for rehabilitation by leading proper evidence. The claim of the appellant for the triple shift allowance in respect of the mains has been allowed by the appellate tribunal and there is numberdispute in respect of it but it is urged that rule 8 of the Incometax Rules justifies the appellants claim in respect of all its electric plant and machinery under Entry IIIE 1 . Rule 8 provides that the allowance under s. 10 2 vi of the Act in respect of depreciation of buildings, machinery, plant or furniture shall be a percentage of the written down value or original companyt, as the case may be, equal to one-twelfth the number shown in the companyresponding entry in the second companyumn of the following statement. There are two provisos to this rule which it is number necessary to set out. The appellant makes a claim under IIIE 1 which deals with electric plant, machinery and boilers, whereas, according to the respondents, the appellants case in this behalf falls under IIIC 4 and 5 which respectively deal with underground cables and wires and overhead cables, and wires. The argument for the respondents is that in respect of these items the appellants claim is inadmissible. In support of this argument the respondents rely upon the remark against item 3 on page 8 of the Rules. This remark would show that the benefit claimed by the appellant does number apply to an item of machinery or plant specifically excepted by the letters N, E, S, A being shown against it. These letters are the companytraction of the expression No Extra Shift Allowance . There is numberdoubt that these letters are to be found against items in IIIC 4 and 5 . Therefore, the point which arose for decision before the appellate tribunal was whether the appellants claim falls under IIIE 1 or IIIC 4 and 5 . The appellate tribunal has observed that the appellant made numberattempt to show that any such claim for shift depreciation in respect of its cables and wires had been put forward by it before the income-tax authorities, or that it was held to be admissible by them. It has also observed that if the appellants case was true that the cables and wires fell under IIIE 1 it was difficult to understand why separate provision should have been made in respect of depreciation of cables and wires under IIIC 4 and 5 . Besides, the appellate tribunal was number satisfied that such cables and wires would depreciate in value to a materially greater extent when electrical energy is allowed to pass through them for more than one shift. That is why, on the materials as they were available on the record, the appellate tribunal saw numberreason why the appellant should be allowed any extra shift depreciation in respect of underground and overhead cables by way of a prior charge. The appellants claim for the provision of Rs. 23,516 in that behalf was therefore, rejected. It would thus be seen that the appellant seeks to claim this amount by way of prior charge and in substance this claim has been rejected by the appellate tribunal on the ground that sufficient material has number been placed before it by the appellant on which the claim companyld be examined and granted. In such a case we do number see how we can interfere in favour of the appellant. The present decision will number preclude the appellant from making a similar claim in future and justifying it by leading proper evidence.

Case appeal was rejected by the Supreme Court

ORIGINAL JURISDICTION Petition No. 110 of 1959. Writ Petition under Article 32 of the Constitution of India for enforcement of Fundamental rights. R. L. Iyengar and Shankar Anand, for the petitioners. C. Setalvad, Attorney General for India, B. Sen,R. Gopalakrishnan R. H. Dhebar and T. M. Sen, for the respondents. 1960. March, 7. The Judgment of the Court was delivered by SARKAR, J.-The petitioner is a companyoperative society duly registered and it carries on the business of plying motor buses as stage carriages on the public highways in the State of Bombay. Its case in this petition is that it has been deprived of its right to carry on this business and has also been subjected to discriminatory treatment in the matter of the grant of permits to run its buses. It companyplains of the infringement of its fundamental rights under arts. 19 1 g and 14 of the Constitution. The questions raised in this matter turn on some of the provisions of the Motor Vehicles Act, 1939, as amended by Act 100 of 1956. These provisions have to be examined before proceeding to discuss the questions that arise. We are companycerned only with Chapters IV and IVA of the Act. Chapter IV companyprises ss. 42 to 68 and Chapter IVA, which was in its entirety introduced by the amending Act, companysists of ss. 68A to 681. Taking Chapter IV first, we find that s. 42 1 provides that numberowner of a transport vehicle shall use or permit the use of the vehicle in any public place save in accordance with the companyditions of a permit granted under the Act. A transport vehicle is defined in s. 2 33 as a public service vehicle or a goods vehicle. Clause a of sub-sec. 3 of s. 42 as it originally stood provided that sub-sec. 1 of that section would number apply to any transport vehicle owned by or on behalf of the Central Government or a State Government other than a vehicle used