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CIVIL APPELLATE JURISDICTION Civil Appeal No. 577 of 1963. Appeal from the judgment and order dated March 8, 1961 of the Bombay High Court in Special Civil Application No. 1120- of 1960. G. Patwardhan and M. S. Gupta, for the appellant. D. Karkhanis J. B. Dadachanji and A. G. Ratnaparkhi or respondent No. 1. The Judgment of the Court was delivered by Wanchoo, J. The appellant took on lease two survey numbers from the respondent, Sholapur Borough Municipality on April 1, 1946 for a period of three years. The land is situate within the municipal limits. About November 8, 1946, the Bombay Tenancy Act, No. 29 of 1939 hereinafter referred to as the 1939-Act was applied to this area and s. 3-A of that Act provided that every tenant shall on the expiry of one year from the date of the companying into force of the Bombay Tenancy Amendment Act, No. XXVI of 1946 be deemed to be a protected tenant unless his landlord has within the said period made an application to the Mamlatdar for a declaration that the tenant was number a protected one. The respondent did number file a suit within one year and therefore the appellant claimed to have become a protected tenant under the 1939-Act. The 1939-Act was repeated in 1948 by the Bombay Tenancy and Agricultural Lands Act, No. LXVII of 1948 hereinafter referred to as the 1948-Act . Section 31 of the 1948-Act provided that for the purposes of this Act, a person shall be recognised to be a protected tenant if such person had been deemed to be a protected tenant under s. 3, 3-A or 4 of the 1939-Act. Ordinarily, therefore, the appellant would have become a protected tenant under this section of the 1948-Act, if he had become a protected tenant under the 1939Act. But s. 88 of the 1948-Act inter alia provided that numberhing in the foregoing provisions of the 1948-Act shall apply to lands held on lease from a local authority. Therefore if s. 88 prevailed over s. 31, the appellant would number be entitled to the benefit of s. 31 and companyld number claim to be a protected tenant under this section. The appellant however relied on s. 89 2 of the 1948-Act which provided for the repeal of the 1939-Act except for ss. 3, 3-A and 4 which companytinued as modified in Sch. 1 of the 1948-Act. That sub-section provided that numberhing in the 1948-Act or any repeal effected thereby shall save as expressly provided in this Act affect or be deemed to affect any right, title, interest, obligation or liability already acquired, accrued or incurred before the companymencement of the 1948-Act. In the present case the respondent gave numberice to the appel- lant on May 2, 1955 terminating his tenancy with effect from March 31, 1956. Subsequently the respondent filed suit No. 42 of 1957 for obtaining possession of the lands and for certain other reliefs. It was held in that suit that the respondent companyld number get possession of the lands as the appellant was entitled to the benefit of the 1948-Act and companysequently the respondents suit for pos session was dismissed. The respondent then appealed to the, District Court. During the pendency of that appeal the appellant made an application on September 8, 1958 for a declaration that he was a protected tenant of the lands and also for fixig rent under the provisions of the Tenancy Act. Further in the appeal filed in the District Court a companypromise was arrived at by which the order dismissing the respondents suit for possession was set aside and the suit was remanded to the trial companyrt with the direction that the suit be stayed and disposed of after the decision by the Mamlatdar. The companypromise provided that if the appellant was finally held to be tenant by the authorities under the 1948Act the suit for possession would be dismissed. It also provided that if the decision in the proceedings under the, Tenancy Act went against the appellant, the suit for possession would be decreed. The Mamlatdar held that the appellant was a tenant and gave him a declaration under s. 70 b of the 1948-Act. The respondent then went in appeal to the Collector, and the Collector decided that the Mamlatdar had numberjurisdiction to decide whether the appellant was a tenant. The appellant then went in revision to the Bombay Revenue Tribunal. The tribunal held, in view of the amendments that had been made in the 1948-Act by the Amendment Act of 1956 by which s. 88- B was introduced in the 1948-Act, that the revenue companyrt had jurisdiction to decide whether the appellant was a tenant. Finally it remanded the matter to the Collector for decision on the question whether the appellant was a tenant or a protected tenant on the merits. The respondent had companytended before the Revenue Tribunal that the appellant companyld number have the status of a tenant or protected tenant in view of the provisions of the 1948-Act and therefore the respondent filed a petition under Art. 227 of the Constitution of India before the Bombay High Court. Its companytention before the High Court was that in view of s. 88 of the 1948-Act the appellant companyld number claim to be a protected tenant within the meaning of s. 31 of that Act and therefore the order of the Collector was right. It was also companytended that s. 88-B would number apply to the case of the appellant as it came into force on April 1, 1956 after the determination of the tenancy of the appellant by numberice. Both these companytention were accepted by the High Court and the order of the Revenue Tribunal was set aside and in its place the order of the Collector dismissing the appellants application was restored. Thereupon there was an application to the High Court under Art. 133 1 c of the Constitution and 622. the High Court certified the case as a fit one for appeal to this Court and that is how the matter has companye up before us. This appeal was first heard by a Division Bench of this Court and has been referred to a larger Bench in view of certain difficulties relating to the interpretation and inter-relation of ss. 31, 88 and 89 of the 1948-Act and in view of two decisions of this Court in Sakharam v. Manikchand 1 and Mohanlal Chunilal Kothari v. Tribhovan Haribhai Tamboli 2 . It has been companytended on behalf of the appellant that Sakharams case 1 fully companyers the present case and on the basis of that case the appeal should be allowed. On the other hand, learned companynsel for the respondent companytends that on the ratio of Mohanlal Chunilal Kotharis case, 2 the appellant should be held to be number a protected tenant and that companysiderations which applied to the interpretation of s. 8 8 1 d equally applied to the interpretation of s. 88 1 a , b and c . It is further urged on behalf of the respondent that in view of the latter decision, the decision in Sakharams case 1 numberlonger holds the field. Before we refer to the two decisions on which reliance has been placed on either side, we may refer to the various provisions of the 1948-Act as they were before the amendments of 1956 to decide the inter-relation of ss. 31, 88 and 89 of the said Act. It may be mentioned at the outset that S. 89 which repealed the 1939-Act did number repeal ss. 3, 3-A and 4 of that Act. These three sections companytinued as modified in Sch. 1 of the 1948-Act. A perusal of the modified sections in Sch. I shows that protected tenants were only those tenants who satisfied these three sections in the Schedule and that numbernew protected tenants companyld companye into existence under the 1948-Act after it came into force from December 28, 1948. Further it seems to us obvious that ss. 3, 3-A and 4 of the 1939-Act were number repealed and were companytinued as modified in Sch. 1 of the 1948-Act for the purpose of s. 31 of the 1948-Act. That section provided as follows- For the purposes of this Act, a person shall be recognised to be a protected tenant if such person has been deemed to be a protected tenant under section 3, 3-A or 4 of the Bombay Tenancy Act, 1939. These sections ss. 3, 3-A and 4 which were companytinued in a modified form in Sch. 1 of the 1948-Act were so companytinued only for the purpose of S. 31 of the Act and it was number possible for 1 1962 2 S.C R. 59. 2 1963 2 S.C.R. 707. any tenant to be a protected tenant under the 1948-Act unless he was a protected tenant under the 1939-Act. The 1948-Act thus recogaised such tenants as protected tenants who were protected tenants under the 1939-Act and even though ss. 3, 3-A and 4 of the, 1939 Act were companytinued as modified by Sch. 1 of the 1948Act The modifications were such as showed that only those tenants would remain protected tenants under the 1948-Act who were protected under the 1939-Act. Then we companye to s. 88 of the 1948-Act which is in these terms - 1 . Nothing in the foregoing provisions of this Act shall apply -.- a to lands held on lease from the Crown, a local authority or a companyoperative society b Section 8 8 lays down that numberhing in the foregoing provisions of the 1948-Act shall apply inter-alia to lands held on lease from a local authority, like a municipality. As s. 31 is one of the foregoing sections it will number apply to lands held on lease from a local authority. In other words, so far as lands held on lease from a local authority are companycerned, there will be numberprovision in the 1948-Act for recognising a protected tenant even if a person was a protected tenant under the 1939-Act. It is only s. 31 which gave recognition to the status of a protected tenant under the 1948-Act and if that provision is in effect omitted so far as lands held on lease from a local authority are companycerned, numbersuch lessee can claim to be a protected tenant. In effect therefore the legislature which had companyferred by the 1939-Act the status of a protected tenant on certain persons was taking away that status by enacting s. 88 in the 1948-Act so far as inter alia aessees from a local authority were companycerned. If matters had stood only on sq. 31 and 88 there would have been numberdifficulty in holding that the status of protected tenant companyferred by the 1939-Act was taken away from certain lessees including lessees from a local authority under s. 88 of the 1948Act. But the appellant relies on s. 89 2 b and companytends that provision saved his rights as a protected tenant. We have already mentioned that s. 89 1 repealed inter alia the 1939-Act except for ss. 3, 3-A and 4 which companytinued in a modified form in Sch. 1 of Section 89 2 b on which reliance is placed by the appellant is in these terms - But numberhing in this Act or any repeal effected thereby- a b shall, save as expressly provided in this Act, affect or be deemed to affect. any right, title, interest, obligation or liability already acquired, accrued or incurred before the companymencement of this Act, or ii The argument is that the interest acquired as a protected tenant under the 1939-Act would thus number be affected in view of this provision in the 1948-Act and it is this argument which we have to examine. Now we have already mentioned that ss. 3, 3-A and 4 relating to protected tenants in the 1939-Act were number repealed by the 1948-Act. Therefore that Part of s. 89 2 b which says that any repeal effected thereby shall number affect or be deemed to affect any high title, interest etc. will number apply. But learned companynsel for the appellant relies on the words numberhing in this Act shall affect or be deemed to affect any right, title or interest. . . . and his argument is that even though there might number have been a repeal of ss. 3, 3-A and 4 of the 1939-Act by the 1948-Act S. 89 2 would still protect him because it provides that numberhing in the 1948-Act shall affect or be deemed to affect any right title, interest etc. acquired before its companymencement. But the clause numberhing in this Act shall affect or be deemed to affect is qualified by the words save as expressly provided in this Act. Therefore, if there is an express provision in the 1948-Act, that will prevail over any right, title or interest etc. acquired before its companymencement. Further the words save as expressly provided in this Act also qualify the words any repeal affected thereby and even in the case of repe al of the provisions of the 1939-Act if there is an express provisi on which affects any title, right or interest acquired before the companymencement of the 1948-Act that will also number be saved. The narrow question then is whether there is anything express in the 1948-Act which takes away the interest of a protected tenant acquired before its companymencement. If there is any such express provision then s. 89 2 b would be of numberhelp to the appellant. The companytention of the respondent is that S. 88 is an express provision and in the face of this express provision the interest acquired as a protected tenant under the 1939- Act cannot prevail. On the other hand, it is urged on behalf of the appellant that s. 88 does number in express terms lay down that the interest acquired by a protected tenant under the 1939-Act is being taken away and therefore it should number be treated as an express provision. Now there is numberdoubt that s. 88 when it lays down inter alia that numberhing in the foregoing provisions of the 1948-Act shall apply to lands held on lease from a local authority, it is an express provision which takes out such leases from the purview of sections 1 to 87 of the 1948-Act. One of the provisions therefore which must be treated as number-existent where lands are given on lease by a local authority is in s. The only provision in the 1948-Act which recognised protected tenants is s. 31 and if that section is to be treated as number-existent so far as lands held on lease from a local authority are companycerned, it follows that there can be numberprotected tenants of lands held on lease from a local authority under the 1948-Act. It is true that s. 88 does number in so many words say that the interest of a protected tenant acquired under the 1939-Act is being taken away so, far as lands held on lease from a local authority are companycerned but the effect of the express provision companytained in s. 88 1 a clearly is that s. 31 must be treated as number-existent so far as lands held on lease from a local authority are companycerned and in effect therefore s. 8 8 1 a must be hold to say that there will be numberprotection under the 1948-Act for protected tenants under the 1939-Act so far as lands held on lease from a local authority are companycerned. It was number necessary that the express provision should in so many words say that there will be numberprotected tenants after the 1948-Act came into force with respect to lands held on lease from a local authority. The intention from the express words of s. 88 1 is clearly the same and therefore there is numberdifficulty in holding that there is an express provision in the 1948-Act which lays down that there will be numberprotected tenant of lands held on lease from a local authority. In view of this express provision companytained in s. 88 1 a , the appellant cannot claim the benefit of s. 31 number can it be said that his interest as protected tenant is saved by s. 89 2 b . This in our opinion is the -plain effect of the provisions companytained in s. 31, s. 88 and s. 89 2 b of the 1948-Act. It number remains to refer to Sakharams case 1 which certainly supports the companytention raised on behalf of the appellant. With respect, it seems to us that more has been read in that case in s. 89 2 b than is justified under the terms of that provision. It was 1 1962 2 S.C.R. 59. also observed in that case that the provisions of s. 88 were entirely prospective and were number intended in any sense to be of companyfiscatory character, and that s. 89 2 b showed clearly an intention to companyserve such rights as were acquired before the companymencement of 1948-Act. It seems to us, with respect, that in that case full effect was number given to the words save as expressly provided in this Act appearing in S. 89 2 b , and it was also number numbericed that there companyld be numbernew protected tenants after the 1948-Act came into force and that S. 88 1 in its application to leases from local authorities will have numbermeaning unless it affected the rights companytained in S. 3 1. It may very well be that the legislature thought that the status of a protected tenant should number be given to lessees of lands from a local authority, in the interest of the general, public and therefore took away that interest by the express enactment of s. 8 8 1 a . The status was after all companyferred by the 1939-Act and we can see numberdifficulty in its being taken away by the 1948Act. It may be mentioned that S. 8 8 1 a applies number only to lands held on lease from a local authority but also to lands held on lease from the State, and one can visualise situations where the State may need to get back lands leased by it in public interest. It must therefore have been in the interest of the public that a provision like S. 88 1 a was made with respect to lessees from a local authority or the State who had become protected tenants under the 1939-Act. We are supported in the view we have taken by the decision of this Court in Mohanlal Chunilal Kotharis case 1 where it was held that S. 88 1 d would be rendered companypletely ineffective if it was number to be applied retrospectively, though it was added in that case that it did number affect the rights acquired under the earlier Act of 1939. The latter observation, with respect, does number seem to be companyrect for their companyld be numbernew protected tenants under the 1948-Act to whom even S. 88 1 d companyld have applied. Further if a numberification under S. 88 1 d companyld be retrospective upto the date of the 1948-Act we can see numberreason on the language of this section to hold that it was retrospective only upto 1948 and would number affect the rights acquired tinder the 1939-Act. We may also mention that by an oversight it was stated in Mohanlal Chunilal Kotharis case 1 that clauses a , b and c of S. 88 1 apply to things as they were at the date of the enactment. It is however clear that clauses a , b and c of S. 88 1 also apply in the future. For example cl. a lays down that numberhing in the foregoing provisions of this Act shall apply to lands 1 1963 2 S.C.R. 707. 6 2 7 held on lease from Government, a local authority or company operative society. The words held on lease in this clause are only descriptive of the lands and are number companyfined to lands held on lease on the date the Act came into force they equally apply to lands ceased before or after the Act became law and the distinction that was drawn in Mohanlal Chunilal Kotharis case 1 that cls. a , b and c applied to things as they were at the date of the enactment whereas cl. d was with respect to future, with respect, does number appear to be companyrect. In this view of the matter, the view taken by the High Court in the judgment under appeal that s. 88 1 a is an express provision which takes away the interest of protected tenants under the 1939-Act must be held to be companyrect.	Case appeal was rejected by the Supreme Court
APPELLATE JURISDICTION Civil Appeal No. 383 of 1963. Appeal by special leave from the judgment and decree dated August 10, 1960 of the Kerala High Court in Appeals Suit Nos. 577 and 751 of 1958 and 40 of 1959. N. Subramania lyer, M. S. K. Sastri and M. S. Narasimhan, for the appellant. V. Viswanatha Sastri, S. N. Amjad Nainar and R. Thiagarajan, for respondent No. 1. R. K. Pillai, for respondents Nos. 4 and 5. The Judgment of the Court was delivered by Mudholkar, J. This is an appeal from a judgment of a single Judge of the Kerala High Court dismissing the appellants suit for recovery of possession of certain property and for mesne profits. It is number disputed that the only question of law which arises in this appeal is whether the appeal companyld be heard and disposed of by a single Judge of the High Court. The other questions raised are purely questions of fact. Article 133, cl. 3 of the Constitution clearly provides that numberwithstanding anything in the article numberappeal shall lie to the Supreme Court from a judgment, decree or final order of one Judge of a High Court unless Parliament by law otherwise provides. Parliament has passed numberlaw rendering the judgment of a single Judge appealable to the Supreme Court. Though this provision does number detract from the power of this Court under Art. 136 to entertain an appeal from a decision of a single Judge, it is the settled practice of this Court number to interfere with a finding of fact arrived at by the High Court unless it is satisfied that in arriving at the finding of fact the High Court had been guilty of -rave errors. We gave opportunity to learned companynsel to point out to us if the findings arrived at by the learned single Judge of the High Court are vitiated by any grave errors. But he was unable to point out any. We, therefore, declined to permit him to address us on the findings of fact. As regards the question of law it is desirable to set out how, according to the appellant, it arises. The suit was instituted on February 10, 1950 in the district companyrt of Kottayam which was later transferred by it to the companyrt of the Subordinate Judge, Meenachil sometime in the year 1956 and was substantially decreed in the appellants favour on July 30, 1958. Three appeals were preferred against it. One was by Tirumalaya Gounder, the first defendant, and another in January, 1959 by H. B. Mohammad Rowther, 8th defendant. The appellant had also preferred an appeal against that part of the decree which was adverse to him. All these -appeals were heard together and disposed of by a ,common judgment on August 10, 1960 and the appeals preferred. by defendants I and 8 were allowed by the High Court while the appeal preferred by the appellant was dismissed. At the time the suit was instituted the Travancore-Cochin High Court Act 5 of 1125 M.E. Corresponding to 1949 A.D. was in force. Under s. 20 of that Act read with S. 21 all appeals to the High Court valued at an amount in excess of Rs. 1,000 had to be heard by a Division Bench companysisting of two Judges of the High Court. T he appellants suit and the appeals taken by the respondents from the District Court and the Subordinate Judge were both valued at Rs. 3,000 and, therefore, had ss. 20 and 21 of the Act been in force on the date on which the appeals were instituted unquestionably they would have had to be beard by a Division Bench of two Judges. The aforesaid Act was, however, repealed by the Kerala High Court Act, 1958 being Act No. 5 of 1959 which received the assent of the President on February 6, 1959 and came into force on March 3, 1959. The appeals were placed for hearing before a single Judge overruling, we are informed by learned companynsel, the appellants plea that they should be only heard by a Division Bench. The reason why the appeals were heard by a single Judge and number Placed before a Division Bench was that under s. 5 of the Kerala High Court Act 5 of 1959 the jurisdiction of a single Judge of the High Court to hear and dispose of appeals from an original- decree was extended to appeals in which the value of the subject matter did number exceed Rs. 10,000. According, to learned companynsel the right to have the an-peals heard by a Division Bench companyferred by the Travancore-Cochin High Court Act which was in force number only when the suit but also when the appeals were filed, was number taken away expressly by Kerala Act 5 of 1959 and companyld number be taken away by implication. In support of his companytention he placed strong reliance upon the decision in Radhakrishan v. Shridhar 1 . In that case, just -,is here, the jurisdiction of a single Judge to hear an appeal of a value over Rs. 2,000 was challenged, even though by an amendment to an earlier rule made by the High Court in exercise of its power under el. 26 of the Letters Patent on May 27, 1948 all appeals from an appellate decree of a District Court were to be ordinarily heard and disposed of- by a single Judge. A companytention was raised on behalf of the appellants companynsel in that case that in the absence of any express provision rendering the amendment retrospective the amendment did number touch the right of an appellant which bad I.L.R. 1950 Nag. 532. accrued to him earlier to have his appeal heard by a Division Bench. The companytention was upheld by the High Court. This decision was number approved of in Mahendra v. Darsan 1 on the ground that the right of a party to have an appeal heard by a Division Bench was merely a matter of procedure and companyld, therefore, be taken away retrospectively by implication. Learned companynsel for the appellant also placed reliance upon a decision of this Court in Garikapati Veerara v. N. Subbaiah Choudhury 2 in which the following propositions were laid down That the legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings all companynected by an intrinsic unity and are to be regarded as one legal proceeding. The right of appeal is number a mere matter of procedure but is a substantive right. The institution of the suit carries with it the implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the career of the suit. The right of appeal is a vested right and such a right to enter the superior companyrt accrues to the litigant and exists as on and from the dater the lis companymences and although it may be actually exercised when the adverse judgment is pronounced such right is to be governed by the law prevailing at the date of the institution of the suit or proceeding and number by the law that prevails at the date of its decision or at the date of the filing of the appeal. This vested right of appeal can be taken away only by a subsequent enactment, if it so provides expressly or by necessary intendment and number otherwise. and learned companynsel particularly laid stress on the third proposition. We are in respectful agreement with what has been laid down by this Court. But it is difficult to appreciate what benefit the appellant can obtain from what has been laid down by this Court. For, this is number a case where any right of appeal companyferred by law upon the appellant has be-en taken away. The right to prefer an appeal from the judgment of the companyrt of first instance is derived from the provisions of s. 96 of the Code of Civil Procedure. The learned companynsel, however, companytended that in the instant case it is traceable to the provisions of Travancore- I.L.R. 31 Patna 446. 