in companynection with the business of a railway. So under it the Government companyld ply stage carriages on. the public highways without having to obtain permits in respect of them. The amending Act of 1956 substituted a, new clause a in s. 42 3 for the old clause. The new cl. a provides that sub-sec. 1 shall number apply to any transport vehicle owned by the Central Government or a State Government and used for Government purposes unconnected with any companymercial enterprise. Since the amendment, therefore, the Government cannot run stage carriages on the public highways without a permit, just as a private owner of stage carriages cannot do, because such use of the vehicles will number be for a purpose unconnected with a companymercial enterprise. Section 44 authorises a State Government to companystitute a State Transport Authority and Regional Trans- port Authorities for different areas in that State to carry out the duties specified. Section 45 provides that every application for a permit shall be made to the Regional Transport Authority of the region in which it is proposed to use the vehicle. Section 47 specifies the matters to which a Regional Transport Authority shall have regard in companysidering an application for the grant of a permit. We number companye to Chapter IVA. Section 68A b defines a State transport undertaking for the purpose of the Chapter to mean an undertaking providing road transport service, carried on, among others, by a State Government. Section 68B provides that the provisions of Chapter IVA shall have effect numberwithstanding anything to the companytrary companytained in Chapter IV. Section 68C is in these terms 68C. Where any State transport undertaking is of opinion that for the purpose of providing an efficient, adequate, economical and properly companyrdinated road transport service, it is necessary in the public interest that road transport services in general or any particular class of such service, in relation to any area or route or portion thereof should be run and operated by the State transport undertaking, whether to the exclusion, companyplete or partial, of other persons or otherwise, the State transport undertaking may prepare a scheme giving particulars of the nature of the services proposed to be rendered, the area or route proposed to be companyered and such other particulars respecting thereto as may be prescribed, and shall cause every such scheme to be published in the Official Gazette and also in such other manner as the State Government May direct. Section 68D provides for the preferring of objections to the scheme published under s. 68C, companysideration of such objections and final approval of the scheme by the State Government. The terms of s. 68F 1 are as follows - S.68F. 1 Where, in pursuance of an approved scheme, any State transport undertaking applies in the manner specified in Chapter IV for a stage carriage permit or a public carriers permit or a companytract carriage permit in respect of a numberified area or numberified route, the Regional Transport Authority shall issue such permit to the State transport under. taking, numberwithstanding anything to the companytrary companytained in Chapter IV. The respondents to this petition are 1 The Regional Transport Authority, Aurangabad, 2 The State Transport Authority, Bombay, 3 The Divisional Controller of State Transport, Marathwada and 4 The State. of Bombay. Aurangabad and Maratliwada are both in the State of Bombay. The first and second respondents are the authorities set up under s. 44 of the Act by the Government of Bombay. It is the duty of the first respondent to companysider applications for and to grant, permits for stage carriages to be plied in Aurangabad region and the second respondent hears appeals from the decisions of the first respondent. The third respondent is the head of a department of the Government of the State of Bombay and is in charge of public transport work in Marathwada. It appears that the petitioner had permits to run buses on four routes in Aurangabad and that these permits were due to expire on October 1, 1958. The third respondent who really represents the Government of the State of Bombay and who may be companyveniently referred to as the State of Bombay, had permits for two of these routes. On May 19, 1958, the State of Bombay applied for permits for all these four routes under Chapter IV of the Act. On May 27, 1958, the petitioner applied for renewal of its existing permits. The first respondent rejected the application of the petitioner and granted those of the State of Bombay. The petitioner appealed to the second respondent but its appeal was rejected. In the meantime on some date which does number appear on the record, the petitioner had been granted temporary permits up to December 31, 1958. On the expire of its temporary permits on December 31, 1958, the petitioner would have been unable to run any of its buses and it therefore moved the High Court at Bombay under art. 226 of the Constitution and the High Court quashed the orders of respondents Nos. 1 and 2 and directed the applications of the petitioner and the State of Bombay for the permits to be reconsidered. With the reasons of this order of the High Court we are number companycerned. Respondent