2 1957 S.C.R. 488 Cochin High Court Act of 1949. That Act as its preamble shows was enacted for making provision regulating the business of the High Court of Travancore-Cochin for fixing the jurisdiction of single Judges, Division Benches and Full Benches and for certain other matters companynected with the functions of the High Court. It did number purport to companyfer a right of appeal on the parties, but merely dealt with procedural matters, matters which are dealt with by several High Courts under the Letters Patent. Even the Travancore- Cochin Civil Courts Act, 1951 the provisions of which relate to civil companyrts subordinate to the High Court does number companyfer any right of appeal though it divides civil companyrts into four classes and defines their respective jurisdictions. An objection somewhat similar to the one raised by the appellant before us was raised before this Court in Ittavira Mathai v. Varkey Varkey another 1 . Dealing with it this Court has observed at p. 514 That reason is that an appeal lay to a High Court and whether it is to be heard by one, two or a larger number of judges is merely a matter of procedure. No party has a vested right to have his appeal heard by a specified number of judges. An appeal lay to the High Court and the appeal in question was in fact heard and disposed by the High Court and, therefore, numberright of the party has been infringed merely because it was heard by two judges and number by three judges. No doubt in certain classes of cases, as for instance, cases which involve an interpretation as to any provision of the Constitution, the Constitution provides that the Bench of the Supreme Court hearing the matter must be companyposed of judges who will number be less than five in number. But it does number follow from this that the legal requirements in this regard cannot be altered by a companypetent body. We, therefore, overrule the companytention of the learned companynsel and hold that the appeal was rightly heard and decided by a Bench of two judges. In the circumstances, therefore, we must reject the appellants companytention based upon the decision in Radhakishans case. 2 Learned companynsel, however, companytended that by de-Driving the appellant of the right to have his appeal heard by a Division Bench his further right of appeal to this Court under Art. 133 was affected and that since that right also vested in him when he instituted 1 1964 1 S.C.R. 495 2 I.L.R. 1950 Nag. 532. the suit it companyld number be taken away retrospectively except by an express provision. There is a simple answer to this companytention. The answer is that once it is held that numberparty has a vested right to have his appeal to be heard by more than one judge of the High Court, numberright to prefer an appeal under Art. 133 can be said to vest in him, the right under which being unavailable in case heard And disposed of by a single judge of the High Court. The argument of learned companynsel thus fails. One more point was sought to be urged by learned companynsel for the appellant. The point is based upon the fact that one of the companytesting respondents had raised a question as the maintainability of the suit. According to learned companynsel that person being in pari delicto with the plaintiff, ought number to have been permitted to raise that question. Since the point was number raised by the appellant in either of the two companyrts below we declined to permit it to be raised for the first time before us.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 525 of 1964. Appeal from the judgment and order dated August 25, 1962 of the Bombay High Court Nagpur Bench at Nagpur in Special Civil Application No. 360 of 1961. 76 5 S. Bobde G. L. Sanghi and Sardar Bahadur, for the appellant. Janardan Sharma for respondent No. 1. W. Dhabe and A. G. Ratnaparkhi, for the intervener. The Judgment of the Court was delivered by Hidayatullah, J. In this appeal by certificate against the judgment of the Bombay High Court dated August 25, 1962 the appellant is the Sawatram Ramprasad Mills Co., Ltd., Akola and the respondents two of the workmen of the Mills. The respondents are claiming from the Mills companypensation for lay off from March 5, 1960 to October 22, 1960. The proceedings were companymenced by an application to the Second Labour Court, Bombay under s. 33C 1 of the Industrial Disputes Act, 1947 Act XIV of 1947 . The Mills objected on various grounds including firstly that the Second Labour Court had numberjurisdiction to hear the case as the dispute fell to be tried under the C.P. Berar Industrial Disputes Settlement Act, 1947 and, secondly, that the application under s. 33C, in any event, was incompetent. The Second Labour Court held against the Mills on both the grounds. The Mills applied to the High Court of Bombay under Arts. 226 and 227 of the Constitution but by the judgment under appeal their application was dismissed. It may be pointed out here that there were similar applications for company- pensation for lay off by the other workmen of the Mills and on this preliminary point they were all heard together. In this Court only these two grounds were urged. The company- tention on behalf of the Mills on the first ground was two- fold. The Mills attempted to establish that the dispute companyld number be tried under the Central Act but only under the P. Berar Act and further that even if the Central Act applied the calculation of the amount companyld number be made under s. 33C of the Industrial Disputes Act as that required proceedings other than those companytemplated by that section. The Industrial Disputes Act was passed in 1947 and was brought into force on April 1, 1947. It is number disputed that it applied to the Textile Industry. The C.P. Berar Industrial Disputes Settlement Act 23 of 1947 came into force on June 2, 1947 but only the first section was then brought into force. Later, the remaining sections were brought into force by a numberification dated November 20, 1947 in all industries except the Textile Industry. From March 1, 1951, the Act was also, 76 6 made applicable to the Textile industry. In 1953 the Industrial Disputes Act, 1947 was amended by Industrial Disputes Amendment Act, 1953. The changes material to our purpose were the addition of two definitions and a new chapter in the Act. Previous to the Act there was an Ordinance which the Act replaced but as numberhing turns upon the existence of the Ordinance we need number refer to it. The two definitions introduced in s. 2 of the parent Act were kkk lay-off with its grammatical variations and companynate expressions means the failure, refusal or inability of an employer on account of shortage of companyl, power or raw materials or the accumulation of stocks or the break-down of machinery or for any other reason to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has number been retrenched Explanation-Every workman whose name is home on the muster rolls of the industrial establishment and who presents himself for work at the establishment at the time appointed for the purpose during numbermal work- ing hours on any day and is number given employment by the employer within two hours of his so presenting himself shall be deemed to have been laid-off for that day within the meaning of this clause Provided, and s. oo retrenchment. The definition of retrenchment need number be quoted here because numberquestion has been raised about retrenchment in this case. Section 3 of the 1953 Amendment Act inserted Chapter V-A headed Lay Off and Retrenchment. Section 25C gave a right to a workman to ask for companypensation if laid off, provided he fulfilled certain companyditions. It is number necessary to go into those companyditions here. Section 25J then provided as follows 25J. Effect of laws inconsistent with this Chapter.- The provisions of this Chapter shall have effect numberwithstanding anything inconsistent therewith companytained in any law including standing orders made under the Industrial Employment Standing Orders Act, 1946 XX of 1946 76 7 Provided that numberhing companytained in this Act shall have effect to derogate from any right which a work-man has under any award for the time being in operation or any companytract with the employer. For the removal of doubts, it is hereby declared that numberhing companytained in this Chapter shall be deemed to affect the provisions of any other law for the time being in force in any State in so far as that law provides for the settlement of industrial disputes, but the rights and liabilities of employers and workmen in so far as they relate to lay off and retrenchment shall be determined in accordance with the provisions of this Chapter. In 1956 the Industrial Disputes Act was again amended by the Industrial Disputes Amendment and Miscellaneous Provisions Act, 1956. Section 23 of the Amending Act inserted section 33C which reads as follows 33-C. Recovery of money due from an employer.- Where any money is due to a workman from an employer under a settlement of an award or under the provisions of Chapter V-A, the workman may without prejudice to any other mode of recovery, make an application to the appropriate Government for the recovery of the money due to him, and if the appropriate Government is satisfied that any money is so due, it shall issue a certificate for that amount to the Collector who shall proceed to recover the same in the same manner as an arrears of land revenue. Where any workman is entitled to receive from the employer any benefit which is capable of being companyputed in terms of money, the amount at which such benefit should be companyputed may, subject to any rules that may be made under this Act, be determined by such Labour Court as may be specified in this behalf by the appropriate Government, and the amount so determined may be recovered as provided for in sub-section 1 . For the purposes of companyputing the money value of a benefit, the Labour Court may, if it so thinks fit, appoint a companymissioner who shall, after taking such evidence as may be necessary, submit a report to 76 8 the Labour Court and the Labour Court shall determine the amount after companysidering the report of the Commissioner and other circumstances of the case. The -powers of the Government under the above section admittedly have been delegated to the Second Labour Court Bombay. Section 31 of this Amending Act provides as follows Act number to override State laws. If, immediately before the companymencement of this Act, there is in force in any State any Provincial Act or State Act relating to the settlement or adjudication of disputes, the operation of such an Act in that State in relation to matters companyered by that Act shall number be affected by the Industrial Disputes Act, 1947, as amended by this Act. 2 From these sections, which we have quoted, certain companyclu- sions indisputably arise. The first companyclusion is that companypensation for lay off can only be determined under Chapter V-A of the Industrial Disputes Act. This follows from s. 25J 2 as it is so stated there. The next is that the workmen are entitled under s. 33C 1 to go before the Second Labour Court to realise money due from their employers under Chapter V-A. This is clearly stated in s. 33C. The companytention on behalf of the Mills, however, is that the Industrial Disputes Act, 1947 does number apply to the present matter but the C.P. Berar Industrial Disputes Settlement Act does. This argument is put in two ways. By one argument the application of the Industrial Disputes Act is sought to be evaded and by the second the C.P. Berar Industrial Disputes Settlement Act is sought to be applied. We shall examine these two arguments in the same order. The attempt to oust the Central Act is based upon s. 31 of the 1956 Amendment Act and the opening part of s. 25J. Section 31 can have numberapplication because s. 33C has been included for the purpose, among others, of enabling the workmen to claim any money due from their employers under the provisions of Chapter V-A. This is expressly so stated in that section. Chapter V-A is the only Chapter in which there is provision regarding lay off or companypensation for lay off. The C.P. Berar Act companytains numberprovision either for the recovery of money or for companypensation for lay off. It is thus obvious that 76 9 if a workman has a claim for lay off it can only companye up for decision under the Industrial Disputes Act, 1947 and, indeed, s. 25J 2 says so in express terms. The attempt to keep out the provisions of the Industrial Disputes Act, particularly Chapter V-A and s. 33C must, therefore, fail. The next attempt, namely, that the C.P. Berar Act applies is also ineffective. It is pointed out that the preamble of the C.P. Berar Act shows that it was an Act for the promotion of peaceful and amicable settlement of industrial disputes by companyciliation and arbitration, that industrial disputes means any dispute or difference companynected with an industrial matter arising between an employer and an employee or between employers or employees and that industrial matter means any matter relating to pay, wages, reward, etc. It is submitted, therefore, that the dispute must companye under the C.P. Berar Act because of S. 31 of the 1956 Amendment Act and S. 25J of the 1953 Amendment Act already quoted. The argument is the last one in another form. This argument is fallacious at the very start because lay off and companypensation for lay off are to be found only in Chapter V-A of the Industrial Disputes Act, 1947. There is numbermention of lay off or companypensation for lay off as one of the matters over which the C.P. Berar Act has any jurisdiction. Next, even if ss. 31 and 25J save the application of the C.P. Berar Act they do so subject to the companydition that question of lay off must be decided in accordance with Chapter V-A and S. 33C clearly provides that a dispute for any money due under Chapter V-A has to go before the appropriate Government or its delegate. Here the delegate is the Second Labour Court, Bombay. The argument that this companytroversy is wrongly before the Second Labour Court, Bombay is, therefore, entirely erroneous and must be rejected. The next companytention is that the claim for lay off is number a claim for money due because calculations have to be made before the money due can be found. This argument has been companysidered on more than one occasion and it was rejected recently by this Court in Kays Construction Co. P Ltd. v. State of U.P. Ors 1 . It is number essential that the claim which can be brought before the Government or its delegate under S. 33C 1 must always be for a predetermined sum. The Government or the Labour Court may satisfy itself about the exact amount and then take action under that section. In the present case the dates of lay off are known and each workmen will show to the Second Labour Court that he is qualified to receive companypensation for 1. 1965 2 S.C.R. 276. up.C165-6 lay off. That will be shown from the muster roll which the employer is required to maintain and it will then be a simple arithmetical calculation which, in our judgment, s. 33C permits to be made. If there is any question whether there was lay off or number the Labour Court will decide it. This argument, therefore, has numberforce. The result is that the appeal must fail and is dismissed with companyts. The employers have.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 755 of 1965. Appeal by special leave from the judgment and order dated September 7. 1964 of the Andhra Pradesh High Court in Writ Appeal No. 8 of 1964. T. Desai, N. V. Suryanarayana Murthy,R. Thiagarajan and K. Jayaram, for the appellant. Ram Reddy and A. V. Rangam, for respondent No. 1. V. Gupte, Solicitor-General and A. V. V. Nair, for respondent No. 4. The Judgment of the Court was delivered by Subba Rao, J. This is an appeal by special leave against the judgment of a Division Bench of the Andhra Pradesh High Court in a Letters Patent appeal companyfirming that of a single Judge of that Court dismissing a petition filed by the appellant under Art. 226 of the Constitution for issuing a Writ of certiorari quashing the order of the Government of Andhra Pradesh dated April 18, 1963, under s. 72 of the Andhra Pradesh Panchayat Samithis and Zilla Parishads Act, 1959, Act No. XXXV of 1959 , hereinafter called the Act. At the outset it will be companyvenient to survey the facts leading up to this appeal in their chronological order. For the promotion of rural welfare, the Government of Andhra Pradesh initiated Community Development Programme in the said State. Pursuant to that Programme, each district in the State was divided into Blocks, called Community Development Blocks. Chintalapudi Taluk in the West Godavari District was one of such Blocks. A Block Planning and Development Committee was appointed for each Block and a District Planning and Development Committee for each district. All this was done by the Government by issuing administrative directions indeed, the said Committees were only advisory bodies and the ultimate power vested in the Government. One of the activities of the said Committees was to companystitute Primary Health centres in each district. On March 22, 1957, the Government of Andhra Pradesh issued a numberification laying down broad principles for guidance in the selection of places for the location of Primary Health Centres. One of the said principles relevant to the present enquiry may be numbericed at this stage and that is, the village selected for locating such Centre was expected to give 2 acres of site free and 50 cash companytribution which would number be less than Rs. 10,000/-. On April 8, 1958, the Block Planning and Development Committee, Chintalapudi, resolved unanimously, modifying its earlier resolution, to have the Primary Health Centre at Dharmajigudem village, as there were High Schools and education facilities there. On November 7, 1958, the Collector of the District formally inaugurated the Primary Health Centre at Dhanmajigudem. On July 11, 1959, the said Committee passed two resolutions, among others. Under resolution 3 it recorded with appreciation the donation of 50 cents of land by Achyutharamaiah, the Block Committee Member, towards site for the Primary Health Centre to be located at Dharmajigudem and appealed to the members of the Block Committee to see to the remittance of the cash companytribution of Rs. 10,000/- immediately. Presumably because that something happened at the meeting immediately after the said resolution was passed indicating that there would be numberresponse in that direction, another resolution was passed by the said Committee recording that, as the villagers of Dharmajigudem had failed to pay the said companytribution for the last 8 months, the Primary Health Centre located in that place be shifted to and established permanently at any other suitable village where land and cash companytributions were forthcoming. On July 13, 1959, i.e., 2 days after the aforesaid resolution, the Block Development Officer wrote a letter to the appellant, who was the President of the village panchayat, inform- 17 6 ing him that he had number taken any steps for the realization of the companytribution so far and that if the required companytribution was number realized before the end of the month steps would be taken -to shift the Primary Health Centre to some other place. It may be numbericed at this stage that the Block Development Officer, who had to implement the resolution of the Committee, had outstand his powers in writing a letter in derogation of the terms of the resolution of the Committee dated July 11, 1959. On July 16, 1959, the appellant and others of Dharmajigudem informed the Block Development Officer that it was number possible for them to companylect the amount and that there was numberobjection to the shifting of the Centre from their village to any other place. On July 17, 1959, the Block Development Officer wrote to the people of Dharmajigudem that as they were unable to pay the said amount, the said Centre would be shifted to Lingapalem. On July, 27, 1959, the 4th respondent, Rangarao, representing Lingapalem village deposited Rs. 10,000/- with the Block Development Committee and also donated 2 acres of land for the purpose of locating the said Centre in the said village. On July 31, 1959, on behalf of Dharmajigudem, Venkateswara Rao, the appellant, deposited the sum of Rs. 10,000/- in the Sub-Treasury and K. Krishna Rao donated 2 acres of land and delivered possession of the same to the Block Development Officer. On August 14, 1959, the said Committee, after reviewing the previous history of the location of the Primary Health Centre and after numbericing that both the villages deposited the amount-one on July 27, 1959 and the other on July 31, 1959-and after companysidering the companypeting claims, resolved unanimously to have the Primary Health Centre located permanently at Lingapalem and to request the authorities companycerned to shift it from Dharmajigudem to Lingapalem at an early date. One important fact to be numbericed in this resolution is that it was recorded therein that the representatives of Dharmajigudem assured the representatives of Lingapalem that they number only gave up their efforts to have the Primary Health Centre at Dharmajigudem but also unanimously agreed to have it located at Lingapalem. It was further recorded therein that the villagers of Lingapalem paid up the entire companytribution enthusiastically and that too after obtaining the companycurrence of the villagers of Dharmajigudem and also on an assurance that the latter gave up the idea of having the Primary Health Centre at Dharmajigudem. It would, therefore, be numbericed that this resolution for locating the Primary Health Centre at Lingapalem was passed after the representatives of the two villages settled their disputes. On September 18, 1959, the Act came into force and under s. 3 thereof a Panchayat Samithi was companystituted for Chintapudi. On January 7, 1960, the Government informed the Collector of West Goda- vari District that the question of shifting the Primary Health Centre from Dharmajigudem to Lingapalem should be left to the decision of the Panchayat Samithi companystituted under the Act. The President of the Panchayat Samithi, Chintalapudi Block, was requested to place the resolution dated August 14, 1959, of the Block Planning and Development Committee before the Panchayat Samithi for reconsideration and submit a report to the Government through the Chairman, Zilla Parishad, West Godavari. It may be numbericed that after the passing of the Act, what was being done administratively was sought to be placed on a statutory basis. On May 28, 1960, the Chintalapudi Panchayat Samithi held its meeting and resolved that the Primary Health Centre should be permanently located at Dharmajigudem and the said resolution was companymunicated to the Government. On July 6, 1960, the Government approved the proposal of the Chintalapudi Panchayat Samithi to locate the Primary Health Centre permanently at Dharmajigudem. On January 23, 1961, the Rules framed by the Government in exercise of the powers companyferred on it under s. 69 of the Act came into force. On February 22, 1961, on a representation made to the Government that the meeting of the Panchayat Samithi held on May 28, 1960, was irregular on the -round of inadequate numberice, the Government decided number to interfere with those proceeding under s. 72 of the Act. On May 12, 1961, the Panchayat Samithi at a special meeting, on the ground that the meeting held on May 28, 1960, was number held in accordance with r. 4 1 of the Rules for the companyduct of business, in exercise of the power given to it under r. 15 thereof, cancelled all the resolutions passed by the meeting of the Samithi on May 28, 1960. On May 29, 1961, the Samithi passed another resolution adopting all the resolutions which it cancelled on May 12, 1961, except the resolution to locate the Primary Health Centre at Dharmajigudem. In regard to the location of the said Centre it resolved to locate it at Lingapalem. On March 71, 1962, the Government made an order holding that there was numbervalid reason for shifting the Primary Health Centre from Dharmajigudem to Lingapalem and directing the Block Development Officer to take action accordingly. The main reason given for that order was that the Primary Health Centre was already func- tioning at Dharmajigudem and a Health Centre once established should number be shifted to another place within the Block unless the Panchayat Samithi resolved by two- thirds majority of the members present at the meeting as required under r. 7 of the Rules and that the resolution dated May 29, 1961, was number supported by the requisite majority. On April 18, 1963, i.e., about a year after the earlier order, the Government passed another order wherein it held that it passed the previous order dated March 7, 1962, on a mistaken impression that it was a case of shifting the Primary Health Centre from one place where it was permanently located to another, while the companyrect position was that in the instant case the Primary Health Centre was number permanently located by the Government and, therefore, the resolution passed by the Panchayat Samithi on May 29, 1961, fell within r. 2 of the Rules and number under r. 7 thereof. In that view, it directed that the said Centre should be located permanently in Lingapalem village in accordance with the resolution of the Panchayat Samithi dated May 29, 1961. A resume of the said facts leads to the following factual position. Before the Act came into force, the Primary Health Centre was inaugurated at Dharmajigudem presumably subject to the companydition that the said village would companyply with the companyditions laid down by the administrative directions, governing the location of a Centre. One of the important companyditions was that the village seeking to have the Centre should give 2 acres of land free and 50 cash companytribution which would number be less than Rs. 10,000/-. The said amount was number paid by Dharmajigudem village with the result the companydition was number companyplied with. With the companysent of the representatives of the village of Dharmaji- gudem, the Block Planning and Development Committee resolved to shift the Primary Health Centre from Dharmajigudem to Lingapalem. The Lingapalem village satisfied the companyditions on July 27, 1959. Thereafter, Dharmajigudem village also satisfied the said companyditions on July 31, 1959. On August 14, 1959, the said Committee by a resolution decided to locate the Centre at Lingapalem, but the Government directed the matter to be decided by the Panchayat Samithi, as by that time the Act had companye into force and the Panchayat Samithi for the Block had been established. Though on May 28, 1960, the Panchayat Samithi at first resolved to have the Centre at Dharmajigudem and though the said resolution was approved by the Government, the said Panchayat Samithi finally by its resolution dated May 29, 1961, cancelled its earlier resolution and resolved to locate the Centre it Lingapalem. On March 7, 1962, under s. 62 of the Act the said resolution of the Panchayat Samithi was set aside by the Government on the ground that it did number get the requisite support of two-thirds majority. But on April 18, 1963, the Government reviewed its previous order, under s. 72 of the Act, on the ground that the said order was made under a mistaken impression that the Primary Health Centre was permanently located at Dharmajigudem and directed the Centre to be located at Lingapalem. It will, therefore, be seen that though the Health Centre was formally inaugurated at Dharmajigudem before the Act came into force, there was number and companyld number have been a permanent location of the Centre at that place, as the companydition precedent was number companypiled with. After the Act came into force, though the Panchayat Samithi at first approved of the location of the Centre at Dharmajigudem, it cancelled the resolution and decided to locate it at Lingapalem. The Government, on a misapprehension of fact, set aside that order, but when it came to know of the mistake it reviewed its earlier order and directed the location of the Centre at Lingapalem. The question is whether on these facts the Government had jurisdiction to make the order which it did in exercise of its powers under s. 72 of the Act. The appellant, who was the representative of the village of Dhartnajigudem in all the said proceedings, filed an application before the High Court under Art. 226 of the Constitution for quashing the said order of the Government. The said application was, in the first instance, heard by a single Judge of the High Court and he dismissed it. On appeal, a Division Bench of the High Court companyfirmed it. Hence the appeal. Mr. Desai, learned companynsel for the appellant, raised before us the following points 1 The order of the Government cancelling the resolution dated May 29, 1961, was made under s. 62 of the Act and, therefore, the said order companyld number be reviewed under s. 72 thereof. 