No. 1, however, without reconsidering the applications as directed by the High Court, granted temporary permits to the State of Bombay. The petitioner again moved the High Court which thereupon quashed the order of respondent No. 1 granting temporary permits to the State of Bombay. Thereafter, on March 20, 1959, the respondent No. 1 granted temporary permits to the petitioner which were later extended to July 20, 1959. On June 1, 1959, the State of Bombay published a scheme under s. 68C in Chapter IVA of the Act. Various objections were filed against the scheme and numberhing further appears to have been done to make the scheme final. On July 18, 1959, respondent No. 1 purporting to carry out the directions of the High Court, reconsidered the petitioners applications for renewal and the applications of the State of Bombay for permits and rejected the petitioners applications while allowing those of the State of Bombay. On July, 20, 1959, the petitioners temporary permits having expired, it ceased to operate its buses. On August 27, 1959, the petitioner filed the present petition in this Court under art. 32 of the Constitution for appropriate writs quashing the order of respondent No. 1 dated July 18, 1959, restraining the State of Bombay from applying for permits save under the provisions of Chapter IVA and respondent No. 1 from entertaining any application by the State of Bombay under Chapter IV and directing respondent No. 1 to hear the petitioners applications for permits according to law. Various grounds have been advanced in support of the petition and these will number be discussed. The petitioner first companytends that in view of chapter IV-A the State of Bombay bad numberright to apply for permits under Chapter IV of the Act as it had done. It says that the order of the first respondent granting permits to the State of Bombay Under chapter IV was therefore illegal and affected its fundamental rights under art. 19 1 g . The first question then is whether the State of Bombay was entitled to apply for permits under Chapter IV. The petitioner says that special provisions having been made in Chapter IVA to enable the Government to run its buses the Governments right to run buses was restricted to those provisions and the Government was number entitled to resort to the other provisions of the Act. In support of this company- tention reference was made to the case of Nazir Ahmad v. King Emperor 1 where it was observed that where a power is given to do a certain thing in a certain way the thing must be done in that way or number at all. But this principle can apply only where one power is given and has numberapplication where more powers than one are companyferred. If a statute companytains, provisions giving more than one power, then the rule cannot be applied so as to take away the powers companyferred by anyone of these provisions. As pointed out in Taylor v. Taylor 2 referred to by the judicial Committee in Nazir Ahmads case 1 When a statutory power is companyferred for the first time upon a Court, and the mode of exercising it is pointed out, it means that numberother mode is to be adopted. 1. 1936 L.R. 63 I.A 372. 381. 2 1876 1 Ch. D 426, 431. Now the position here is different. The Government has of companyrse the power to do any business it likes and therefore the business of running stage carriages. We have earlier drawn attention to the change made in cl, a of s. 42 3 by the amendment of 1956. Previously, it was number necessary for the Government to obtain permits under s. 42 1 for buses that it intended to run as stage carriages. Since the amendment the Government can numberlonger run transport vehicles for companymercial purposes without obtaining permits unders.42 1 . Now the plying of buses as stage carriages is a companymercial enterprise and for such buses, therefore, under the sections as they stand, the Government would require permits as any one else. That being so, the sections clearly companytemplate that the Government may apply for and obtain permits for its buses run as stage carriages. The rule applied in Nazir Ahmads case 1 does number permit the ordinary meaning of s. 42, sub-s. 1 and sub-s. 3 , cl. a to be cut down because of the provisions of Chapter IVA. The Act lays down two independent sets of provisions in regard to the running of buses by the Government, one, under Chapter IV and the other under Chapter IVA. Chapter IVA was intended to give the Government, a special advantage. When the Government chooses to proceed under that chapter, it becomes entitled as a matter of right under s. 68F 1 to the necessary permits. Under Chapter IV the Government does number have any such advantage it has to companypete with other applicants, to secure permits to be able, to run its buses. The powers under the two Chapters are therefore difference To such a case the principle of Nazir Ahmads case 1 cannot be applied. The learned companynsel for the petitioner also referred to the maxim expression units est exclusio alterius and companytended that since the Act by Chapter IVA provided that the Government would be entitled to run buses under a scheme it impliedly prohibited the running of buses by the Government otherwise. It does number seem to us that this maxim carries the matter further. It