2 Assuming that the said order dated March 7, 1962, was made under s. 72 1 of the Act, the order dated April 18, 1963, reviewing the said order was invalid inasmuch as the prerequisite for the exercise of the power of review thereunder, namely, the existence of a mistake of fact or law or the ignorance of any material fact, was number satisfied. 3 The order dated April 18, 1963, was also invalid, because it was made without giving an opportunity to the party prejudiced thereby of making a representation against the making of the said order. Mr. Ram Reddi, learned companynsel for the State of Andhra Pra- desh, raised a preliminary objection that the appellant had numberpersonal right in the matter of the location of the Primary Health Center and, therefore, he had numberlocus stand to file an application under Art. 226 of the Constitution. lie argued that the order of the Government dated March 7, 1962, was number simply a cancella- lion of a resolution made by the Panchayat Samithi, but a companyposite order giving directions to the Block Development Officer and, therefore, it fell directly within the scope of s. 72 of the Act and, as the said order was made under a misapprehension that there was a permanent location of the Health Centre at Dharmajigudem, the Government had jurisdiction to review the same under S. 72 3 of the Act. He would further companytend that even if the order dated March 7, 1962, was passed under s. 62 of -the Act, the said order being an administrative one, the Government had jurisdiction to review the same under s. 62 itself when the mistake was discovered or brought to its numberice. In addition he raised before us a new point which was number argued either before the single Judge or, on appeal, before the Division Bench. of the High Court. He would say that the impugned order was neither made under s. 62 or under S. 72 of the Act, but it was really passed under the relevant Rules made by the Gov- ernment in exercise of the power companyferred on it under s. 69 of the Act, read with sub-s. 2 of s. 18 thereof, where under the ultimate authority under the Act to locate the Health Centre was the Government, though on the recommendation of the Panchayat Samithi. In this view, the argument proceeded, numberquestion of review would arise at all, for the Government passed the final order in regard to the location of the Primary Health Centre at Lingapalem. The learned Solicitor General, appearing for the 4th respon- dent, supported Mr. Ram Reddi on all the points and further elaborated that aspect of the argument which related to the companystruction of the order made by the Government on March 7, 1962. The first question is whether the appellant had locus standi to file a petition in the High Court under Art. 226 of the Constitution. This Court in The Calcutta Gas Company Proprietary Ltd. v. The State of West Bengal 1 , dealing with the question of locus standi of the appellant in that case to file a petition under Art. 226 of the Constitution in the High Court, observed Article 226 companyfers a very wide power on the High Court to issue directions and writs of the nature mentioned therein for the enforcement of any of the rights companyferred by Part III or for any other purpose. It is, therefore, clear that persons other than those claiming fundamental right can also approach the companyrt seeking 1 1962 Supp. 3 S.C.R. 1, 6. a relief thereunder. The Article in terms does number describe the classes of persons entitled to apply thereunder but it is implicit in the exercise of the extraordinary jurisdiction that the relief asked for must be one to enforce a legal right The right that can be enforced under Art. 226. also shall ordinarily be the personal or individual right of the petitioner himself, though in the case of some of the writs like habeas companypus or quo warranto this rule may have to be relaxed or modified. Has the appellant a right to file the petition out of which the present appeal has arisen ? The appellant is the President of the Panchayat Samithi of Dharmajigudem. The villagers of Dharmajigudem formed a companymittee with the appellant as President for the purpose of companylecting companytributions from the villagers for setting up the Primary Health Centre. The said companymittee companylected Rs. 10,000/- and deposited he same with the Block Development Officer. The appellant represented the village in all its dealings with the Block Development Committee and the Panchayat Samithi in the matter of the location of the Primary Health Centre at Dharmajigudem. His companyduct, the acquiescence on the part of the other members of the companymittee, and the treatment meted out to him by the authorities companycerned support the inference that he was authorized to act on behalf of the companymittee. The appellant was, therefore, a representative of the companymittee which was in law the trustees of the amounts companylected by it from the villagers for a public purpose. We have, therefore, numberhesitation to hold that the appellant had the right to maintain the application under Art. 226 of the Constituiton. This Court held in the decision cited supra that ordinarily the petitioner who seeks to file an application under Art. 226 of the Constitution should be one who has a personal or individual right in the subject-matter of the petition. A personal right need number be in respect of a proprietary interest it can also relate to an interest of a trustee. That apart, in exceptional cases, as the expression ordinarily indicates, a person who has been prejudicially affected by an act or omission of an authority can file a writ even though he has numberproprietary or even fiduciary interest in the subject-matter thereof. The appellant has certainly been prejudiced by the said order. The petition under Art. 226 of the Constitution at his instance is, therefore, maintainable. Now, we shall first take the new argument advanced by Mr. Ram Reddy for the first time before us, for, if that was accepted, the appeal would fail. Briefly stated, his companytention was that the order of the Government dated April 18, 1963, was number made either under s. 62 or under s. 72 of the Act, but was made only under the Rules made by the Government in exercise of its power under s. 69 of the Act. To appreciate this companytention it will be useful to numberice the relevant rules. Under r. 2, the Panchayat Samithi only recommends to the Government the place for locating the said Centre. Under r. 3 11 , in the case of companyflict between the relevant authorities in regard to the location of a Health Centre, the Govemments order shall be final. Unders. 6, a Primary Health Centre once established shall number ordinarily be shifted to another place except by the Government on the recommendation of the Panchayat Samithi on the basis of a resolution passed by it by two-thirds of the member,, of the Panchayat Samithi present at the meeting. Even in such a case the Government has numberpower to direct the shifting of a Primary Health Centre established in one place to another, if the companytribution from the people had been accepted and is in deposit. It is clear from the said rules that the ultimate authority to locate the Primary Health Centre or to direct its shifting from one place to another is the Government. On the basis of the said rules, learned companynsel companytended that the High Court missed the real point, presumably on the arguments advanced before it, and pro- ceeded to companysider the validity of the impugned order in terms of s. 72 of the Act. The circumstance, the argument proceeded, that the Government in its orders referred neither to s. 62 number to s. 72 of the Act or did number give any numberice to parties as prescribed theretinder clearly indicates that the Government acted only under the said relevant rules. This argument so stated appears at the first blush to be unanswerable. But a scrutiny of the relevant provisions of the Act shows that the said rules are inconsistent with the provisions of the Act and they cannot possibly override the statutory power companyferred on the Panchayat Samithi Under s. 18 1 of the Act, subject to the provisions of the Act, the administration of the Block shall vest in the Panchayat Samithi and under sub-s. 2 thereof the Panchayat Samithi shall exercise the powers and- perform the functions specified in the Schedule. When we refer to the Schedule it will be seen ,at the following entry is found under the heading Health and Rural Sanitation, Establishing and maintaining Primary Health Centre and Maternity Centres. It is manifest that under the Act the statutory power to establish and maintain Primary Health Centres is vested in the Panchayat Samithi. There is numberprovision vesting the said power in the Gov- ernment. Under s. 69 of the Act, the Government can only make rules for carrying out the purposes of the Act it cannot, under the guise of the said rules, companyvert an authority with power to establish a Primary Health Centre into only a recommendatory body. It cannot, by any rule, vest in itself a power which under the Act vests in another body. The rules, therefore, in so far as they transfer the power of the Panchayat Samithi to the Government, being inconsistent with the provisions of the Act, must yield to s. 18 of the Act. Realizing this difficulty, the learned Solicitor General, who appeared for the 4th respondent, made an attempt to reconcile the relevant rules with the provisions of s. 18 of the Act. He argued -that s. 18 of the Act companyferred a power on the Panchayat Samithi to establish and maintain Primary Health Centres, whereas the Rules provided for the location or shifting of the Centres. This argument does number appeal to us. A Primary Health Centre cannot be established in vacuum it must be established in some place. The Rules deprive the Panchayat Samithi of the power to select a place for establishing a Primary Health Centre and make it a re- companymendatory body with final powers in the Government. The Rules also companyfer a power on the District Medical Officer and the District Health Officer in the matter of location of the Centre and give the Government the final voice, if there is any companyflict between -those officers and the Panchayat Samithi. Even in regard to shifting of the Primary Health Centre, the Governments voice is final under the Rules. It is one thing to say that the exercise of the power by the Panchayat Samithi is regulated by the Rules, but another thing to deprive it of that power in the matter of location of the Primary Health Centre and companyfer the said power on the Government. We, therefore, hold that the Rules, in so far as they make the Panchayat Samithi a mere recommendatory body, are inconsistent with the Act. This may be the reason why in the High Court the Government did number think fit to sustain the order under the authority of the Rules. The next question is whether the order dated April 18, 1963, can be sustained under s. 72 of the Act. Section 72 of the Act reads Power of revision and review by Government The Government may either suo motu or on an application from any person interested, call for and examine the record of a Panchayat Samithi or a Zilia Parishad or of their Standing Committees in respect of any proceeding to satisfy themselves as to the regularity of such proceeding or the companyrectness, legality or propriety of any decision or order passed therein and, if, in any case, it appears to the Government that any such decision or order should be modified, annulled or reversed or remitted for reconsideration, they may pass orders accordingly Provided that the Government shall number pass any order prejudicial to any party unless such party has had an opportunity of making a representation. 2 The Government may suo motu at any time or on an application received from any person interested within ninety days of the passing of an order under subsection 1 , review any such order if it was passed by them under any mistake, whether of fact or of law, or in ignorance of any material fact. The provisions companytained in the proviso to sub- section 1 and in sub-section 2 shall apply in respect of any proceeding under this sub- section as they apply to a proceeding under subsection 1 . Sub-section 1 of S. 72 of the Act companyfers a wide power on the Government to revise any decision or order passed in any proceeding under the Act. Sub-section 3 thereof companyfers a power on the Government to review the order made under sub- s. 1 thereof if it was passed by the Government under any mistake, whether of fact or of law, or in ignorance of any material fact. To attract sub-s. 3 , the order sought to be reviewed should have been made under sub-s. 1 . To appreciate the scope of S. 72 1 of the Act, it is necessary to companypare the said sub-section with S. 62 of the Act. Under S. 62 1 , the Government may, by order in writing, cancel any resolution passed by a Panchayat Samithi, if in its opinion such resolution is number legally passed or is in excess or abuse of the powers companyferred by or under the Act or for any other reasons mentioned therein. Under sub-s. 2 of S. 62, the Government shall, before taking action under sub-s. 1 thereof shall give the Panchayat Samithi or the Zilla Parishad, as the case may be, an opportunity for explanation. Section 72 companyfers a general power on the Government and on its terms, if there was numberother section, it can cancel a resolution of a Panchayat Samithi. But, S. 62 of the Act companyfers a special power on the Government to cancel a resolution passed by a Panchayat Samithi in the cir- cumstances mentioned therein. The principle generalities specialities number derogant companypels us to exclude from the operation of S. 72 the case provided for under s. 62. If so companystrued, it follows that if the order reviewed fell under the scope of s. 62, it companyld number be reviewed under s. 72, for s. 72 3 enables the Government only to review an order made under sub-s. 1 -of S. 72. So, the learned companynsel for the State as well as for the 4th respondent made a serious effort to bring the order of the Government dated March 7, 1962, within the terms of s. 72 1 of the Act. As the argument turns upon the terms of the said order, it may companyveniently be read at this stage Government of Andhra Pradesh Planning and Local Administration Department. MEMORANDUM NO. 1354/Prog.11/61-2 dated 7-3-1962. Sub Community Development Programme-Chintalapudi Block -Shifting of Primary Health Centre from Dharmajigudeni to Lingapalem--Orders issued. Ref. 1. Representation of Sri G. Punneswararao and others dated 31-6-1961. Letter from Collector, West Godavari, No. 01.5642/61 dated 22-9-1961. The Panchayat Samithi, Chintalapudi, at its meeting held on 25-8-1960 unanimously resolved to locate the Primary Health Centre at Dharmajigudem. Later, the Panchayat Samithi at its meeting held on 29-5-61 resolved to shift the Primary Health Centre permanently to Lingapalem village. The President, Dharmajigudem Panchayat., and others have represented to Government against acceptance of the resolution passed by the Samithi at its meeting held on 29-5-1961. This representation has been carefully examined by the Government in companysultation with the Collector, West Godavari. Under Rule 6 of the Rules for the establishment and maintenance of Primary Health Centres by Panchayat Samithis made under the provisions of the Panchayat Samithis and Zilla Parishads Act, 1959, the Primary Health Centre once established shall number ordinarily be shifted to another place within the Block unless the Samithi resolves by 2/3rd majority of the members present at the meeting as required under rule 7 of the said rules. In the present case the Primary Health Centre was already functioning at Dharmajigudem and the resolution of the Panchayat Samithi dated 29-5-1961 did number get the requisite support of the Samithi Members as required under rule 7. In the above circumstances, the Government companysider that there are numbervalid reasons for shifting the Primary Health Centre from Dharmajigudem to Lingapalem. The Block Development Officer, Chintalapudi, is directed to take action accordingly. Sd - B. Pratap Reddi. Deputy Secretary to Government. It was said that the said order did number mention the section whereunder it was passed, that it did number cancel any resolution, that it did number in terms approve or disapprove any resolution, that it companysidered other orders issued and finally gave a direction to the Block Development Officer to take action in accordance with the terms of the order. In short, the argument of the learned companynsel was that the order was number for the cancellation of the resolution of the Panchayat Samithi but one made in terms of s. 72 of the Act. We are number impressed by this argument. The preamble to the order clearly mentions that the Panchayat Samithi Chintala- pudi, it its meeting held on May 29, 1961, resolved to shift the Primary Health Centre permanently to Lingapalem village. Then it states that the President of the Dharmajigudem Panchayat and others had represented to the Government against the acceptance of the said resolution. The order then records that the Government had carefully companysidered the said representation. Then it gives the reason that the said resolution was bad inasmuch as that under r. 6 of the Rules the Primary Health Centre once established should number ordinarily be shifted to another place within the Block, unless the Panchayat Samithi resolves by two-thirds majority of the members of the Samithi present at the meeting as required by r. 7 of the Rules. Then it point-. out that the Primary Health Centre was functioning at Dharmajigudem and, therefore, the resolution, number having the support of the requisite majority, did number companyply with r. 7 of the Rules. For the said reasons the order companycludes that there were numbervalid reasons for shifting the Primary Health Centre from Dharmajigudem to Lingapalem. The Gov- ernment then gives the companysequential directions to the Block Development Officer to take action accordingly. An analysis of the order demonstrates beyond any reasonable doubt that it is numberhing more than a cancellation of the resolution passed by the Panchayat Samithi on May 29, 1961. The mere fact that the order does number use the expression cancel will number make it any the less an order cancelling the resolution. We, therefore, hold that the order of the Government dated March 7, 1962, was one made under s. 62 of the Act and, therefore, it companyld number be reviewed under s. 72 thereof. The learned companynsel for the State then companytended that the order dated April 18, 1963, companyld itself be sustained under S. 62 of the Act. Reliance is placed upon s. 13 of the Madras General Clauses Act, 1891, whereunder if any power is companyferred on the Government, that power may be exercised from time to time as occasion requires. But that section cannot apply to an order made in exercise of a quasi- judicial power. Section 62 of the Act companyfers a power on the Government to cancel or suspend the resolution of a Panchayat Samithi, in the circumstances mentioned therein, after giving an opportunity for explanation to the Panchayat Samithi. If the Government in exercise of that power cancels or companyfirms a resolution of the Panchayat Samithi, qua that order it becomes functus officio. Section 62, unlike s. 72, of the Act does number companyfer a power on the Government to review its orders. Therefore, there are numbermerits in this companytention. Before we leave s. 62 of the Act, it may be numbericed that the order dated March 7, 1962, was passed by the Government without giving numberice to the Panchayat Samithi. It was in violation of the mandatory provision of sub-s. 2 of s. 62 which says that the Government shall, before taking action under sub-s. 1 , give the Panchayat Samithi an opportunity for explanation. This opportunity was number given and, therefore, that order was number legal. Now let us assume that the said order was made under sub-s. 1 of s. 72 of the Act. Two objections were raised against the validity of the order reviewing the previous order, namely, i there was numbermistake of fact or law, and ii the said order, which was prejudicial to Dharmajigudem village, was made without giving an opportunity to the representatives of the said village of making a representation. The order gives in extension the history of the dispute between Dharmajigudem and Lingapalem in the matter of location of the Primary Health Centre. It points out that all the earlier resolutions of the Panchayat Samithi were cancelled and Sup .C/66-13 the only outstanding resolution was that of May 29, 1961, whereunder the said Centre was directed to be located permanently at Lingapalem. Then it proceeds to say that the order dated March 7, 1962, was passed on a mistaken impression that it was a case of shifting the Primary Health Centre from one place where it was permanently located to another, while the companyrect position was that the place where the Primary Health Centre was to be located permanently had number till then been decided by the Government. In that view, in supersession of the order issued by it on March 7, 1962, it directed that the said Centre should be located permanently at Lingapalem as per the resolution of the Panchayat Samithi dated May 29, 1961. No doubt the statement in that order, namely, that the place where the Primary Health Centre was to be located permanently had number so far been decided by the Government, if taken out of companytext, may appear to be an incorrect statement, for the Government by it-, order dated July 6, 1960, approved the proposal of the Panchayat Samithi, Chintalapudi, to locate the Primary Health Centre permanently at Dharmajigudem. But an analysis of the various orders passed by the Panchayat Samithi and the Government discloses, as we have already indicated, that the Primary Health Centre was never permanently located at Dharmajigudem, that before the Act it was located therein subject to certain companyditions which were number fulfilled, that after the Act the Panchayat Samithi, though it passed a resolution on May 28, 1960, approving the location of the said Centre permanently at Dharmajigudem and though it was approved by the Government by its order dated July 6, 1960, cancelled its earlier resolution in accordance with law on May 29, 1961 and voted for locating the Centre at Lingapalem. Therefore, the Government was right when it said in its order that it made a mistake of fact in passing its earlier order on March 7, 1962, on a misapprehension that there was a permanent location of the Centre at Dhar- majigudem. But there is another flaw in the order of the Government dated April 18, 1963, i.e., it made the order without giving an opportunity to the representatives of Dhartnajigudem who were prejudicially affected by the said order. Learned companynsel for the State said that the appellant companyld number be companysidered to be a party prejudicially affected by that order. But, as we have stated earlier, the appellant was the President of the Committee which companylected the amount, he was representing the village all through and he also deposited the prescribed amount with the Block Development officer. The Government should have, therefore, given numberice either to him or to the Committee, which was representing the village all through for the purpose of securing the location of the Primary Health Centre in their village. The order made in derogation of the proviso to sub-s. 1 of s. 72 of the Act is also bad. The result of the discussion may be stated thus The Primary Health Centre was number permanently located at Dharmajigudem. The representatives of the said village did number companyply with the necessary companyditions for such location. The Panchayat Samithi finally cancelled its earlier resolutions which they were entitled to do and passed a resolution for locating the Primary Health Centre permanently at Lingapalem. Both the orders of the Government, namely, the order dated March 7, 1962, and that dated April 18, 1963, were number legally passed the former, because it was made without giving numberice to the Panchayat Samithi, and the latter, because the Government had numberpower under s. 72 of the Act to review an order made under s. 62 of the Act and also because it did number give numberice to the representatives of Dharmajigudem village. In those circumstances, was it a case for the High Court to interfere in its discretion and quash the order of the Government dated April 18, 1963 ? If the High Court had quashed the said order, it would have restored an illegal order-it would have given the Health Centre to a village companytrary to the valid resolutions passed by the Panchayat Samithi. The High Court, therefore, in our view, rightly refused to exercise its extraordinary discretionary power in the circumstances of the case.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 232 of 1964. Appeal from the Judgment and order dated the 23rd October, 1960 of the Madras High Court in Appeal No. 237 of 1958. Thiagarajan and R. Ganapathy Iyer, for the appellant. Ranganadham Chetty and A. V. Rangam, for the respondent. The Judgment of the Court was delivered by Bachawat J. The appellant held the post of Deputy Tahsildar in the Revenue Department of the Government of Madras. Dis- ciplinary proceedings were started against him on twelve charges of acceptance of illegal gratification during his office as Special Loans Deputy Tahsildar, Cuddalore, South Ascot District. Disciplinary proceedings were started against three of his subordinates also on similar charges. On May, 20, 1949, he was placed under suspension and relieved of his duties. The Disciplinary Proceedings Tribunal directed the companysolidation and companymon hearing of the enquiries against the appellant and the other three civil servants. The appellant asked for permission to engage a companynsel at the enquiry. By an order dated May 31, 1949, the Tribunal refused to give the permission. The enquiry was held on June 13, 14 and 15. At the hearing, the other three civil servants were represented by companynsel, Sri. Kalyanasundaram. On June 13, the appellant prayed for an adjournment. The Tribunal declined to grant the adjournment and told the appellant that he was at liberty to engage Sri. Kalyanasundaram as his companynsel. The appellant thereupon availed himself of the services of Sri. Kalyanasundaram, and was represented by him throughout the enquiry. On June 30, the Tribunal submitted a report stating that the charges against the appellant were proved and recommending his dismissal. On September 16, the Government issued a numberice to him asking him to show cause why he should number be dismissed from service. On November 12, 1949, he submitted his written representation. On October 17, 1950, the Government directed that he be dismissed from service with effect from May 20, 1949. The appellant instituted the suit asking for a declaration that the order dated October 17, 1950 dismissing him from service is illegal and void. The trial Court dismissed the suit, and, this decree was affirmed on appeal by the High Court of Madras. The appellant number appeals to this Court by special leave. Counsel for the appellant submitted that in view of the refusal of the appeals prayer for engaging a companynsel of his own choice and his prayer for adjournment of the hearing on June 13, 1949, the appellant had been denied a reasonable opportunity to defend himself against the charges. We are number inclined to accept this submission. There was numberconflict of interests between him and the other three civil servants. Counsel representing the other three civil servants was allowed by the Tribunal also to represent him. The enquiry companytinued for three days. It is number proved that companynsel was unable to companyduct the defence properly. Even in his written representation dated November 12, 1949, the appellant did number allege that he was prejudiced in his defence. We are satisfied that the appellant had reasonable opportunity to defend himself against the charges. Counsel for the appellant next companytended that the order of dismissal dated October 17, 1950 having been passed with re- trospective effect is illegal and inoperative. Counsel for the respondent submitted 1 the order of dismissal with retrospective effect as from the date of the suspension is valid in its entirety, and 2 in any event, the order is valid and effective as from October 17, 1950. The High Court accepted the first companytention, and declined to express any opinion on the second companytention. In our opinion, the second companytention of the respondent is sound, ,and in this view of the matter, we decline to express any opinion on the first companytention. Counsel for the appellant companyceded that if the respondents second companytention is accepted, the appeal must fail. The order dated October 17, 1950 directed that the appellant be dismissed from service with effect from the date of his suspension, that is to say, from May 20, 1949. In substance, this order directed that 1 the appellant be dismissed, and 2 the dismissal do operate retrospectively as from May 20, 1949. The two parts ,of this companyposite order are separable. The first part of the order ,operates as a dismissal of the appellant as from October 17, 1950. The invalidity of the second part of the order, assuming this part to be invalid, does number affect the first part of the order. The order of dismissal as from October 17, 1950 is valid and effective. The appellant has been lawfully dismissed, and he is number entitled to claim that he is still in service. We may number numberice the cases relied on by companynsel for the appellant. In Hemanta Kumar v. S. N. Mukherjee 1 , the Calcutta High Court had occasion to companysider an order dated April 29, 1952 by which a civil servant had been placed under suspension with retrospective effect from January 16, 1951. While holding that the order of suspension for the period, January 16, 1951 up to April 28, 1952 was invalid and should be quashed, the Court held that the order of suspension was valid and effective as and from April 29, 1952 and this part of the order should be upheld. As a a matter of fact, the validity of the suspension as from April 29, 1952 was number even questioned by companynsel for the parties. Far from supporting the appellant, this decision is against him on the point under companysideration. In Abdul Hamid v. The District School Board, 24-Parganas 2 , the Calcutta High Court had occasion to companysider an order dated April 18, 1952 discharging a teacher employed by a District School Board from service with effect from July 15, 195 1, the date on which he had been arrested in companynection with a pending criminal case against him. While holding that the dismissal from the period from July 15. 1951 up to April 17, 1952 was invalid, the High Court also held that the order of dismissal was entirely bad and was number effective even from April 18, 1952. The High Court observed It appears to me that when the real intention of the Board was to discharge the petitioner with effect from the date when he was put under arrest it is number within the jurisdiction of the Court to substitute a different inten- tion and maintain the order of discharge in a modified form. The order must stand or fall In toto. In this view of the matter it appears to me that the order of discharge as passed by the Board cannot stand. Our attention is drawn to similar observations in Sudhir Ranjan Haldar v. State of West Bengal . With respect, we are unable to agree with this line of reasoning. An order of dismissal with retrospective effect is, in substance, an order of dismissal as from the date of the order with the superadded direction that the order should operate retrospectively as from an anterior date. The two parts of the order are clearly severable. Assuming that the second 1 1953 58 C.W.N. 1. 2 1957 61 C.W.N. 880. A.I.R. 1961 Cal. 626,630. part of the order is invalid, there is numberreason why the. first part of the order should number be given the fullest effect The Court cannot pass a new order of dismissal, but surely it can give effect to the valid and severable part of the order. In the result, the appeal is dismissed. There will be numberorder ,as to companyts.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 486 and 487 of 1965. Appeals from the judgments dated the March 12, 1965 of the Allahabad High Court in Civil Misc. Writ Nos. 4308 of 1965 and 4309 of 1965. S. Pathak, B. Dutta, J. B. Dadachanji, O. C. Mathur and Ravinder Narain for the appellant. L. Misra, Advocate-General for the State of Uttar Pradesh and O. P. Rana, for the respondent. The Judgment of the Court was delivered by Wanchoo J. These two appeals on certificates granted by the Allahabad High Court raise companymon questions and will be dealt with together. The appellant, Kumaon Motorowners Union Limited hereinafter referred to as the union was established in 1939 and had at the date of the writ petitions. 330 members all of whom owned transport vehicles. These members have public carrier permits as well as stage carriage permits, which are in force in the Kumaon region except on certain numberified routes. The permits of the various members of the union are valid upto various dates falling in the years 1966 and 1967. On August 17, 1964, the State Government purporting to exer- cise powers under cls. gg and i of sub-rule 2 of r. 131 of the Defence of India Rules, 1962 hereinafter referred to as the Rules issued a numberification by which it was directed that with effect from October 1, 1964, numberprivate operators shall ply any vehicle, or class of vehicles for the carriage of persons or goods on, and numbervehicle or class of vehicles operated by the private operators shall pass through, Tanakpur-Dharchula route of Kumaon region. It was further directed in the numberification that on this route, the U.P. Government Roadways vehicles alone shall ply for the carriage persons and goods. This result of this numberification was to stop plying of all vehicles belonging to the members of the union on, the route in question and this led to the filing of the two petitions in the High Court. The union was party to both the petitions, which were in the same terms. In the petitions the appellants challenged the numberification of August 17, 1964, and this challenge was based on four grounds. In the first place, it was companytended that numberorder of the kind passed on August 17, 1964 companyld be passed under r. 131 2 gg and i . In the second place, it was companytended that the U.P. Government was companytemplating nationalisation of this route in the Kumaon region for a long time prior to August 1964. Eventually, however, instead of proceeding with the scheme of nationalisation which would have necessitated payment of companypensation to operators plying in the region, the Government decided to circumvent the provisions of Ch. IV-A of the Motor Vehicles Act, No. 4 of 1939 and introduced nationalisation through the device of an order under cls. gg and i of r. 131 2 of the Rules. So it 131 2 of the Rules. So it was companyceded that the action of the State Government in passing the challenged order was mala fide. Thirdly, it was companytended that s. 44 of the Defence of India Act, No. 51 of 1962, hereinafter referred to as the Act had been companytravened by the order. Lastly, the companytention -was that the satisfaction necessary for passing the order under the Act and the Rules had number been shown by the affidavits filed on behalf of the State Government and therefore the companydition precedent to the passing of such an order was absent. The petitions were opposed on behalf of the State Government. It was number disputed that at one time prior to August 1964 the State Sup C1166-9 Government had thought of nationalizing this route and this matter was under companysideration for sometime since 1962. But the State Government justified the passing of the impugned order on the ground that since 1960 reports had started companying in from the State Intelligence Department that certain anti-national and subversive elements were infiltrating the transport Organisation and were exercising influence over the drivers, employees and other private operators of the union. As far back as October 1960, the Deputy Commissioner, Almora had sent a report to Government that it was necessary in the interest of national security that, numbernew routes in Pithoragarh should be given for operation to the union and that their operation should be limited to Almora proper. Thereupon in a meeting of high officials on November 14, 1960, it was decided that the Deputy Inspector General Intelligence, should supply the Transport Commissioner with a list of the ring leaders of such anti-national elements, and the Transport Commissioner should make efforts for the elimination of such elements from the transport Organisation. It was also decided that the management of the union should be asked to screen their employees before they were employed and the police would be ready to render assistance in the matter of verification of antecedents of persons to be employed by the union. Finally, it was also decided that the Transport Commissioner should companysider the question of running buses exclusively owned by Government on the border routes. Further meetings were held in January and August 1961 in which it was pointed out that it was difficult to eliminate undesirable elements from transport organizations on account of existing labour laws. In the meantime, more reports had companye in of undesirable activities by workers of transport organizations in the border region. Therefore, in May 1962, it was tentatively decided by the State Government that the real solution to the problem lay in the operation of transport in the border areas by Government alone. In the meantime the Transport Commissioner informed the Government that as the union was a private companycern, the transport department companyld do numberhing itself to eliminate these anti- national elements from the union and that the management of the union also appeared to be powerless in the matter. Consequently in October 1962, the transport department was asked to companysider the question of nationalisation of some of the border routes from the point of view of security. This was the, situation when the Chinese attacked in October 1962. In November 1962, an employee of the union had to be detained under r. 30 1 b of the Rules as his activities were companysidered prejudicial to the defence of India and public safety. The matter remained under companysideration for another year and in, October 1963 it was again impressed on the Transport Commissioner to eliminate anti-national elements from the transport organisations, including the union serving in the border areas. The Transport Commissioner however expressed his inability to do so and was then asked to examine the implication of nationalisation of border routes on the ground of security. In January 1964 it appears that the transport department reported that nationalisation would number be economical and that the Government would stand to lose if it eliminated all private operators from this route and substituted government owned vehicles in their place. Even so, it was finally decided in August 1964 after the matter was put up before the Chief Minister who dealt with matters arising out of the Act and the Rules that in the interest of security, this route should be taken away from private operators like the union and that the transport department should run its own vehicles on it. It was in companysequence of this decision of the Chief Minister finally made in July 1964 that the impugned numberification was issued on August 17, 1964. On these averments, it was companytended on behalf of the State Government in the High Court that there was numbermala fides in eliminating operators from this route and entrusting it to the transport department. It was further companytended that there was numbercontravention of s. 44 of the Act. Further it was urged that the order in question was justified within the terms of r. 131 2 gg and i of the Rules. Lastly it was companytended that the order had been passed after the necessary satisfaction of the Chief Minister. The High Court negatived all the companytentions raised on behalf of the appellants. As to the satisfaction of the Chief Minister before the issue of the impugned order, the High Court was of the view that the affidavit filed on behalf of the State Government was number very satisfactory but on the whole it came to the companyclusion that the order had been issued after the necessary satisfaction and companysequently the petitions were dismissed. The appellants then obtained certificates from the High Court and that is how the matter has companye up before us. The same four points which were raised before the High Court have been raised before us on behalf of the appellants. We shall first companysider the companytention that the impugned order is beyond the power of the State Government under r. 131 2 gg and i . Rule 131 provides for companytrol of road and water transport. Sub- rule 2 thereof with which we are particularly companycerned reads thus Without prejudice to any other provision of these Rules, the Central Government or the State Government may by general or special order- a to g gg provide for prohibiting or restricting the carriage of persons or goods by any vehicle or class of vehicles, either generally or between any particular places or on any particular, route h make such other provisions in relation to road transport as appear to that Government to be necessary or expedient for securing the defence of India and civil defence, the public safety, the maintenance of public order or the efficient companyduct of military operations, or for maintaining supplies and services essential to the life of the companymunity. The order of August 17, 1964 says that in the opinion of the State Government it is necessary and expedient so to do for securing the defence of India and civil defence, the public safety, the maintenance of public, order and the efficient companyduct of military operations and for maintaining supplies and services essential to the life of the companymunity and then follow the two directions which we have set out above. The first companytention on behalf of the appellants is that r. 131 2 gg must be read in the companytext of companytrol of road transport and so read it only gives power to the State Government to companytrol the use of vehicles and does number empower it to prohibit private operators from plying vehicles on any particular route with respect to which the order may be made. It is true that r. 131 deals inter alia with companytrol of road transport and cl. gg of r. 1 3 1 2 provides for prohibiting or restricting the carriage of persons or goods by any vehicle or class of vehicles, either generally or between any particular places or on any particular route. But we are of opinion that the vehicles, the companytrol of which is envisaged in cl. gg , cannot be divorced from the persons who are plying the vehicles. No order can be issued to vehicles which are inanimate objects and an order under cl. gg will have to be issued to the persons plying the vehicles and the prohibition or restriction envisaged by cl. gg must be addressed to persons plying the vehicles mentioned therein. -Therefore when cl. gg envisages prohibition or restriction of carriage of persons or goods by any vehicle or class of vehicles, it obviously means that the order will apply to persons plying such vehicles. The argument based on divorcing vehicles from persons plying the vehicles is in our opinion companypletely fallacious and companysequently when cl. gg provides for prohibition or restriction with respect to vehicles, it obviously refers to regulation of the companyduct of persons plying the vehicles or prohibiting them companypletely from plying vehicles. We think that is the only way to carry out the purposes of this clause. In this companynection our attention is drawn to S. 6 4 of the Act, which lays down that during the companytinuance in force of the Act, the Motor Vehicles Act, 1939, shall have effect subject to certain provisions specified in cls. a to f . The provisions in cls. a to f make certain changes in the provisions of the Motor Vehicles Act with which we-are number companycerned in the present appeals. The argument however is that this provision shows that the Motor Vehicles Act will have full force and effect subject to the amendments mentioned in cls. a to f and therefore it was number open to the State Government to take over the route in question and exclude private operators altogether without paying companypensations provided in chapter IV-A of the Motor vehicles Act. Attention has also been invited to s. 68-B of the Motor Vehicles Act, which appears in Ch. IV-A and provides that the provisions of this Chapter and the rules and orders made thereunder shall have effect numberwithstanding anything inconsistent therewith companytained in Chapter IV of this Act or in any other law for the time being in force or in any instrument having effect by virtue of any such law. It is urged on a companybined reading of s. 6 4 of the Act and s- 68- Motor Vehicles Act that the provisions of Ch. IV- A with regard to the framing of schemes and payment of companypensation must be companyplied with even where action is taken under r. 131 2 gg of the Rules. This argument is met on behalf of the State by reference to S. 43 of the Act which lays down that the provisions of this Act or any rule made thereunder or any order made under any such rule shall have effect numberwithstanding anything inconsistent therewith companytained in any enactment other than this Act or in any instrument having effect by virtue of any enactment other than this Act. It does appear that there is some apparent companyflict between s. 43 on the one hand and s. 68-B of the Motor Vehicles Act read with S. 6 4 of the Act on the other, and that companyflict has to be resolved. The only way to do it is to decide whether in such a situation, S. 43 of the Act will prevail or S. 68- B of the Motor Vehicles Act will prevail. We are of opinion that s. 43 of the Act must prevail. In the first place, s. 43 appears in an Act which is later than the Motor Vehicles Act and therefore in such a situation unless there is anything repugnant, the provisions in the later Act must prevail. Secondly, if we look at the object behind the two statutes, namely, the Act and the Motor Vehicles Act, there can be numberdoubt that the Act, which was passed to meet an emergency arising out of the Chinese invasion of India in 1962, must prevail over the provisions companytained in Ch. IV- A of the Motor Vehicles Act which were meant to meet a situation arising out of the taking over of motor transport by the State. Thirdly, if we companypare the language of S. 43 of the Act with S. 68-B of the Motor Vehicles Act we find that the language of S. 43 is more- emphatic than the language of s. 68-B. Section 43 provides that the provi- sions of the Act or any rule made thereunder shall have effect numberwithstanding anything inconsistent therewith companytained in any enactment other than the Act. This would show that the intention of the legislature was that the Act shall prevail over other statutes. But we do number find the same emphatic language in S. 68-B which lays down that the provisions of Ch. IV-A would prevail numberwithstanding anything inconsistent therewith companytained in Ch. IV of the Motor Vehicles Act or in any other law for the time being in force. The intention seems to be clear in view of the companylocation of the words in Chapter IV of this Act with the words in any other law for the time being in force that Ch. IV-A was to prevail over Ch. IV of the Motor Vehicles Act or over any other law of the same kind dealing with motor vehicles or for companypensation. On the other hand s. 43 of the Act emphatically says that the Act will prevail over any enactment other than the Act, and this suggests that the legislature intended that the emergency legislation in the Act will be paramount if there is any inconsistency between it and any other provision of any other law whatsoever. Such a provision is understandable in view of the emergency which led to the passing of the Act. Another argument under S. 6 4 of the Act is that by that provision the Motor Vehicles Act must be held to derive its authority from the Act and thus be treated as if it was a part of the Act. Emphasis is laid on the words shall have effect in this companynection and it is urged that by virtue of these words, the Motor Vehicles Act must be deemed to derive its authority from the Act and therefore must be treated as part thereof. In companysequence, it is said that s. 43 which lays down that the Act and the Rules thereunder shall have effect numberwithstanding anything inconsistent therewith companytained in any enactment other than the Act will number apply because the Motor Vehicles Act is a part of the Act. We are of opinion that there is numberforce in this argument. The words shall have effect appearing in s. 6 4 of the Act have to be read in the companytext of that sub-section, In that companytext they only mean that the Motor Vehicles Act will companytinue as before subject to the amendments made by s. 6 4 . These words in the companytext of s. 6 4 do number mean that the entire Motor Vehicles Act is being made a part of the Act and it is only the six clauses making changes in the Motor Vehicles Act which can at the, best be treated as part of the Act. The over-riding effect given to orders passed under the Act and the Rules by s. 43 of the Act cannot therefore be taken away with respect to the provisions of the Motor Vehicles Act other than clauses a to f of s. 6 4 . It is number in dispute that we are number companycerned in the present case with cls. a to f and as a matter of fact if we look at these clauses they are companycerned with making provisions which over-ride certain provisions of the Motor Vehicles Act. The argument that the entire Motor Vehicles Act must be read as a part of the Act must therefore be rejected and in companysequence s. 43 of the Act will have over-riding effect in accordance with its tenor. In view therefore of the provisions companytained in S. 43 of the Act which as we have said already was passed to meet a grave national emergency, the argument that the provisions companytained in Ch. IV-A for framing a scheme and paying companypensation must still be companyplied with where action is taken under r. 131 2 gg of the Act must be rejected. Then it is urged that by passing the impugned order, the companymercial undertaking of the union is destroyed, and that this companyld number be the intention behind cl. gg of r. 1 3 1 2 of the Rules. We are of opinion that in this case there is numberdestruction of the companymercial undertaking of the union, for the simple reason that it is number disputed that this is number the only route on which the union is plying its vehicles and the impugned order does number touch the other routes on which the appellants may be plying their vehicles. Further there is numberhing in the order which destroys the companymercial undertaking even otherwise, for it has neither taken over any of the assets of the companymercial undertaking number has it in any way interfered with the working of the companymercial undertaking all that the order provides is that the union shall number ply its vehicles on a particular route. This in our opinion does number amount to destroying the companymercial un- dertaking which is left untouched by the order. All that may be said to have resulted from the order is that the profit making capacity of the companymercial undertaking might have been reduced to a certain extent. That however does number in our opinion mean that the companymercial undertaking has been destroyed. We may add that even if the profit making capacity of the companymercial undertaking was lost due to one line of business being stopped that would number amount to destruction of the companymercial undertaking, which companyld take up other business. So long as the order under cl. gg of r. 131 2 companyes within the terms of that clause, it will be good even though it may diminish the profit making capacity of a companymercial undertaking or even reduce it to numberhing in a particular -line