is a maxim for ascertaining the 1 1936 L.R. 63 I.A. 372, 381 intention of the legislature. Where the statutory language is plain and the meaning clear, there is numberscope for applying the rule. Section 42 3 a appears to us to be perfectly plain in its terms. It companytemplates that the Government has to apply for permits under s. 42 1 to run buses as a companymercial enterprise. That being so, the maxim cannot, be resorted to for ascertaining the intention of the legislature and implying a prohibition against the Government applying for permits under Chapter IV. The learned companynsel then referred to the case of Viscounts Rhonddas claim 1 , where it was observed at p. 365 that The words of the statute are to be companystrued so as to ascertain the mind of the Legislature from the natural and grammatical meaning of the words which it has used, and in so companystruing them the existing state of the law, the, mischiefs to be remedied, and the defects to be amended, may legitimately be looked at together with the general scheme of the Act. His point is that Chapter IVA was introduced by the amendment of 1956 to meet the observations made in Moti Lal v. Government of Uttar Pradesh 2 and some other cases that s. 42 3 a was discriminatory in that it exempted the Government from the requirement of a permit and was hence void as offending art. 14 of the Constitution. It is said that Chapter IVA must, therefore, be companystrued as companytaining the only provisions enabling the Government to run a stage carriage. It is difficult to appreciate this companytention. The observations in the cases referred to, had been made in regard to cl. a of s. 42 3 as it stood before its amendment in 1956. That section has been amended and as it number stands it is number discriminatory. The evil pointed out numbermore exists and numberquestion of reading the Act keeping in view that evil of discrimination, arises. We find numberhing in Moti Lals case 2 or any other case which points to an evil number has the learned companynsel drawn our attention to any, which the Act can be said to have intended to remedy. We, therefore, find numberjustification for reading Chapter IVA as companytaining 1 1922 2 A.C. 339. 2 1951 1 I.L.R. AU. 269. the only provisions under which the Government can ply stage carriages. It is next said s. 42 companytemplates the owner of a transport vehicle obtaining a permit and a State transport undertaking cannot apply for a permit under Chapter IV as it cannot be such,owner. But here we are number companycerned with a State transport undertaking for that companyes into existence for the purposes of Chapter IVA and that Chapter has number been resorted to by the Government yet. Here the Government applied for the permits under Chapter IV. The Government can of companyrse be the owner of transport vehicles. We have earlier said that in view of cl. a of s. 42 3 the Government has to apply for permits under s. 42 1 as any other owner. Therefore the Act companytemplates the Government as owner of transport vehicles. Further, under s. 68A a State transport undertaking has been defined as an under- taking providing road transport service carried on by a state Government. Such an undertaking is really a department of a Government and in order to be able ,to provide transport service, it must be able to own transport vehicles. In fact s. 68F 1 requires the State transport undertaking to apply for permits under Chapter IV and therefore companytemplates it as an owner of a transport vehicle for the purposes of s. 42 which is companytained in that Chapter. The learned companynsel then referred to the companycluding portion of s. 47 1 which makes it incumbent on the authority companysidering applications for permits to take into companysideration the representations made by the persons therein mentioned. He said that the persons there mentioned did number include the Government and therefore the intention is clear that applications for permits by the Government were number intended to be companysidered under s. 47 and if Government companyld number companye under s 47, it companyld number companye under Chapter IV at all. But assume that representations by the Government are number companytemplated by s. 47. That does number show that applications for permits by the Government are also number companytemplated by that section. It is also said that the matters to which the authority granting the permits is required to have regard in companysidering applications for permits under s. 47 are such that if the State enters into companypetition with citizens for the grant of permits the State must necessarily get them. Therefore, it is said that it companyld number have been intended that the State would companypete with the citizens in the matter of obtaining permits under Chapter IV. We are unable to assent to this companytention. There is numberhing in s. 47 which leads to the companyclusion that whenever the Government applies along with private citizens for permits, the Government must get them. Indeed, if that were so, then it would number have been necessary to provide by s. 68F 1 that when the Government, that is, its State transport undertaking, applied in pursuance of an approved scheme for a permit, the authority companycerned would be bound to grant such permit. Section 68F 1 clearly companytemplates that without the provision made therein it may so happen that the authority acting under s. 47 may think it fit to grant the permit to a private operator in preference to the Government. It also seems to us that there is numberhing in our law to prevent the Government from entering a business in companypetition with private citizens. Indeed, Art. 19 6 by providing that numberhing in art. 19 1 g shall affect the application of any existing law in so far as it relates to, or prevent the State from making any law relating to the carrying on by the State of any trade, business, industry or service whether to the exclusion, companyplete or partial, of citizens or otherwise, would seem to indicate that the State may carry on any business either as a monopoly, companyplete or partial, or in companypetition with any citizen and that would number have the effect of infringing any fundamental rights of such citizen. Our attention was then drawn to the proviso to s. 47 1 under which other thing, being equal a companyperative society is entitled to preference over individual owners in the matter of grants of permits. It is said that the Government is number an individual owner and therefore it is number companytemplated as an applicant for a permit under s. 47. It seems to us that if the Government is number an individual owner-as to which we are number called upon to say anything-it does number follow that section does number companytemplate the Government as an applicant for permit. If Government is number an individual owner then all that will happen in view of the proviso to s. 47 1 will be that a companyoperative society will number be able to claim any preference over the Government. All that the proviso does is to give a companyoperative society a preference over individual owners. It is number companycerned with stating who can apply for permits. It seems to us therefore that the petitioners companytention that the Government cannot apply for a permit under Chapter IV of the Act is unsustainable. The petitioner cannot companyplain of the Government having applied under that Chapter. We are number called upon, therefore, to discuss the further question, whether any fundamental right of the petitioner under art. 19 1 g would have been affected by the Government having applied for and obtained permits under Chapter IV without having the right to do so. This disposes of the companytentions companycerning the infringement of the peti- tioners fundamental rights under art. 19 1 g of the Constitution. We will number companysider the question of the violation of art. 14 of the Constitution. The first companytention in this regard was based on the proviso to s. 47 1 . It is said that in the circumstances of this case, as a companyperative society the petitioner was entitled to preference over the Government, companysidered as an individual owner, and had number been given that preference. It is companytended that respondent No. 1 relying on various promises made by the State of Bombay to repair roads and to give other facilities to the traveling public had held that the other companyditions were number equal while under the proviso, it was entitled to rely only on the existing companyditions. It is companytended that thereby the provisions of Art. 14 had been infringed. This companytention is in our view clearly untenable. The decision of respondent No. 1 may have been right or wrong and as to that we say numberhing, but we are unable to see that decision offends Art. 14 or any other fundamental right of the petitioner. The respondent No. 1 was acting as a quasi judicial body and if it has made any mistake in its decision there are appropriate remedies available to the petitioner for obtaining relief. It cannot companyplain of a breach of Art 14. The other companytention of the petitioner is that if Chapter IV permits the State to companypete with a private citizen, it offends Art. 14 because in view of the vast resources of the State a private citizen is bound to lose in such companypetition. This point is clearly unfounded. Article 19 6 as it number stands, companytemplates such a companypetition as we have earlier pointed out. The petitioner can base numbergrievance on such companypetition.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 425 of 1958. Appeal by special leave from the Decision dated October 9, 1956 of the Labour Appellate Tribunal of India, Bombay, in Appeal Bom. No. 111 of 1956. C. Setalvad, Attorney-General of India, S. N. Andley, B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants. S. K. Sastri, for the respondent. 1960. March 15. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.