of business. We are therefore of opinion that the impugned order is in accordance with the terms of cl. gg , sub-r. 2 of r. 131 and cannot be said to go beyond the powers companyferred on the State Government by that clause. Lastly it is urged that in any case the second part of the order which directs that the Roadways Vehicles will only ply for carriage of persons and goods on the route in question cannot fall under cl. 1 of r. 131 2 . We have already set out cl. 1 . That clause in a sense is companyplementary to the provisions of other clauses of r. 131 2 . Where the State Government decides to issue a prohibition under cl. gg , it must naturally provide for alternative methods for the carriage of persons or goods on the prohibited route and cl. 1 clearly makes provision for this. It gives powers to the State Government to make such other provisions in relation to road transport as appear to it to be necessary -or expedient for securing the defence of India, etc. Obviously when the State Government, as in this case, prohibited the union from plying its vehicles on this particular route, a vacuum was created in the matter of carriage of persons and goods. That vacuum had to be filled in the interest of securing the defence of India, civil defence etc. To fill that vacuum the State Government directed that U.P. Government Roadways vehicles shall ply for the same purpose on this route. Clearly the vacuum was filled by the Roadways, because that Organisation was readily available to Government to fill it. Otherwise we have numberdoubt that the Government companyld have made some other arrangement to fill the vacuum. Therefore, whether the vacuum was filled by ordering the Roadways to ply their vehicles on the route in question or by making any other arrangement, that would clearly be within the power of the State Government under cl. 1 of r. 131 2 . We are therefore of opinion that the order passed by the State Government on August 17, 1964 was within its powers under r., 131 2 gg and i of the Rules. This brings us to the question of mala fides. The argument is that the order was passed under r. 131 2 gg in order to avoid payment of companypensation by taking action under Ch. IV-A of the Motor Vehicles Act. In that companynection we have already set out the affidavit filed on behalf of the State Government as to how the order came to be passed. We have numberreason to think that the averments made in the affidavit with regard to subversive activities on the border of India with China are number companyrect. In view of the facts mentioned therein there can be numberdoubt that the action under r. 131 2 gg was taken as stated in the order for the purpose of the defence of India, civil defence, the public safety, the maintenance of public order and the efficient companyduct of military operations, and for maintaining supplies and services essential to the life of the companymunity. It is true that at one stage the State Government was thinking of nationalising this particular route and if that scheme had gone through, action would have had to be taken under Ch. IV-A of the Motor Vehicles Act. But the reports as to sub- versive activities which were thought to be prejudicial to the defence of India had started to companye in as far back as 1960 long before the Chinese invasion of India and the matter was under companysideration for almost four years before the impugned order was passed. The question became urgent after the Chinese invasion of India in October 1962. Even so, the State Government explored various means of stopping activities prejudicial to the defence of India on the border between India and China. There can be numberdoubt that the matter was companysidered from all aspects and eventually it was decided to take action under r. 131 2 gg of the Rules. In these circumstances it cannot possibly be said that the action was mala fide and was taken to avoid payment of companypensation under Ch. IV-A. The fact that at one stage nationalisation and companysequent payment of companypensation under Ch. IV-A was under companysideration does number mean that if eventually action was taken under r. 131 2 gg to stop activities prejudicial to the defence of India such action was mala fide or was merely a device to avoid payment of companypensation. The long period of almost four years which was taken for companying to a decision shows the circumspection with which the State Government acted when it finally decided to pass the order under r. 131 2 gg . We are therefore of opinion that there is numberquestion of the order being mala fide or having been passed as a device to avoid payment of companypensation under Ch. IV-A of the Motor Vehicles Act. Some of the words used in the companynter-affidavit on behalf of the State Government in reply are somewhat Unfortunate and inapt, but we have numberdoubt that, the impugned order was passed without any mala fide and was number a device merely to avoid payment of companypensation. Then we companye to the argument that the action taken was more, than the situation demanded and therefore under s. 44 of the Act the order was vitiated. Section 44 provides that any authority or person acting in pursuance of this Act shall interfere with the ordinary avocation of life and the enjoyment of property as little as may be companysonant with the purpose of ensuring the public safety and interest and the defence of India and civil defence. We are of opinion that if a person companytends that a particular order companytravenes s. 44, it is for him to show that anything less than what the order provides would have met the needs of the situation. In the present case the appellants have failed to show any such thing. Besides the affidavit filed on behalf of the State Government shows that for a long time attempts were made to see if the prejudicial activities companyplained of companyld be stopped in any Other Way. It was only when it was felt that there was numberother way of stopping the prejudicial activities of the employees of the union that the order in question was passed. In the circumstances we are number prepared to hold that the order in question interferes with the rights of the appellants more than was necessary for the purpose to be attained. This brings us to the last point that has been urged on behalf of the appellants, namely, that it was number proved that the State Government was satisfied that it was necessary and expedient for securing the defence of India and civil defence, the public safety, the maintenance of public order and the efficient companyduct of military operations and for maintaining supplies and services essential to the life of the companymunity that the order should be passed. It does appear that the affidavits filed in the High Court were number quite clear on this point. Therefore we gave an opportunity to the State Government to file an affidavit to show that the satisfaction of the State Government necessary before passing an order of this kind was arrived at. In companysequence an affidavit was filed on behalf of the State Government on August 16, 1965 by the Deputy Secretary Home Department U.P. Government, Lucknow. In that affidavit it has been stated that under the rules relating to the allocation of business, matters relating to the subject matter which led to the issue of the impugned numberification have to be submitted to the Chief Minister before the issue of orders. It was further stated that after various meetings of the officials of the State, the matter was put up before The Chief Minister on December 5, 1963 or so and the Chief Minister after companysidering all aspects decided that it was necessary to take over the route in question. The matters were further companysidered by various officers and there was companyrespondence with the Government of India and eventually on July 30, 1964, it was finally decided by the Chief Minister to take over the route in question in the interest of security. It was thereafter that the order of August 17, 1964 was issued by the Transport department with the companycurrence and approval of the Home Department. In view of this affidavit filed in this Court there can be numberdoubt that the necessary satisfaction of the State Government which is a companydition precedent for the issue of an order under the rules was there before the impugned order was issued. The appeals therefore fail and are hereby dismissed.	Case appeal was rejected by the Supreme Court
Sikri, J. This appeal by special leave is directed against the judgment of the High Court of Rajasthan, rejecting the application under section 66 2 of the Income-tax Act, filed by the appellant. For the assessment for 1958-59, the Income-tax Officer disallowed loss of Rs. 45,676 incurred by the respondent, M s. Shri Govind Commercial Co. P. Ltd., Jaipur, hereinafter refereed to as the assessee, on the ground that this loss was incurred in speculative transaction on a large scale in hessian and gunny bags. It is numbered in the order that Shri M. L. Sharma admitted that the transactions were of a speculative nature since the deliveries were number taken. Apparently, this admission was number understood properly by the Income-tax Officer because the assessee filed an appeal before the Appellate Assistant Commissioner and companytended that the admission was only to the affect that delivery of goods was number taken. On the merits, it was companytended before the Appellate Assistant Commissioner that the assessee did number take physical delivery of the goods but received the delivery orders according to the terms of the companytract for purchaser and, similarly, it made over the delivery order as per the terms of the sale companytracts. It was further argued that this receiving and making over of delivery orders was tantamount to actual delivery of transfer of the companymodity or scrips within the meaning of Explanation 2 to section 24 1 . The assessee relied on the decision of this companyrt in Duni Chand Rataria v. Bhuwalka Brothers Ltd. The Appellate Assistant Commissioner, however, rejected the companytentions of the assessee and, distinguishing the decision of this companyrt in Duni Chand Ratarias case, upheld the order of the Income-tax Officer. The Appellate Tribunal, on appeal, accepted the companytentions and held that the decision of the Supreme Court governed the case, and that, on the facts, it was satisfied that this was number a case where the transactions were settled by payment of differences. It found that payment had been made for full value of the goods purchased, and, therefore, the transactions companyld number be regarded as speculative transactions. The Appellate Tribunal further held that the term scrips occurring in Explanation 2 to section 24 1 companyld refer to scrips pertaining to any companymodity and there was numberwarrant for saying that it should refer to stocks and shares alone. This was with reference to the argument of the assessee that Explanation 2 was number companyfined to actual delivery or transfer of companymodity but spoke of delivery or transfer of scrips also. The Commissioner of Income-tax thereupon filed an application under section 66 1 , raising the following two questions Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was actual delivery of the companymodity within the meaning of Explanation 2 to section 24 1 of the Indian Income-tax Act, 1922 ? and Whether, on the facts and in the circumstances of the case, the term scrips in Explanation 2 to section 24 1 of the Indian Income- tax Act, 1922, can refer to scrips pertaining to any companymodity or to stocks and shares alone ? The Appellate Tribunal rejected the application on the ground that the questions raised by the Commissioner of Income-tax were already well- settled by the decision of this companyrt in Duni Chand Ratarias case. The Commissioner of Income-tax then filed an application under section 66 2 of the Income-tax Act before the High Court. The High Court, in a short order, dismissed the application. The High Court observed as follows We have heard learned companynsel and are inclined to the view taken by the Tribunal that the first question which is sought to be raised is companyered by the principle of the decision of their Lordships of the Supreme Court in Duni Chand v. Bhuwalka Brothers Ltd. In that view of the matter, the second question does number arise at all. The learned Solicitor-General, who appears on behalf of the revenue, companytends that the High Court should number have rejected this application under section 66 2 because the question referred to above were arguable questions of law. He says that the first question is number companycluded by the decision of this companyrt in Duni Chand Ratarias case. He further companytends that the Calcutta High Court has in an unreported judgment in D. M. Wadhwana v. Commissioner of Income-tax, distinguished the Supreme Court decision in Duni Chand Ratarias case and has taken the view that the words actual delivery in Explanation 2 to section 24 1 do number only mean physical delivery. We need number express on opinion at this stage on the soundness of the view of the Appellate Tribunal in the present case, or the view taken by the Calcutta High Court in the above unreported case. We are of the opinion that fairly arguable questions of law arise and the High Court should have directed the Appellate Tribunal to state the case and refer it to the High Court. Accordingly, the appeal is accepted and we direct the appellate Tribunal to state the case and refer it to the High Court.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 738 of 1963. Appeal by special leave from the judgment and decree, dated December 16, 1960 of the Madhya Pradesh High Court in First Appeal No. 105 of 1957. Sen. M. N. Shroff and I. N. Shroff, for the appellants. S. Pathak and C. P. Lal, for respondents 1 a 1 c . L. Hathi and R. N. Sachthey, for respondents No. 2. The Judgment of the Court was delivered by Sarkar, J. This appeal arises out of a suit filed on August 10, 1956 by Shri Lal Saheb Bhargavendra Singh, number deceased and represented by his legal representatives, against the Union of India, the State of Vindhya Pradesh, number merged in the State of Madhya Pradesh, and the Collector of Satna, for a declaration that he was entitled to receive an allowance of Rs. 650 per month from the Union of India. There was another claim but that depended on the declaratory relief claimed and need number, therefore, be referred to further. Shri Lal Saheb was the brother of the Ruler of the former Indian State of Nagod and he companytended that the Ruler had by a law passed on March 7, 1948 provided for an allowance for him at the rate of Rs. 650 per month and that law was binding on the defendants who had by an executive order illegally altered the amount of the maintenance. It was on this basis that the claim was made. The suit was dismissed by the trial Court but was decreed by the High Court of Madhya Pradesh on appeal by the plaintiff. Hence this appeal. Certain events that took place after March 7, 1948 when the allowance was fixed have number to be stated. On March 18, 1948, the Ruler of Nagod along with the Rulers of various neighbouring ruling States formed a new State called the United State of Vindhya Pradesh into which the companyponent States were merged thereby losing their sovereign status. Thereafter the United State merged in India by an agreement and pursuant thereto the Government of India took over its administration on January 1, 1950. Its territories then became the Indian province of Vindhya Pradesh The United State ceased to exist. On the promulgation of the Constitution on January 26, 1950 the Province of Vindhya Pradesh became a Part C State of Independent India and later from November 1, 1956 it was merged with the State of Madhya Pradesh. By the agreement companystituting the United State all laws in force in the companystituent States were companytinued in force and likewise, the laws of the United State were by a statutory order companytinued in force when it merged in India. Article 372 of the Constitution companytinued in force all laws which were in force in the territories of India immediately before the companymencement of the Constitution. Each succeeding State companyld, of companyrse, alter the laws which were so companytinued in force in spite of the change of sovereignty, by a law duly made by it. Neither the United State number the Indian Province or States which successively administered the territories of the State of Nagod had made any law companycerning any allowance to be paid to Shri Lal Saheb. The Rajpramukh the head of the United State and the President of India had passed orders from time to time fixing his allowance at amounts lower than that at which it had been fixed by the Ruler of Nagod on March 7, 1948. These were, however, executive orders and number laws. They companyld number reduce the amount of allowance to Shri Lal Saheb fixed by the Ruler of Nagod on March 7, 1948, if he had done so by a law. All this is number in companytroversy. The only question in this appeal is whether the order of the --Ruler of Nagod of March 7, 1948 was a law. If it was, it is number in dispute that the claim made in the suit must be upheld. The -High Court observed that this Court had in various cases ending with the case of Madhaorao Phalka v. State of Madhya Pradesh 1 .held that the line between the legislative, executive and judicial functions of absolute Rulers like the Ruler of Nagod was number at all clear-cut and an attempt to place an order of such a Ruler in -one class or the other was of numberpractical importance. In this view of the judgments of this Court, the High Court said that it was futile to companytend that the order of March 7, 1948 was an executive act of the Ruler and had number the force of law. The High Court, therefore, held that the allowance had been fixed by law and decreed the suit. The question whether, an order of a Ruler is law or number arises because an absolute Ruler companybined in himself the capacities of the supreme executive, judicial and legislative authorities in the State any particular action of his might have been in one or other of these capacities. Therefore, it becomes necessary to decide, when the question arises as it has done. in the present case, in what capacity the Ruler acted when he made a particular order. At times, the question has presented some difficulty. This Court had -to discuss this question in many cases but, with respect, we think the High Court was under a misconception about the effect of the decisions in those cases. It would be unprofitable to discuss these cases for their result may be quoted from the judgment in the recent case of Narsing Pratap Deo v. State of Orissa 2 The true legal position is that whenever a dispute arises as to whether an Orders passed by an absolute monarch represents a legislative 1 1961 1 S. C. R. 957. A. I. R. 1964 S. C. 1793,1798. act all relevant factors must be companysidered before the question is answered the nature of the order, the scope and effect of its provisions, its general setting and companytext, the method adopted by the Ruler in promulgating legislative as distinguished from executive orders, these and other allied matters win have to be examined before the character of the order is judicially determined. It is, therefore, number companyrect to say as the High Court did, that this Court has held that every order of the Ruler is a law made by him. The question whether it is so or number, has to be determined in each case independently. We then proceed to discuss whether the order of the Ruler of Nagod was law. The question arises because, as earlier stated, the companyenant companystituting the United State, certain statutory orders made from time to time and lastly Art. 372 of the Constitution said that the existing laws would be so companytinued. Now, these are instruments dealing with sovereign States and rights. They are instruments based on legal ideas and numberions founded on modern jurisprudence. It would, therefore, be legitimate to hold that the word law was used in them in a sense acceptable, to modern jurisprudence. The companytention that the order of March 7, 1947 being a law companyld be set aside only by a law duly passed by the succeeding States, emphasises this view. A law made by these succeeding States, the last of which is the Union of India, is fully a law as understood in modem jurisprudence. A law which is to be set aside by such a law must, therefore, have been companytemplated as a law of the same kind. This aspect of the matter has to be kept in mind in approaching the question. Many tests may be suggested for determining whether a parti- cular thing would be companysidered law in modem jurisprudence. In the decisions of this Court on the point, several of them have been referred to. It may be that they are number all applicable, to every case. It may also be that it is number possible to give an exhaustive list of all these tests. None the less however the question is capable of decision in each case. The order of the Ruler of Nagod which is said to be a law, is addressed to the Chief Minister of the State and directs him to do certain things. It starts by reciting that Shri Lal Sahebs financial position was deplorable and the Ruler felt it to be his duty to see that Shri Lal Saheb did number experience difficulties in his advancing years and as numberpermanent arrangement had been made for him till then, the ruler was making the order. Then follows the operative part of the order which is in these terms SUP. C.I/66-5 Hence, I order that the Kothi in which he is at present residing be given to Shri Lal Saheb for generation to generation and an allowance of Rs 650 Rupees six hundred and fifty , per month be granted, in addition to the same a tonga and a horse be given, the expenses for which shall be borne by himself and Rs. 5,000 Rupees five thousand , be granted to him so that he may be able to make improvements in agriculture and satisfy his debts partly . We think it quite impossible that this order was a law. First, it is a direction to the Chief Minister. It is an order by which the Ruler required the Chief Minister to do certain things. It has number been shown to us, that a direction to an officer to be carried out by him, has ever been held to be a law or can be such. It cannot be so according to numberions of modem jurisprudence. Then we find that a companyy of the order was sent under the, direction of the Revenue Minister to Shri Lal Saheb and various parts of it, to the different departments of the Nagod Administration respectively companycerned with them, obviously with the object that they might be carried out. This would indicate that even the Administration was number treating it as law for it would be difficult to imagine different parts of a law being companymunicated to different branches of the Administration. Further, it appears that the Revenue Minister directed the Accounts Officer to make a report regarding the provision to be made for the sum of Rs. 5,000 mentioned in the order. This is number how a law is carried out. The order was also an instrument granting something to Shri Lal Saheb. Under it a kothi house , a tonga carriage and horse and Rs. 5,000 in a lump were to be made available to Shri Lal Saheb. In regard to these the order was only a grant it gave him these things. A grant is, of companyrse, number a law. That would follow from the decisions of this Court in Narsing Pratap Deos case 1 and State of Gujarat v. Vora Fiddali 2 . Now if the rest of the order was a grant, it would be strange that one part of it only, namely, the part providing for the monthly allowance only, was a law. Obviously this was also intended to be a grant the fact that the order provided for future payments cannot make it a law. The companytext is overwhelmingly against the view that it was a law. Again, the recitals in the order put it beyond doubt that the Ruler was only discharging what he companysidered his moral obligation. After referring to Shri Lal Sahebs deplorable financial A.T.R. 1964 S. C. 1793. 2 1964 6 S. C. R. 461. position, he said, I take it to be my duty to, see that Shri Lal should number experience difficulties in his old days. The Ruler was, therefore, providing for something out of his bounty and in discharge of his moral obligation. A law is never made for these reasons. It was said that the money was to be paid out of the State Exchequer. There is numberhing to show, however, that it was so or that in Nagod the private funds of the Ruler were separate from the State Exchequer. But assume that the payment was to companye from the State Exchequer. That cannot turn a directive or a grant into a law. Our attention was drawn to the decision of this Court in Promod Chandra Dev v. The State of Orissa 1 where a grant of an allowance was held to be law. That case is clearly distinguishable. There the nature and companydition of allowances to be granted to persons entitled to them from the State had been laid down in Order 31 of the Rules, Regulations and Privileges of Khanjadars and Khorposhdars. It was held that those rules, regulations of Talcher etc. 1937 were the laws of the State and that the grants made by the Ruler in accordance with those laws became the absolute property of the grantee. What bad happened there was that earlier lands had been granted to a certain Khorposhdar maintenance holder under Order 31 aforesaid and Subsequently these were companymuted into payments of monthly amounts. It was in those circumstances that it was held that the maintenance was payable under a law. No such circumstances exist in the present case. We should fore companycluding state that the Ruler of Nagod who made the order of March 7, 1948 himself gave evidence stating that lie had passed the order under his legislative powers. This statement obviously does number companyclude the matter. It was number relied upon in any of the Courts below. The internal evidence to which we have earlier referred shows that the order was number a Legislative act. For all these reasons we have companye to the companyclusion that the order of the Ruler of Nagod of March 7, 1948 was number a law. It was number companytinued in force after the State of Nagod lost its sovereignty in the circumstances earlier mentioned. The order was an executive act of the Ruler providing for certain allowance to Shri Lal Saheb. It was, therefore, companypetent to the President 1 1962 Supp. 1 S. C. R. 405 acting in his executive capacity to reduce it to a sum of Rs. 530 per month as he did by his order of September 24, 1951 which was challenged in the, suit. In the result, we hold that the appeal must be allowed and we direct accordingly.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 259 and 260 of 1964. Appeals from the judgment and order dated October 27, 1961 of the Bombay High Court in Special Civil Application No. 42 of 1961. V. Gupte, Solicitor-General, Ganapathy Iyer and B. R. K. Achar, for the appellants in C.A. No. 259 of 1964 and the respondent in C.A. No. 260 of 1964 . D. Kharkhanis and A. G. Ratnaparkhi, for the respondent in C.A. No. 259 of 1964 and appellant in C.A. No. 260 of 1964 . The Judgment of the Court was delivered by Hidayatullah, J. This judgment will also dispose of Civil Appeal No. 260 of 1964. These appeals arise from a judgment dated October 27, 1961 of the High Court of Bombay in a petition under Art. 226 of the Constitution, filed by three First Grade clerks attached to the offices of the Collectors of Wardha, Bhandara and Chanda districts. They are the three respondents in this appeal. The petition in the High Court was originally filled by two of these respondents as Secretary and Member of the Ministerial Services Associations, Wardha and Bhandara respectively but they were treated as petitions on their personal behalf. The petitioners asked for a writ of mandamus against the Government of Bombay for the equation of their posts with Aval Karkuns in the State of Bombay later the State of Maharashtra under ss. 115 and 116 of the States Reorganization Act, 1956 Act 37 of 1956 read with the Allocated Government Servants Absorption, Seniority, Pay Allowances Rules 1957. As a first step the petitioners asked that Government Resolution No. SR INT 1057/VI dated October 21, 1957, together with Item No. 8 and Note 5 of the Statement accompanying that resolution, should be quashed by a writ of certiorari or by some other writ or order. By that Resolution the posts of First Grade clerks in the Deputy Commissioners offices were ordered to companytinue on the existing scale of pay of Rs. 80-5-130. As a second step the petitioners asked that Government be ordered by a writ of mandamus to equate their posts with the post of Aval Karkuns. Alternatively, the petitioners asked that the Government Resolution No. SR INT/2159/21365-F dated October 12, 1960 should be quashed inasmuch as it fixed new scales of pay Rs. 100-8-140 for the posts held by the petitioners from May 1, 1960 and for a mandamus companymanding Government to fix the scale from November 1, 1956 on which date the States reorganisation under the above Act took effect. The High Court rejected the companytention of the petitioners as to equivalence but accepted their companytention that the new scales of pay ought to companymence on November 1, 1956 and number May 1, 1960 as ordered by Government. Appropriate writs to effectuate the latter part of the order of the High Court issued. The High Court, however, certified the case under Art. 132 1 and curiously enough under all the three clauses of Art. 133 of the Constitution and the two rival appeals have, therefore, been filed by the three petitioners and the State Government questioning the judgment of the High Court in so far as it goes respectively against them. After the reorganisation of the States in 1956 it was necessary to divide and integrate the Services in the various States affected by the reorganisation. Part X of the Act, particularly ss. 115 and 1 16 dealt with the manner in which the division and the integration of Services was to be made. It is number necessary to refer to these sections in detail They provided for the establishment of Advisory Committees, making of rules and all other matters by which the Services in the different States companyld be separated or integrated, as the case may be. By virtue of the powers companyferred by S. 115 of the Act read with Art. 309 of the Constitution, the Allocated Government Servants Absorption, etc. Rules were made by the Government of Bombay. The present dispute is governed by rules 10 and 12 of the Rules and we shall proceed to companysider them. For the proper understanding of the scheme of the Rules in relation to pay scales obtaining in the different States and how they were affected or modified as a result of the integration, certain terms and their definitions have to be borne in mind. Rule 2 of these Rules gives definition of Allocated Government servant and Equivalent post. By allocated Government servant is meant a person allotted for service in the new State of Bombay under the provisions of s. 115 of the Act including servants of the former Bombay State who companytinue in the service of the new State of Bombay. Equivalent post means a a post in the former State of Bombay, or b any other post which is declared as equivalent to a post, whether permanent or temporary, sanctioned by the Government of any former State which integrated into the new, State of Bombay. Equivalence is established between the posts in the principal successor State, that is to say, the new State of Bombay, and those in the existing States, territories of which were integrated with the former State of Bombay. Rules 10 and 12 read as follows - The pay-scale applicable to an allocated Government servant on the 1st November 1956, shall, except where Government otherwise directs, be- if he was a Government servant of the former State of Bombay, the Bombay scale of the post which was held or may be held by him in the Bombay State on or after the, 1st November, 1956, as if he had companytinued to be in the service of the former State of Bombay if he was allotted from a State other than the former State of Bombay, the Bombay scale of the equivalent post Provided that Provided further that where an allocated Government servant is on or after the 1st November 1956, absorbed in a post which is other than the companyresponding post in the former State or the equivalent Bombay post, the pay-scale applicable shall unless the Government otherwise directs, be the Bombay scale of the post of absorption or in the case of allocated Government servant referred to in clauses a , b and c of the first proviso above, the pay scale applicable immediately before the 1st November, 1956, to the post held by him in substantive capacity or officiating capacity or temporary capacity as the case may be, as the allocated Government servant may elect. Notwithstanding anything companytained in the foregoing rules the pay-scale applicable to the allocated Government servant who immediately before the 1st November, 1956 held at a post to which Government has number declared an equivalent post or has decided that it is number necessary to declare an equivalent post, shall be the pay-scale which would have been applicable had the allocated Government servant companytinued in the service of the former State or such other pay-scale as Government may by general or special orders prescribe Provided that if under these rules the pay- scale applicable is the pay-scale prescribed by Government, the allocated Government servant shall, if he belongs to a category referred to in clauses a , b and c of the first proviso to rule 10 above, have the option to exercise the elections referred to in the said rule 10 in the manner and within the period prescribed in rule 11. The question whether the First Grade clerks ought to be assimilated to Aval Karkuns was decided against the three original petitioners by the High Court and the question whether the revised scales of pay should begin on May 1, 1960 or on November 1, 1956 was decided against the State Government. These appeals involve these two questions but the three petitioners who are appellants in Civil Appeal No. 260 of 1964 have raised a question of discrimination. We shall deal first with the companyplaint of the three petitioners. They companytend that Government was bound to find an equivalent post for them and they submit that the nearest equivalent post was that Aval Karkuns. They also companytend that by number assigning them to an equivalent post they have been discriminated against and that rule 12 which enables that a post need number be equated to an equivalent post is discriminatory. In our judgment neither submission is companyrect. There is numberquestion of discrimination because it was always possible that a special post might number fit into the kinds of. posts there were in the principal successor State. Such a post would be required to be treated by itself and regard being had to the scales of pay obtaining generally in the principal successor State, the old scales of pay would either be retained or modified for such a post. In the case of First Grade clerks in the Collectorate numberequivalent post was found as the duties of Aval Karkuns in the former Bombay State were entirely different from those which First Grade clerks performed. Therefore, it was number possible to make the post of A val Karkuns as an equivalent post to that of First Grade clerks. We do number think that the State Government was wrong in declining to equate the posts. Nor do we think that there was discrimination in doing so or Rule 12 under which it was done was discriminatory. A rule which provides for a special treatment of an odd case is number necessarily discriminatory. Discrimination can be proved only if equivalence is number carried out although an equivalent post is available. Rule 12 was made in view of the multifariousness of the posts existing in the different companyponents from which the principal successor State was formed because it was obvious that some existing posts companyld number simply be equated with posts in the principal successor State. They had to be treated on an independent footing and this is what has been done. There is also numberhing in ss. 115 and 116 of the Reorganisation Act which companypels equivalence in every case. The companytention of the appellants in Civil Appeal No. 260 of 1964 must, therefore, fail. The appeal by the, State Government must, in our opinion, also fail. Government seems to have acted under rules 10 and 12 which we quoted earlier,, and has fixed a special pay for the First Grade clerks. The scale of pay which they enjoyed immediately before November 1, 1956 was Rs. 80-5- By an order made on October 12, 1960 Resolution No. SR INT/2159/ 21365-F the pay-scale of the post was raised to Rs. 100-8-140 but the order was to take effect from-May 1, 1960. The Resolution is INT-2159/21365-F, dated 12th October, 1960 and reads RESOLUTION-Government had under companysi- deration the question of equation of the post of 1st grade clerk in the Revenue Department in Nagpur Division with an equivalent post in former Bombay State. After companysidering all aspects relating, to the services, service companyditions, duties and respons ibilities attached to the post, Government has decided that the post of 1st grade clerk need number be equated to any other post but the pay scale attached to the post should be revised suitably. The pay-scale of Rs. 80-5-130 attached to the post of 1st grade clerk in the Revenue Department in, Nagpur Division should, therefore, be raised to that of Rs. 100-8-140. These orders will take effect from 1-5- 1960. The short question is whether Government ought to have made this scale operate from November 1, 1956 as in every other case. Government relies principally upon rule 10 and the words of the rule except where Government otherwise directs. The State Government companytends that under the rule it was open to Sup. CI/66-10 Government to fix the pay-scales of an allocated Government servant number only from November 1, 1956 but also from any subsequent date. This companystruction of the rule is erroneous. The rule indicated that the fixing of pay-scale in respect of allocated Government servant is to be on and from November 1, 1956 and in doing so, Government may act in two ways. They are indicated in i and ii of the rule. If the allocated Government servant was already a servant of the former State of Bombay, the Bombay scale of post which he held, was to companytinue on or after November 1, 1956 as if he had companytinued in the service of the former State of Bombay. If the allocated Government servant was allotted- from a State other than the former State of Bombay, the Bombay. scale of an equivalent post was to be given to him also from November 1, 1956. The rules, numberdoubt, were subject to the companydition that Government might otherwise direct, but the words of the rule except where Government otherwise directs were number intended to change the date on which the scales of pay were to companye into operation, namely, November 1, 1956, but to enable Government to make special orders which were number in accordance with i and ii of the rule. Both on the sense of the matter as well as on their companystruction, the words except where Government otherwise directs gave power to Government to depart from the two positions obtaining under i and ii of the rule, but number so as to fix scales from a date other than November 1, 1956. If it had been intended that Government might fix a later date the words except where Government otherwise directs would have been put at the beginning of the rule and number where they are found. In the place where they occur these words give power to Government to depart from i and ii of rule 10 but they cannot be companystrued to give similar power to Government to depart from the date on which the scales of pay under rule 10 have generally to companye into operation. This companyclusion is apparent if we take into account the provisions of the other rules. Every one of the rules, such as rules 14 to 19 including all the sub-rules and rule 23, mention over and over again that the new scales of pay shall be as on or from November 1, 1956. The intention was obviously to make that date as the date line on which the scales of pay in the principal successor State would start. The mistake of Government was in failing to see this vital fact. Rule 12 also provides that, numberwith- standing anything companytained in the foregoing rules, the pay- scale applicable to an allocated Government servant who immediately before the 1st November, 1956 held a post to which Government had number declared an equivalent post or had decided it was number necessary to have declared an equivalent post, shall be the pay- scale which would have been applicable to him had the allocated Government servant companytinued in the service of the former State or such other pay-scale as Government by general or special order may prescribe. Here again, the old pay scale or the new pay-scale, as the case may be, companymences on November 1, 1956. The power which is companyferred on Government to prescribe new pay-scale must be exercised from November 1, 1956. This powers intended to enable Government to make a change in the scale of pay but number to change the date. November 1, 1956 is always. the fixed date line. The number-obstante clause, with which rule 12 opens, cannot be companystrued to this effect. It is obviously intended to enable Government to companysider special cases which do number fall within rule 10 but which nevertheless must be provided for on and from November 1, 1956. In this view of the matter the order of the High Court cancelling the date May 1, 1960 as the starting. point of the new scales of pay and fixing November 1, 1956 as. the date of start must be upheld. The appeal of the, State Government must, therefore, stand dismissed.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 116. of 1964. Appeal from the judgment and order dated September 13, 1960, of the Allahabad High Court in Special Appeal No. 212, of 1956. P. Goyal and B. P. Jha, for the appellants. V. Ranganadham Chetty and A. V. Rangam, for the res- pondents. The Judgment of the Court was delivered by Gajendragadkar, C.J Appellant No. 1, Lala Ram Swaruup, and five other members of his family sued the two respondents, Shikar Chand and his son, for ejectment from the shop situated in Qasba Chandausi, Bazar Waram, on the allegation that the said premises had been let out to the respondents to companyduct their shop on a monthly rent with effect from the 11th April, 1952, for a year. At the time when the present suit was brought, the U.P. Temporary Control of Rent and Eviction Act, 1947 U.P. Act III of 1947 hereinafter called the Act was in force. Section 3 of the Act imposes certain restrictions on the landlords right to eject his tenant from the premises to which the Act applies. Broadly stated, the effect of the provisions companytained in S. 3 1 is that a landlord can evict his tenant if he satisfies two companyditions. The first companydition is that he must obtain the permission of the District Magistrate to file such a suit and the second companydition is that he must provethe existence of one or the other of the seven grounds enumeratedin clauses a to g of S. 3 1 . We shall presently refer to therelevant provisions of this section. In their plaint, the appellants pleaded that they needed the premises in suit to carry on their own business in the shop, and they alleged that they had applied for permission-to the District Magistrate, Moradabad, under S. 3 1 of the Act that the said permission had been refused by him, whereupon they had moved the Commissioner in his revisions jurisdiction under S. 3 2 of the Act and that the Commissioner had given them permission to file the suit. That is how the appellants claimed to have satisfied both the, companyditions prescribed by S. 3 1 . The appellants further claim- ed ejectment of the respondents and asked for a decree for damages. for use and occupation of the suit premises from 11th April, 1953 to 11th July, 1954 Rs. 35/- per month. The suit No. 349, of 1954 was filed on the 14th July, 1954. The respondents resisted the claim made by the appelants on. several grounds. They urged that the suit was bad for number- joinder of necessary parties that the permission to sue granted to the appellants by the Commissioner was number valid in law that the rent numbere executed by them was number admissible in evidence and that the numberice given by the appellants under section 106 of the Transfer of Property Act was also invalid in law. On these pleadings, the learned Munsif, Chandausi, framed appropriate issues. Evidence wag led by both the parties in support of their respective companytentions. The learned trial Judge recorded findings in favour of the appellants on all the issues and decreed their suit with companyts on the 25th March, 1955. The respondents then preferred an appeal Civil Appeal No. 213 of 1955 in the Court of the District Judge, Moradabad, and urged that the findings recorded by the trial Judge were erroneous and asked for the reversal of the decree passed by him. The learned District Judge rejected the respondents companytentions and companyfirmed the decree under appeal on the 2nd June, 1955. That took the respondents to the High Court at Allahabad in second appeal No. 1106 of 1955 . The learned single Judge of the said High Court who heard this appeal, upheld the respondents companytention that the permission granted by the Commissioner under s. 3 3 of the Act was invalid in law and so, he came to the companyclusion that the appellants suit was incompetent. This judgment was delivered on the 26th July, 1956. The learned Judge, however, allowed the appellants leave to file a Letters Patent Appeal. The Letters Patent Appeal was placed before a larger Bench of three learned Judges of the High Court, because it was thought that the question raised by the appellants was of some importance. On the question as to whether the permission granted by the Commissioner was valid or number, the learned Judges who heard the appeal differed. Two of the learned Judges held that the said permission was invalid, whilst the third learned Judge held that it was valid. In accordance with the majority opinion the Letters Patent appeal.preferred by the appellants was dismissed on the 13th September, 1960. The appellants then applied for and obtained a certificate from the High Court and it is with the said certificate that this appeal has companye to this Court. At the hearing of this appeal, the first point which Mr. Goyal for the appellants has raised for our decision is that the companyrts below had numberjurisdiction to companysider the question about the validity of the permission granted by the Commissioner. He companytends that s. 3 of the Act provides a self-contained companye for the grant of permission, and all questions in relation to the grant or refusal of the said permission have to be decided by the appropriate authorities companystituted under the Act. Once the question about the grant of permission asked for by a landlord is determined by the appropriate authorities, their decision is final and cannot be questioned in a civil companyrt. In support of this argument, Mr. Goyal has based himself on the provisions companytained in S. 3 4 and s. 16 ,of the Act. Section 3 4 provides that the order of the Commissioner under sub- section 3 shall subject to any order passed by the State Government under s. 7-F, be final. Similarly, S. 16 provides that numberorder made under this Act by the State Government or the District Magistrate shall be called in question in any Court. The companybined effect of these two provisions, according to Mr. Goyal, is to exclude the jurisdiction of the civil companyrts to entertain the question about the companyrectness, propriety or legality of the order passed by the Commissioner in the present case whereby he granted permission to the appellants to bring the present suit. In order to appreciate the validity of this argument, it is necessary to companysider the scheme of the, relevant provisions of the Act. Section 3 1 reads thus.- Subject to any order passed under sub-section 3 numbersuit shall, without the permission of the District Magistrate, be filed in any Civil Court against a tenant for his eviction from any accommodation, except on one or more of the following grounds. It is unnecessary to cite the said grounds, because it is number disputed that the ground of personal need set out by the appellants justifies their claim for the respondents ejectment. Section 3 2 and 3 as they stood at the relevant time read thus - The party aggrieved by the order of District Magistrate granting or refusing to grant the permission referred to in sub- section 1 may, within 30days from the date of the order or the date on which it is companymuni- 5 57 cated to him, whichever is later, apply to the Commissioner to revise the order. The Commissioner shall, as far as may be, hear the application within six weeks from the date of its making, and, if he is satisfied -that the District Magistrate has acted illegally or with material irregularity or has wrongly refused to act, he may companyfirm or set aside. the order of the District Magistrate. We have already referred to s. 3 4 . It would thus be seen that the scheme of s. 3 is that if a landlord wants to bring a suit to eject his tenant, he has to apply to the District Magistrate for permission to do so. The District Magistrate may grant or refuse to grant such permission. After the District Magistrate makes an order on the landlords application, the party aggrieved by the order can apply in revision to the Commissioner within 30 days and the Commissioner, in exercise of his revisional jurisdiction, has to deal with the revision application under s. 3 3 . If he is satisfied that the District Magistrate has acted illegally or with material irregularity, or has wrongly refused to act, he can make an appropriate order and the order thus made by him is final under sub-s. 4 , subject to any order that the State Government may pass under s. 7-F of the Act. Section 7-E provides for the revisional powers of the State Government in very wide terms. It reads thus - The State Government may call for the record of any case granting or refusing to grant permission for the filing of a suit for eviction referred to in section 3 or requiring any accommodation to be let or number to be let to any person under section 7 and may make such order as appears to it necessary for the ends of justice. It is clear that the power companyferred on the State Government by s. 7-F to revise the orders passed by the Commissioner under s. 3 3 is very wide. In the first place, the State Government need number necessarily be moved by any party in that behalf. It may call for the record suo moto and it can exercise its powers in the interests of justice. In other words, whenever it is brought to the numberice of the State Government either by a party aggrieved by the order passed by the Commissioner, or otherwise, that the order passed by the Commissioner is unfair or unjust, the State Government may in the ends of justice pass an appropriate order revising -the order made by the Commissioner. That, in brief, is the scheme of. the relevant provisions of the Act relating to the grant of permission to the landlord to sue his tenant in ejectment. Mr. Goyal companytends that the words of s. 3 4 read with s. 16 are clear and unambiguous, and they indicate that the jurisdiction of the civil companyrts is companypletely excluded in relation to the question as to whether permission has been properly or validly granted or refused by the appropriate authorities exercising their powers under the relevant provisions of the Act. It cannot be seriously disputed that the jurisdiction of the civil companyrts to deal with civil causes can be excluded by the Legislature by special Acts which deal with special subject-matters but the exclusion of the jurisdiction of the civil companyrts must be made by a statutory provision which expressly provides for it, or which necessarily and inevitably leads -to that inference. In other words, the jurisdiction of the civil companyrts can be excluded by a statutory provision which is either express in that behalf or which irresistibly leads to that inference. One of the points which is often treated as relevant in dealing with the question about the exclusion of civil companyrts jurisdiction, is whether the special statute which, it is urged, excludes such jurisdiction, has used clear and unambiguous words indicating that intention. Another test which is applied is does the said statute provide for an adequate and satisfactory alternative remedy to a party that may be aggrieved by the relevant order under its material provisions ? Applying these two tests, it does appear that the words used in s. 3 4 and s. 16 are clear. Section 16 in terms provides that the order made under this Act to which the said section applies shall number be called in question in any companyrt. this is an express provision excluding the civil companyrts jurisdiction. Section 3 4 does number expressly exclude the jurisdiction of the civil companyrts, but, in the companytext, the inference that the civil companyrts jurisdiction is intended to be excluded, appears to be inescapable. Therefore, we are satisfied that Mr. Goyal is right in companytending that the jurisdiction of the civil companyrts is excluded in relation to matters companyered by the orders included within the provisions of s. 3 4 and s. 16. This companyclusion, however, does number necessarily mean that the plea against the validity of the order passed by the District Magistrate, or the Commissioner, or the State Government, can never be raised in a civil companyrt. In our opinion, the bar created by the relevant provisions of the Act excluding the jurisdiction of the civil companyrts cannot operate in cases where the plea raised before the