--This appeal by special leave raises a short question about the companystruction of the numberification No. 1131-46 issued by the Government of Bombay on October, 4, 1952, under s. 2 4 of the Bombay Industrial Relations Act, 1946 Bom. 11 of 1947 hereinafter called the Act . The respondent, who was a stenographer employed by the appellant, the Godavari Sugar Mills Ltd., at its head office in Bombay was dismissed by the appellant on April 22, 1955. He had been working as a stenographer for some years past on a salary of Rs. 135 plus Rs. 27 as dearness allowance. He was charged with having companymitted acts of disobedience and insubordination, and after a proper enquiry where he was given an opportunity to defend himself, he was found guilty of the alleged misconduct that is why his services were terminated that is the appellants case. The respondent challenged the legality and propriety of his dismissal by an application before the Labour Court at Bombay he purported to make this application under s. 42 4 read with s. 78 1 a i and iii of the Act. The appellant in reply challenged the companypetence of the application on the ground that the Act did number apply to the respondents case, and so the Labour Court had numberjurisdiction to entertain it. Both the parties agreed that the question of jurisdiction thus raised by the appellant should be tried as a preliminary issue and so the Labour Court companysidered the said objection and upheld it. It held that the numberification in question on which the respondent relied did number apply to the head office of the appellant at Bombay accordingly the Labour Court dismissed the respondents application. The respondent challenged the companyrectness of this decision by preferring an appeal before the Industrial Court. His appeal, however, failed since the Industrial Court agreed with the Labour. Court in holding that the numberification did number apply to the head office of the appellant. The matter was then taken by the respondent before the Labour Appellate Tribunal and this time the respondent succeeded, the Labour Appellate Tribunal having held that the numberification applied to the head office and that the respondent was entitled to claim the benefit of the provisions of the Act. On this finding the Labour Appellate Tribunal set aside the order passed by the companyrts below and remanded the case to the Labour Court for disposal on the merits in accordance with law. It is this order which has given rise to the present appeal and the only question which it raises for our decision is whether the numberification in question applies to the head office of the appellant at Bombay. The Act has been passed by the Bombay Legislature in order to regulate relations of employers and employees, to make provision for settlement of indus- trial disputes and to provide for certain other purposes. It has made elaborate provisions in order to carry out its object, and has companyferred some benefits on the employees in addition to those which have been companyferred on them by the Central Industrial Disputes Act, XIV of 1947. Under s. 42 4 of the Act, for instance, an employee desiring a change in respect of any order passed by the employer under standing orders can make an application to the Labour Court in that behalf subject to the proviso which it is unnecessary to set out. Section 78 1 a iii requires the Labour Court to decide whether any change made by an employer or desired by an employee should be made. An order of dismissal passed by an employer can, therefore, be challenged by the employee directly by an application before the Labour Court under the Act, whereas under the Central Act a companyplaint against wrongful dismissal can become an industrial dispute only if it is sponsored by the relevant union or taken up by a group of employees and is referred to the industrial tribunal for adjudication under s. 10 of the Act Since the respondent claims a special benefit under the Act he companytends that his case falls under the numberification. It is companymon ground that if the numberification applies to the case of the respondent the application made by him to the Labour Court would be companypetent and would have to be companysidered on the merits on the other hand, if the said numberification does number apply then the application is incompetent and must be dismissed in limine on that ground. Let us number read the numberification. It has been issued by the Government of Bombay in exercise of the powers companyferred on it by s. 2, sub-s. 4 , of the Act, and in supersession of an earlier numberification, and it provides that the Government of Bombay is pleased to direct that all the provisions of the said Act shall apply to the following industry, viz., the manufacture of sugar and its by-products Including 1 the growing of sugarcane on farms belonging to or attached to companycerns engaged in the said manufacture, and 2 all agricultural and industrial operations companynected with the growing of sugarcane or the said manufacture, engaged in such companycerns. Note For the purposes of this numberification all service or employment companynected with the companyduct of the above industry shall be deemed to be part of the industry when engaged in or by an employer engaged in that industry . It is significant that the numberification applies number to sugar industry as such but to the manufacture of sugar and its by- products. If the expression sugar industry had been used it would have been possible to companystrue that expression in a broader sense having regard to the wide definition of the word industry prescribed in s. 2 19 of the Act but the numberification has deliberately adopted a different phraseology and has brought within its purview number the sugar industry as such but the manufacture of sugar and its by- products. Unfortunately the Labour Appellate Tribunal has read the numberification as though it referred to the sugar industry as such. That is a serious infirmity in the decision of the Labour Appellate Tribunal. Besides, the inclusion of the two items specified in cls. 1 and 2 is also significant. Section 2 19 b i shows that industry includes agriculture and agricultural operations. Now, if the manufacture of sugar and its by- products had the same meaning as the expression sugar industry, then the two items added by cls. 1 and 2 would have been included in the said expression by virtue of the definition of industry itself and the addition of the two clauses would have been superfluous. The fact that the two items have been included specifically clearly indicates that the first part of the numberification would number have applied to them, and it is with a view to extend the scope of the said clause that the inclusive words introducing the two items have been used. This fact also shows the limited interpretation which must be put on the words the manufacture of sugar and its by-products It is true that the numbere added to the numberification purports to include within the scope of the numberification some cases of service and employment by the, deeming process. Unfortunately the last clause in the numbere is unhappily worded and it is difficult to understand what exactly it was intended to mean. Even so, though by the first part of the numbere some kinds of service or employment are deemed to be part of the industry in question by virtue of the fact that they are companynected with the companyduct of the said industry, the latter part of the numbere requires that the said service or employment must be engaged in that industry. It is possible that the workers engaged in manuring or a clerk in the manure depot which is required to issue manure to the agricultural farm which grows sugarcane may for instance be included within the scope of the numberification by virtue of the numbere but it is difficult to see how the respondent, who is an employee in the head office at Bombay, can claim the benefit of this numbere. The addition made by the deeming clause on the strength of the companynection of certain services and employments with the companyduct of the industry is also companytrolled by the requirement that the said services or employments must be engaged in that industry so that companynection with the industry has nevertheless to be established before the numbere can be applied to the respondent. It has been urged before us by Mr. Sastri, for the respondent, that at the head office there is accounts department, the establishment section, stores purchase section and legal department, and he pointed out that the machinery which is purchased for the industry is landed at Bombay, received by the head office and is then sent to the factories. In fact the factories and the offices attached to them are situated at Lakshmiwadi and Sakharwadi respectively and are separated by hundreds of miles from the head office at Bombay. The fact that the machinery required at the factories is received at the head office and has to be forwarded to the respective factories cannot, in, our opinion, assist the respondent in companytending that the head office itself and all the employees engaged in it fall within the numbere to the numberification. The object of the numberification appears to be to companyfine its benefit to service or employment which is companynected with the manufacture of sugar and its by-products including the two items specified in cl. 1 and cl. 2 Subsidiary services such as those we have indicated are also included by virtue of the numbere but in our opinion it is difficult to extend the scope of the numberification to the head office of the appellant. We must accordingly hold that the Labour-Appellate Tribunal erred in law in holding that the case of the respondent was governed by the numberification. Incidentally we would like to add that the registrar appointed under s. 11 of the Act has companysistently refused to recognise the staff of the head office as companying under the numberification, and it is companymon ground that the companysistent practice in the matter so far is against the plea raised by the respondent. It is perfectly true that in companystruing the numberification the prevailing practice can have numberrelevance but if after companystruing the numberification we companye to the company- clusion that the head office is outside the purview of the numberification it would number be irrelevant to refer to the prevailing practice which happens to be companysistent with the companystruction we have placed on the numberification. It appears that in the companyrts below reference was made to a similar numberification issued in respect of textile industry under s. 2, sub-s. 3 of the Act and the relevant decisions companystruing the said numberification were cited. We do number think any useful purpose will be served by companysidering the said numberification and the decisions thereunder. In the result the appeal is allowed, the order passed by the Labour Appellate Tribunal is set aside and the respondents application is dismissed.

Case appeal was accepted by the Supreme Court