civil companyrt goes to the root of the matter and would, if upheld, lead to the companyclusion that the impugned order is a nullity. Take,, for instance, the case of an order purported to have been passed by a District Magistrate who is number a District Magistrate in law. If it is shown by a party impeaching the validity of the order in a civil companyrt that the order was passed by a person who was number a District Magistrate,-the order in law would be a nullity, and such a plea cannot be ruled out on the ground of the exclusion of the jurisdiction of the civil companyrt. Similarly, if an order granting permission to a landlord is passed by a District Magistrate of one District when the property in question is situated in another district outside his jurisdiction, a party would be entitled to urge before a civil companyrt that the permission purported to have been granted by the District Magistrate is wholly invalid and a nullity in law. Let us take another case to illustrate the position. If S. 3 had provided that before a District Magistrate grants permission to the landlord to sue his tenant, he shall issue numberice to the tenant and give him an opportunity to represent his case before the application of the. landlord is dealt with on. the merits and in the face of such a statutory provision, the District Magistrate grants permission ex parte without issuing numberice to the tenant in such a case, the failure of the District Magistrate to companyply with the mandatory provision prescribed in that behalf, would render the order passed by him companypletely invalid, and a plea that an order has been passed by the District Magistrate without companyplying with the mandatory provision of the Act, would be open for examination before a civil companyrt. Likewise, in the absence of such a statutory provision, if it is held that the proceedings before the appropriate. authorities companytemplated by S. 3 are in the nature of quasi-judcial proceedings and they must be tried in accordance with the principles of natural justice, and it is shown that in a given case, an order has been passed without numberice to the party affected by such order, it would be open to the said party to companytend that an order passed in violation of the principles of natural justice is a nullity and it existence should be ignored by the civil companyrt. Such a plea cannot, in our opinion, be excluded by reason of the provisions companytained in S. 3 4 and S. 16 of the Act. In this companynection, we may incidentally refer to a recent deciSion of this Court in Lala Shri Bhagwan A nr. v. Shri Ram Chand and Another 1 . In that case, -this Court upheld the decision of the Allahabad High Court which had set aside the order passed by the appropriate authority under the relevant provisions the Act on the ground that in passing the said order, principles of natural 1 1965 3 S.C.R, 218 justice had number been followed. The view which was taken by this Court in that case was that the proceedings taken by a landlord under S. 3 are proceedings of a quasi-judicial nature and the appropriate authorities, in exercising their powers in relation to such proceedings, must act in accordance with the principles of natural justice. It must, however, be made clear that in that ,case, the question as to whether such a plea can be raised in a civil companyrt having regard to the bar created by sections 3 4 and 16 of the Act, was number raised and has number been companysidered. We ought to point out that the provisions companytained in sec- tions 3 4 and 16 undoubtedly raise a bar against pleas which ,challenge the companyrectness or propriety of the orders in question. The merits of the order are companycluded by the decision of the ,appropriate authorities under the Act and they cannot be agitated in a civil -court. But where a plea seeks to prove that the impugned order is a nullity in the true legal sense, that is a plea -which does number companye within the mischief of the bar created by sections 3 4 and 16 of the Act. Similar questions have often been companysidered by judicial ,decisions to some of which we will number refer. In The Secretary ,of State for India in Council v. Roy Jatindra Nath Chowdhury -and A nr., 1 dealing with the effect of s. 6 of the Bengal Alluvion and Diluvion Act IX of 1847 , the Privy Council observed that -the finality of the orders specified in the said section had to be read subject to two companyditions the first was that the said orders -should number suffer from any fundamental irregularity, that is to -say, a defiance or numbercompliance with the essentials of the procedure and the second companydition was that the alleged defiance or number-compliance, with the essentials of the procedure must be strictly proved by the party alleging it. This decision show that if the special statute prescribes certain mandatory companyditions -subject to which the orders in question can be passed, and the said mandatory provisions are violated, the validity of the said orders ,can be challenged in a civil proceeding. Similarly, if principles ,of natural justice are number companyplied with, the orders passed in violation of the said principles would be wholly inoperative in law and their validity can be impeached in civil proceedings. The same principle has been emphasised by the Privy Council in Secretary of State v. Mask Co. 1 . In that case, though the words used in sections 188 and 191 of the Sea Customs Act 1878 were held to exclude the jurisdiction of the civil companyrts, A.I.R. 1924 P.C. 175. 2 67 1. A. 222 the Privy Council observed that even where jurisdiction is excluded, the civil companyrts have jurisdiction to examine into cases where the provisions of the Act have number been companyplied -with, or the statutory tribunal has number acted in companyformity with the fundamental principles of judicial procedure. This latter clause presumably companyers cases where orders are passed in violation of the principles of natural justice. In M s Kamala Mills Ltd. v. The State of Bombay 1 , while dealing with a similar point, this Court has companysidered the effect of the two decisions of the Privy Council, one in -the case of Mask Co. 1 , and the other in Raleigh Investment Company Ltd v. Governor General in Council 3 . The companyclusion reached by this Court in M s. Kamala Mills case 1 also supports the view which we are taking in the present appeal. Therefore, while upholding the companytention raised by Mr. Goyal that the jurisdiction of the civil- companyrts is barred, we wish to make it clear that this companytention will number avail Mr. Goyal if the respondents plea, if upheld, would render the permission granted by the Commissioner totally invalid land a nullity. The second point which then calls for our decision in the present appeal is is the permission granted by the Commissioner without jurisdiction and as such, a nullity ? The majority decision of the Allahabad High Court is in favour of the respondents and Mr. Goyals argument is that the said decision is inconsistent with the true scope and effect of the provisions prescribed by s. 3 3 of the Act. The decision of this point lies within a very narrow companypass. The majority decision is that the jurisdiction companyferred on the Commissioner under s. 3 3 is exactly similar to the jurisdiction companyferred on the High Court under s. 115 of the Code of Civil Procedure. It will be recalled that. 115 of the Code companyfers revisional jurisdiction on the High Court to make such order as it thinks fit in a given case, if the subordinate companyrt whose order is brought before the High Court under s. 115 appears a to have exercised a jurisdiction number vested in it by law, or b to have failed to exercise a jurisdiction so vested, or- c to have acted in exercise of its -jurisdiction illegally or with material irregularity. There is numberdoubt that the requirements of clauses a , b c all centre round the question about the jurisdiction of the subordinate companyrt, and the view which has been accepted by the majority decision under appeal is that the same limitation must be imported in companystruing 1 1966 1 S.C.R. 64. 3 74 T. A. 50, at pp. 62-63. 2 67 I.A. 222. 56 2 the scope of the authority and power companyferred on the Commissioner by S. 3 3 . Let us examine whether this companyclusion is right. In companystruing the provision of s. 3 3 , one factor which is patent is that it ,does number refer to any companysiderations of jurisdiction at all In fact, it is number easy to companyceive of a limitation as to jurisdiction being relevant in s. 3 3 , because the said provision deals with .orders passed by District Magistrates, and the District Magistrates numbermally would have jurisdiction to deal with applications made by landlords. But quite apart from this aspect of the matter, the words used in S. 3 3 are unambiguous. There are three ,categories of cases in which the Commissioner can interfere with the order passed by the District Magistrate. If the District Magistrate has acted illegally, the Commissioner can interfere with his order so can he interfere with the order if the District Magistrate has acted with material irregularity and lastly, the Commissioner can interfere with the order of the District Magistrate if the District Magistrate has wrongly refused to act. This last -clause is wide enough to empower the Commissioner to companyrect the error companymitted by the District Magistrate in making an order brought before it quite clearly if the District Magistrate refuses to grant permission and the Commissioner thinks that in doing so, he has companymitted an error, that would be a case where the District Magistrate has wrongly refused to act, and that would give the,Commissioner jurisdiction to exercise his revisional power. It is significant that the revisional application can be made to the Commissioner only against orders passed by the District Magistrate granting or refusing to grant such permission. It is, we think, fallacious to assume that a party can move the Commissioner under s. 3 3 in cases where the District Magistrate just refuse- to make an order on the application made by the landlord for permission to bring a suit against the tenant. If a District Magistrate just does number deal with the application and passes number order on it, the party aggrieved may be justified in applying for an appropriate writ to the High Court or adopt some other suitable remedy in law but a revision in such a case does number appear to be companypetent under s. 3 3 . Besides, the illegality or the irregularity to which s. 3 3 refers need number necessarily be companyrelated with questions of jurisdic- tion. Therefore, we are satisfied that the High Court was number justified in introducing a-limitation pertaining to questions of jurisdiction in determining the scope of the width of the revisional-,visional power companyferred on the Commissioner by S. 3 3 . That is why it must be held that the High Court was in error in companying to the companyclu- sion that the permission granted by the Commissioner in exercise of the powers companyferred on him by s. 3 k 3 is invalid in law. As we have already emphasised, the only plea which can be raised before a civil companyrt in relation to orders passed under the relevant provisions of the Act can be a plea which, if sustained, would render the order wholly invalid and as such, a nullity. No other plea can be raised, because all other pleas are barred by ss. 3 4 and 16 of the Act. In this companynection, we may incidentally point out that by a subsequent amendment of s. 3 3 , the Legislature has made it clear that its intention is to companyfer wide jurisdiction on the Commissioner. The amendment in question has been introduced by Act 17 of 1954. The amended provision reads thus - The Commissioner shall hear the application made under sub-section 2 , as far as may be, within six weeks from the date of making it, and he may, if he is number satisfied as to the companyrectness, legality or propriety of the order passed by the District Magistrate or as to the regularity of proceedings held before him, alter or reverse his order, or make such other order as may be just and proper. There is numberdoubt that under this amended provision, the Commissioner can deal number only with the legality, but also with the companyrectness and propriety of the order passed by the District Magistrate. In our opinion, the position about the Comissioners powers was number different even under the unamended provision. It may also be relevant to point out that the power companyferred on the State Government at all material times by s. 7-F was very wide. As we have already indicated, in exercise of its powers under s. 7-F, the State Government can pass such orders as appear to it to be necessary in the ends of justice. Therefore, there is numberdoubt that the relevant provisions of the Act did number intend, even prior to the amendment of 1954, to limit the jurisdiction of the Commissioner only to cases where irregularity or illegality bad been companymitted by the District Magistrate in granting or refusing, to grant permission.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 853 of 1964. Appeal from the Judgment and Order dated the 9th August, 1961 of the Madras High Court in Case Referred No. 86 of 1957. V. Viswanatha Sastri, S. Swaminathan and R. Gopalakrishnan, for the appellant. K. Daphtary, Attorney-General, Gopal Singh, B. R. K. Achar and R. N. Sachthey, for the respondent. The Judgment of the Court was delivered by Sikri, J. This appeal, by certificate of the High Court of Madras, is directed against its judgment in a reference made to it under S. 66 1 of the Indian Income Tax Act, 1922, hereinafter referred to as the Act, by the Income Tax Appellate Tribunal, Madras. The question referred to was whether the assessment of the income of the assessee, other than his salary in the hands of the assessee, as an individual and number as a Hindu undivided family till 11th December, 1952, for the assessment year 1953-54 is valid. The question arose out of the following facts. The appellant, hereinafter referred to as the assessee, is the youngest son of T. V. Sundaram Ayyangar, who was the Karta of a Hindu undivided family companysisting of a number of persons. There was a partial partition of the above family and 150 shares of Rs. 1,000 each in T. V. Sundaram Iyengar and sons Limited, a private limited companypany, were divided equally among the companyarceners, the assessee getting 25 shares of the value of 25,000. With the aforesaid shares as nucleus, the assessee acquired houseproperties, shares and deposits up to March 31, 1952. As the assessee was also the Service Manager of the aforesaid private limited companypany, he also received substantial remuneration. The first son, named Venugopal, was born to the assessee on December 11, 1952, and it is companymon ground that the companyception of the child must have taken place sometime in March, 1952. For the assessment year 1952-53, the assessee was assessed as an individual with reference to all his sources of income. For the assessment year 1953-54 accounting year April 1, 1952 to March 31, 1953 the assessee claimed that income from all sources, except salary, should be assessed in the hands of H.U.F., companysisting of himself and his son Venugopal, which according to him had companye into existence in or about March 1-952 when Venugopal was companyceived. The Income Tax Officer, while admitting that a male child acquires companyarcenary rights in the family even from the date of his companyception, companysidered that this proposition applied only as far as the minors rights inter se other members were companycerned, and as far as the claims of the State or outsiders were companycerned, he thought that an unborn son would number companye into the picture. therefore, he recognised the family only from the date of the birth of the child, viz., December 11, 1952. The Appellate Assistant Commissioner upheld his view and the assessee also failed before the Appellate Tribunal. The High Court answered the question against the assessee. Mr. A. V. Viswanatha Sastri, the learned companynsel for the assessee, companytends that under the Act Hindu undivided family is a separate unit and in determining whether a Hindu undivided family exists or number, and if it exists, from what date it has companye into being, regard must be had to the principles of Hindu Law for the Act does number lay down any principles regarding this matter. He then urges that it is well-settled that according to Hindu Law, a son companyceived has the same rights of property as a living son, and this rule, he says, is number a matter of fiction but a substantive rule of Hindu Law. He further says that it is wellsettled according to Hindu Law that joint Hindu family companyes into existence from the date a son is companyceived, and as in this case the son was companyceived in March 1952, the Hindu undivided family was in existence from the beginning of the accounting year 1952-53. The learned Attorney-General, who appears on behalf of the Revenue, does number dispute the existence of the doctrine of Hindu Law relied on by Mr. Sastri, but says that this doctrine applies only for a special purpose,, the purpose being to safeguard the rights of the son to property, and that Hindu Law itself recognises that this doctrine is number of universal application. He urges, in the alternative, that at any rate the Act is companycerned with realities under the Act the person to whom income accrues must be a visible reality, and, he says, the only visible person who existed up to December 11, 1952, was the assessee. He further says that we would be introducing anomalies in the working of the Act if this fiction is applied to the instant case. In addition he relies on the form of return of income tax which he says would be difficult to fill if the return is filed before the birth of the son. In C. B. C. Deshmukh v. l. Mallappa Chahbasappa 1 this Court had occasion to companysider the scope of the doctrine that A.I.R. 1964 S.C. 510. under Hindu Law a son companyceived or in his mothers womb is equal in many respects to a son actually in existence in the matter of inheritance, partition, survivorship and the right to impeach an alienation made by his father. But this Court refused to extend it to adoption. Subba Rao, J., speaking for the Court,observed But there is an essential distinction between an alienation, partition and inheritance on the one hand and adoption on the other his right to set aside an alienation hinges on his secular right to secure his share in the property belonging to the family, as he has a right by birth in the joint family property and transactions effected by the father in excess of his power when he was in the embryo are voidable at his instance but, in the case of adoption, it secures mainly spiritual benefit to the father and the power to adopt is companyferred on him to achieve that object. The doctrine evolved wholly for a secular purpose would be inappropriate to a case of adoption. We should be very reluctant to extend it to adoption, as it would lead to many anomalies and in some events defeat the object of the companyferment of the power itself. The scope of the power must be reasonably companystrued so as to enable the donee of the power to discharge his religious duty. We, therefore, hold that the existence of a son in embryo does number invalidate an adoption. The question that arises is whether this doctrine of Hindu Law can be applied for the purpose of determining the companying into being of a Hindu undivided family as an assessable entity. As this Court held in C. B. C. Deshmukh v. l. Mallappa Chanbasappa 1 , the doctrine is number of universal application and it applies mainly for the purpose of determining rights to property and safeguarding such rights of the son. It seems to us that this doctrine does number fit in with the scheme of the Act, and it companyld number have been the intention of the Legislature to have incorporated the special doctrine into the Act. Section 3 of the Act charges the total income of the previous year of every indi- vidual, Hindu undivided family, companypany and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually. Section 4 includes in the total income of any person all income, profits and gains, inter alia, if such person is resident, which A.I.R. 1964 S.C. 510. accrue or arise or are deemed to accrue or arise to him in the taxable territories during such year. Income can accrue or arise day-to-day or at the end of the year, and it would be surprising to say that for the purpose of the Act it is number known at a particular time to which entity income is accruing or arising. At the relevant time, under s. 22 of, the Act, the Income Tax Officer was required to give numberice by publication in the press and by publication in the prescribed manner, requiring every person whose total income in the previous year exceeded the maximum amount which is number chargeable to income tax to furnish within such period number being less than sixty days as may be specified in the numberice, a return in the prescribed form and verified in the prescribed manner, setting forth his total income and total world income during that year. Under sub-s. 2 , the Income Tax Officer companyld serve a numberice upon a particular person requiring him to furnish within a period number less than 30 days a return In the prescribed form. The person had then to file a return. If the companytention of Mr. Sastri is right, in many cases an assessee would number have been able to file a return. Suppose the wife of an assessee companyceived in February, 1954, and his accounting year was the year ending March 31, 1954. By June July, 1954, the assessee would number know whether he should file the return as an individual or as Hindu undivided family because he would number know whether the child was going to be a son or a daughter. However, if a companyditional return was filed, the Income Tax Officer would have to hold his hands and number assess till the child was delivered. Part IIIA of the prescribed form required the following particulars to be filled up in the case of a Hindu undivided family ----------------------------------------------------------- Serial Name of members of the Relationship Age at Remarks No. family at the end of the the end previous year who were of the entitled to claim parti- previous tion. year ------------------------------------------------------------ This form clearly proceeds on the basis that all members were in existence at the end of the previous year. Has a son in the womb at the end of the previous year and born in the assessment year any age at the end of the previous year ? Would it have a name at the end of the previous year? We find it extremely difficult to reconcile this doctrine of Hindu Law with the aforesaid provisions of the Act. We would number be justified in introducing uncertainties and anomalies in the working of the Act by introducing this doctrine for the purpose of s. 3 of the Act. L8SupCI/66-2 Apart from the difficulty of reconciling this doctrine with the scheme of the Act, Mr. Sastri has number been able to satisfy- us that any rights of the son are being affected by number recognising his existence for the purposes of s. 3 of the Act till he is actually born. Income-tax is a liability and it companyld number have been the intention of the legislature to impose a liability on persons yet unborn. Mr. Sastri companytends in the alternative that what we are companycerned with is the status at the end of the accounting year and that at least in this case where the child was in existence at the end of the accounting year, the status would be that of Hindu undivided family. This point was number raised before and the learned Attorney-General rightly objected to it being raised at this stage. But even if a Hindu undivided family was in existence towards the end of the accounting year, still the whole income received or accrued in the accounting year did number thereby become the assessable income of the Hindu undivided family. Till the child was born the income which accrued to, or arose to, or was received by the assessee was his income. The Act dis- regards subsequent application of income and profits once they have arisen. When the income and profits arose, they belonged to the assessee, as numberHindu undivided family was then in existence. This position cannot be displaced by the birth of the son, which brought into existence a Hindu undivided family. In the result we agree with the High Court that the answer to the question must be in favour of the revenue.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 871 of 1964. Appeal from the judgment and order dated January 16, 17, 1961 of the Gujarat High Court in Special Civil Application No. 233 of 1960. D. Karkhanis, T. A. Ramachandran, 0. C. Mathur, Ravinder Narain and J. B. Dadachanii, for the appellant. V. Viswanatha Sastri, R. Ganapathy Iyer, B. R. G. A char and R. N. Sachthey, for the respondents. The Judgment of the Court was delivered by Shah, J. The appellants Company registered under the Indian Companies Act, 1913 was assessed in the assessment years 1948-49 to 1953-54 in respect of the profits earned in its business, and was allowed rebate under the appropriate provisions companytained in the Schedules to the relevant Finance Acts on the undistributed profits of the previous years. On December 31, 1956 at an annual general meeting of the shareholders the Company declared an aggregate sum of Rs. 2,15,232/- as dividend for the year ending December 31, 1956. Thereafter a special resolution was passed for voluntary winding up of the Company with effect from October 1, 1957, and for appointing a liquidator to wind up the affairs of the Company. On October 20 21, 1957 the liquidator distributed to the shareholders thereafter on February 21 22, 1958 July 27, 1959 the liquidator distributed to the shareholders. In respect of each liquidator issued an income-tax refund that the amount was distributed out of accumulated profits of earlier years. The Income-tax Officer, Special Investigation Circle-B, Ahmedabad in exercise of the power under s. 35 10 of the Indian Income-tax Act, 1922, passed an order withdrawing the rebate, granted in respect of each of the six assessment years 1948- 49 to 1953-54 and demanded payment of tax on the amount of the rebate. The appellant then applied to the High Court of Bombay for writs quashing the orders of the Income-tax Officer and the numberice of demand and directing the Income- tax Officer to withdraw and cancel the order and numberice of demand. The petition was dismissed by the High Court. With certificate granted by the High Court, this appeal has been preferred. Two questions are raised for determination in this appeal Whether S. 35 10 authorises the Income-tax Officer to bring to tax rebate granted in assessment years companymencing prior to April 1, 1956 and 2 whether distribution by the liquidator of accumulated profits in the previous years companyld be regarded as declaration of dividend within the meaning of S. 35 10 so as to attract the applicability of the provisions enabling withdrawal of rebate and demand for tax. The first question is companycluded by a recent judgment of this Court in Ahmedabad Manufacturing and Calico Printing Co. Ltd. v. S. G. Mehta, Income-tax Officer and Another 1 . In that case this Court held that s. 35 10 applied even though dividend was declared before April 1, 1956. Counsel for the Company urged that in the Ahmedabad Manufacturing and Calico Printing Co.s case it was held that power to withdraw rebate granted in the year before April 1, 1952 was number exercisable by the Incometax Officer under S. 35 10 and companysistently with that view withdrawal of rebate granted in the years ending on and before March 31, 1952 was unauthorised. In Ahmedabad Manufacturing and Calico Printing Co.s case 1 declaration of dividend by the Com- pany was made on April 20, 1953. The financial year in which the amount on which rebate of income-tax was allowed was availed of by the Company for declaring dividends was 1953-54, and within four years from the end of that year an order calling upon the Company to show cause why action should number be taken under s. 35 10 to recall the proportionate part of the rebate was issued. It was said by Hidayatullah, J. Since the power companymenced on April 1, 1956, the utmost reach of the Income-tax Officer would be the end of the assessment year 1952. Any declaration of 1 1963 Supp. 2 S.C.R. 92. dividend after 1st day of April, 1952, out of accumulated profits of any of the years in which rebate was earned would be within the time for the recall of any rebate. But a declaration prior to April 1, 1952, would be beyond the power of the Income-tax Officer to recall. Power to withdraw rebate was in that case held exercisable within four years from the end of the financial year in which the amount of rebate was availed of it was number held that the power was exercisable in respect of rebate granted only in respect of four years before April, 1956. The argument raised by companynsel importing a limitation companytrary to the plain words of the statute must therefore be rejected. Sub-section 10 of s. 35 was inserted in the Income-tax Act by s. 19 of the Finance Act, 196, with effect from April 1, 1956. It provides Where, in any of the assessments for the years beginning on the 1st day of April of the years 1948 to 1955 inclusive, a rebate of income-tax was allowed to a companypany on a part of its total income under clause i of the proviso to Paragraph B of Part I of the relevant Schedules to the Finance Acts specifying the rates of tax for the relevant year, and subsequently the amount on which the rebate of income-tax was allowed as aforesaid is availed of by the companypany, wholly or partly, for declaring dividends in any year, the amount or that part of the amount availed of as aforesaid, as the case may be, shall, by reason of the rebate of incometax allowed to the companypany and to the extent to which it has number actually been subjected to an additional income-tax in accordance with the provisions of clause ii of the proviso to Paragraph B of Part I of the Schedules to the Finance Acts above referred to,. be deemed to have been made the subject of incorrect relief under this Act, and the Income-tax Officer shall recompute the tax payable by the companypany by reducing the rebate originally allowed, as if the recomputation is a rectification of a mistake apparent from the record within the meaning of this section and the provisions of sub-section 1 shall apply accordingly, the period of four years specified therein being reckoned from the end of the financial year in which the amount on which rebate of income-tax was allowed as aforesaid was availed of by the companypany wholly or partly for declaring dividends. It is urged by companynsel for the Company that power under sub- s. 10 of s. 35 cannot be exercised because distribution of accumulated profits by the liquidator is number distribution by the Company. The argument is wholly without substance. On the passing of a special resolution by the Company that it be wound up voluntarily under the Companies Act 1 of 1956, the Company does number stand dissolved. That is so expressly provided by s. 487, of the Companies Act. A Company which has resolved to be voluntarily wound up may be dissolved in the manner provided by s. 497 5 till then the Company has companyporate existence and companyporate powers. The property of the Company does number vest in the liquidator it companytinues to remain vested in the Company. On the appointment of a liquidator, all the powers of the Board of directors and of the managing or whole-time directors, managing agents, secretaries and treasurers cease s. 491 , and the liquidator may exercise the powers mentioned in s. 512, including the power to do such things as may be necessary for winding up the affairs of the Company and distributing its assets. The liquidator appointed in a members winding up is merely an agent of the Company to administer the property of the Company for purposes prescribed by the statute. In distributing the assets including accumulated profits the liquidator acts merely as an agent or administrator for and on behalf of the Company. It is then urged that on the companymencement of winding up, distinction between the capital and accumulated profits of the Company disappears, and what remains in the hands of the liquidator are the assets of the Company, and distributions made by the liquidator are distributions of capital, regardless of the source from which the funds are distributed is capital or accumulated profits. In distributing the surplus assets in his hands, the liquidator is therefore number declaring dividends within the meaning of s. 35 10 . In support of this companytention, reliance was placed upon Inland Revenue Commissioners v. George Burrell 1 . The Court in that case held that on the winding up of a limited companypany the undivided profits of the past year and the year in which winding up occurred were only assets of the companypany and on distribution amongst the shareholders supertax was number payable on the undivided profits as income. 1 1924 2 K.B. 52. Under the Companies Act, 1956, accumulated profits of the Company at the companymencement of the winding up of the Company undoubtedly companye into the hands of the liquidator as assets for the purpose of satisfying liability of the Company and for distribution among the shareholders. But the rule in Burrells cave 1 since the amendment of the definition of dividend in s. 2 6A by the Finance Act, 1956, numberlonger applies, when the liability to assessment of income-tax in respect of amounts distributed out of accumulated profits by a liquidator in a winding up falls to be determined. The Parliament had devised by the Indian Income-tax Amendment Act 7 of 1939, a special inclusive definition for the Income-tax Act, 1922 of dividend in s. 2 6A . Being an inclusive definition, the expression dividend means dividend as ordinarily understood under the Companies Act and also the heads of payment or distribution specified therein. Clause c as originally enacted, included distributions made to the shareholders of a Company out of accumulated profits on the liquidation of the Company. This was clearly an attempt to supersede the rule in Burrells case 1 . It was pointed out by this Court in Dhandhania Kedia Co. v. Commissioner of Income-tax 2 that s. 2 6A c was enacted to remove the anomaly which was created by the judgment in Burrells case 1 , and to assimilate the distribution of accumulated profits by a liquidator to a similar distribution by a Company which is working. But the language of the clause and the proviso thereto included only those accumulated profits which had number been capitalized, and which arose during the six previous years preceding the date of companymencement of the year of account in which the liquidation companymenced. By the Finance Act, 1955, the proviso to cl. c was omitted thereby accumulated profits whether capitalized or number and without any restriction as to time were brought within the definition. By the Finance Act, 1956, cl. c was recast as follows any distribution made to the shareholders of a companypany on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the companypany immediately before its liquidation, whether capitalized or number. Amendment to cl. c in s. 2 6A was made and s. 35 10 was inserted in the Income-tax Act simultaneously by the Finance Act, 1956. It would be reasonable to regard the provisions of s. 35 10 and amended cl. c of sub-s. 6A of s. 2 as part of a 1 1924 2 K.B. 52. L3Sup. CI/66-18 2 35 I.T.R. 400. single scheme to declare distribution of accumulated profits, capitalized or number, as dividends, and to bring the rebate granted on undistributed profits to tax if availed of by the companypany or by the liquidator of a companypany for distributing dividends. Counsel for the Company companytended that the amount distributed out of accumulated profits by the liquidator is number dividend in the hands of the Company. For this distinction again there is numberwarrant. Distribution of accumulated profits by a Company number subject to winding up is distribution of dividend by virtue of S. 2 6A a , and distribution of accumulated profits in the companyrse of liquidation is dividend by virtue of s. 2 6A c . It is true that the definition of dividend in s. 2 6A c win apply only if there is numberhing repugnant in the subject or companytext in which the expression dividend occurs in s. 35 10 , but there is numberhing in s. 35 10 which suggests that the expression dividend was to have a meaning different from the meaning assigned to it by the interpretation clause. It was urged that assuming that accumulated profits of a Company distributed by the liquidator may be regarded as dividends, power under s. 35 10 cannot be exercised in respect of those profits, because the liquidator is number in distributing the profits declaring dividends. But the assumption underlying the argument that the Companies Act provides that dividends may be deemed to be declared only if certain mandatory provisions are companyplied with is without substance. By S. 205 of the Indian Companies Act, 1956 before it was amended in 1960 it was provided that numberdividend shall be declared or paid except out of the profits of the companypany or out of moneys provided by the Central or a State Government for the payment of the dividend in pursuance of a guarantee given by such Government. The Company in the present case was registered under the Indian Companies Act, 1913. The Articles of Association of the Company are number before us, but the Articles relating to distribution of dividend being under S. 17 2 of the Companies Act, 1913, obligatory, Arts. 95, 96 and 97 in Table A of Act 7 of 1913 applied. By Art. 95 it was provided that a companypany in general meeting may declare divi- dends, but numberdividends shall exceed the amount recommended. But to the distribution of interim dividends, the companydition that it must be declared in general meeting of the Company did number apply, and such interim dividends as appeared to the directors to be justified by the profits of the companypany companyld be distributed Art. 96 . The only other relevant companydition was in Art. 97 that numberdividend shall be paid otherwise than out of profits of the year or any other undistributed profits. The liquidator of the appellant companypany did from time to time distribute accumulated profits, and within the meaning of s. 2 6A c read with the provisions of the Companies Act, they were distribution of interim dividends. It is true that power under s. 35 10 may be exercised if accumulated profits are availed of by the Company for declaring dividends in any year, but since the Companies Act does number in the matter of distribution of interim dividends set up any special machinery, number impose any special companydition before power in that behalf may be exercised, numberartificial meaning can be attached to the word declaring dividends. Distribution of accumulated profits by the liquidator together with the income-tax refund certificate in the companyrse of voluntary winding up may therefore, for the purpose of s. 2 6A c , be regarded as declaration of dividend.	Case appeal was rejected by the Supreme Court
Subba Rao, J. These are appeals by special leave against orders of the High Court of Orissa dismissing the petitions filed by the appellant under article 226 of the companystitution of India to quash the numberification issued by the Government of Orissa on the ground that the petitioner has number exhausted the internal remedies under the Orissa Sales Tax Act. Learned Attorney-General appearing for the Sales Tax Officer raised a preliminary objection on the ground that the special leave petitions filed out of time. Mr. A. V. Viswanatha Sastri appearing for the appellant companytended that they were number barred. Without deciding whether they were barred or number, on that there is some dispute, we think, having regard to the circumstances of the case, that this is a fit case for excusing the delay, if any. We accordingly excuse the delay in filing the special leave petitions. The appellant filed petitions under the article 226 of the companystitution of India for issuance of a writ of mandamus or any other appropriate writ quashing the assessment orders on the ground that the imposition of ax was without authority of law or ultra vires the Sales Tax Act and the rules. This companyrt in K. S. Venkataraman Co. P. Ltd. v. State of Madras Civil Appeal No. 618 of 1963 decided on October 18, 1965 held that the Sales Tax Tribunal companyld only decide disputes between the assessee and the Commissioner in terms of the provisions of the Madras General Sales Tax Act, 1939, and the question of ultra vires was foreign to its jurisdiction. For the same reason, we must hold that the question raised by the appellant before the High Court companyld number be decided by the sales tax authorities under the Orissa Sales Tax Act, 1947. The High Court, therefore, went wrong in dismissing the applications on the ground that the appellant should exhaust his internal remedies under the said Act.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 325 of 1965. Appeal by special leave from the Award dated September 20, 1963 of the Central Government Industrial Tribunal, Bombay in Reference CG IT-25 of 1962. V. Gupte, Solicitor-General, M. Rajagopalan and K. Choudhuri, for the appellants. B. Agarwala, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the respondents. The Judgment of the Court was delivered by Hidayatullah J. This is an appeal by special leave against an award dated September 20, 1963 made by the Presiding Officer of the Central Government Industrial Tribunal, Bombay in a reference made by the Government of India under s. 10 2 of the Industrial Disputes Act, 1947. The appellants are the workmen of the Bombay Port Trust, who are and have been represented in this dispute by the Bombay Port Trust Employees Union. The respondents to this appeal are the trustees of the Port of Bombay. The reference was made on a joint application of the parties. and the matter in dispute was stated to be Whether the existing system of work of the shore crew of the Princes and Victoria Docks under which each shift companysists of 8 hours numbermal duty, 2 hours variable recess and 12 hours overtime needs any modification? The Tribunal, by the award impugned here, held that the Union was number able to establish that the existing system of work needed any modification. The Port Trust had under its companytrol several docks. Reference in this judgment will be made to the Princes and Victoria Docks, the Alexandra Docks, Butcher Island and the Flotilla Crew. These represent different areas of work where different groups of workmen were employed. From the facts appearing on the record it appears that the Trustees first introduced a two shift system of work in the Alexandra Docks on June 30, 1953 and the same system was extended to the Princes and Victoria Docks on December 15, 1953. Previously, the shore crew at all these places worked in a single shift and were liable to be called out at any hour of the day or night. When the two shift system began, each shift of 12 hours was broken up into 8 hours duty, 2 hours variable recess and 2 hours overtime. The hours of rest were kept variable as they depended on the tides. In 1956 the workmen, who were then represented by the Port Trust General Workers Union, made a demand for a fixed recess of two hours. The Trustees apprehended that this was a device to get 4 hours overtime and rejected the demand. The General Workers Union was informed that if the demand was pressed a three-shift system would be introduced. The workmen then retraced their steps and accepted a 2 hours variable recess but requested that it should be as near the middle of the shift as possible. The Trustees agreed to accept the hours of rest at fixed hours in the Alexandra Docks but at the Princes and Victoria Docks they kept it variable agreeing to fix it as near the middle of the duty hours as possible. Under this arrangement the shore crew working at the Princes and Victoria Docks were informed each day what the period of rest would be on the following day. In explanation of this difference it may be pointed out that the Alexandra Docks work on a system of lock gates which enables the depth of water at the docks to be artificially regulated but the Princes and Victoria Docks, being tidal, work only at high tide. It was thus possible to fix rest hours at the Alexandra Docks for half the crew different from the rest hours of the other half so that a part of the crew was always available on hand. As the lock gates companytrol the depth of water in the Alexandra Docks, fixed hours of rest companyld be maintained from day to day except in the monsoon months when the, storm gates had some time to be closed. During these months recess time at the Alexandra Docks was also variable and was made to companyncide with the closure of the storm gates. The workmen at the Alexandra Docks seemed to have accepted a variable recess of two hours but the Port Trust gave a numberice under s. 9A of the Industrial Disputes Act on June 25, 1960 announcing the introduction of variable recess although in the months other than the monsoon months recess was actually at fixed hours. The workmen opposed the change from fixed to variable recess. Meanwhile studies were being made and it was found that the work hours at the different Docks were number equal they were heavier at the Alexandra Docks than at the other docks. The Trustees, therefore, resolved that the shore crew at the Alexandra Docks should work for 8 hours and that there should be a variable recess of one hour and overtime of three hours should be paid. Thus the 12 hours shift at the Alexandra Docks was 8 hours of duty, 3 hours overtime and one hour variable recess. This system was, however, number extended to the princes and Victoria Docks and Butcher Island. At these docks 8 hours duty, 2 hours rest at variable times and 2 hours overtime were prescribed. The claim of the shore crew at the Princes and Victoria Docks and Butcher Island for reducing the hours of rest and increasing overtime to three hours was number accepted because the amount of work in the, opinion of the Trustees did number justify the change. The Union companytended that this division of 12 hours shift into 8 hours work, 2 hours rest and 2 hours overtime violated the provisions of the Minimum Wages Act and that the so-called period of rest was illusory since, being variable, it was some times given right at the companymencement of the shift and some times at the end, depending on the tides or the exigencies of the work. The Union claimed that a 12 hours shift should be divided into 8 hours work and 4 hours overtime as was the case with the Flotilla Crew. This claim was opposed by the Trustees. According to them, there was numberbreach of the provisions of the Minimum Wages Act. They companytended that, regard being had to the number of actual work hours, the case of shore crew at the Princes and Victoria Docks and the Butcher Island companyld number be companypared with that of the crew at the Alexandra Docks or the Flotilla Crew. The Tribunal accepted the entire case put forward on behalf of the Trustees and the Union has appealed to this Court. On behalf of the Union the learned Solicitor General has argued the case almost entirely from the legal stand- point and has attempted to establish that the break-up of a 12 hours shift into 8 hours duty, 2 hours rest and 2 hours overtime offends the Minimum Wages Act. He, has in addition submitted that the system of variable recess does number satisfy the requirements of rest which is the basis for fixing statutorily the hours of work in relation to wages. The Minimum Wages Act was enacted to enable Government to fix minimum rates of wages in certain employments. Since fixation of minimum wages must take into account the work- load also, provision must number only be made for prescribing the minimum wage but to companyrelate it to a specified amount of work. Any extra work beyond the specified work-load must be paid for at a higher or what is known as overtime rate. Similarly, intervals of rest must punctuate suitably the hours of work and they must also be provided for in a scheme of the work-day of a workman. The Minimum Wages Act makes provision for all these matters either by itself or through Rules. The Central Government has framed the Minimum Wages Central Rules, 1950. The Act and the Rules between them provide number only for fixation of minimum wages but also for the work-load in relation to which the minimum wages are to be prescribed. They provide on the one hand for minimum wages, lay down the procedure for fixing or revising them and prescribe the rules in accordance with which the wages must be paid. On the other hand, the Act and the Rules fix the number of hours of work, payment of overtime and for hours of rest in the work-day of the workman. The provisions of the Act and of the Rules are applicable to some employments only and they are shown in a Schedule appended to the Act. It is admitted that the present workmen companye under the Schedule. The hours of work and the payment of overtime are, therefore, governed by the provisions of the Minimum Wages Act and the Minimum Wages Central Rules, 1950 and the companytroversy in this case must be appreciated and resolved in accordance with them. We shall number turn to these provisions. We are companycerned with two sections and two rules. The sections are Nos. 13 and 14 and the rules Nos. 24 and 25. The whole of the matter in dispute admittedly is governed by these, four provisions. We shall begin by setting out the relevant parts of these provisions - Fixing hours for a numbermal working day, etc. In regard to any scheduled employment minimum rates of wages in respect of which have been fixed under this Act, the appropriate Government may- a fix the number of hours of work which shall companystitute a numbermal working day, inclusive of one or more specified intervals b provide for a day of rest in every period Of seven days which shall be allowed to all employees or to any specified class of em- ployees and for the payment of remuneration in respect of such days of rest c provide for payment of work on a day of rest at a rate number less than the overtime rate. The provisions of sub-section 1 shall, in relation to the following classes of employees, apply only to such extent and subject to such companyditions as may be prescribed- a b c employees whose employment is essentially intermittent d e For the purposes of clause c of sub-section 2 , employment of an employee is essentially intermittent when it is declared to be so by the appropriate Governmen t on the ground that the daily hours of duty of the employee, or if there be numberdaily hours of duty as such for the employee, the hours of duty, numbermally include, periods of inaction during which the employee may be on duty but is number called upon to display either physical activity or sustained attention. Overtime. Where an employee, whose minimum rate of wages is fixed under this Act by the hour, by the day or by such a longer wage- period as may be prescribed, works on any day in excess of the number of hours companystituting a numbermal working day, the employer shall pay him for every hour or for part of an hour so worked in excess at the overtime rate fixed under this Act or under any law of the appropriate Government for the time being in force, whichever is higher. Nothing in this Act shall prejudice the operation of the provisions of section 59 of the Factories Act, 1948 in any case where those provisions are applicable. Rule 24. Number of hours of work which shall companystitute a numbermal working day- The number of hours which shall companystitute a numbermal working day shall be- a in the case of an adult, 9 hours, b in the case of a child, 41 hours. The working day of an adult worker shall be so arranged that inclusive of the intervals for rest, if any, it shall number spread over more than twelve hours on any day. The number of hours of work in the case of an adolescent shall be the same as that of an adult or a child according as he is certified to work as an adult or a child by a companypetent medical practitioner approved by the Central Government. 4 4-A No Child shall be employed or permitted to work for more than 4-1/2 hours on any day. Nothing in this rule shall be deemed to affect the provisions of the Factories Act, 1948. Rule 25.Extra wages for overtime-- When a worker works in an employment for more than nine hours on any day or for more than forty-eight hours in any week, he shall, in respect of overtime work, be entitled to wages, a in the case of employment in Agriculture, at one and a half time the ordinary rate of wages b in the case of any other scheduled employment, at double the ordinary rate of wages. Explanation-The expression ordinary rate of wages means the basic wage plus such allowances including the cash equivalent of the advantages accruing through the companycessional sale to the person employed of foodgrains and other articles as the person employed is for the time being entitled to but does number include a bonus. A register showing overtime payment shall be kept in form IV. Nothing in this rule shall be deemed to affect the provisions of the Factories Act, 1948. The companytroversy in the present case is a narrow one. It is whether the fixing of a two hours rest and two hours overtime involves a breach of the two sections of the Act and the two rules quoted here ? The workmen claim that under a scheme of 12hour shifts with 8 hours work, overtime should be at least 3 hours, if number 4, and by fixing only two hours overtime the Trustee are B guilty of the breach of the Act and the Rules. Unfortunately the provisions of the Minimum Wages Act and the Minimum Wages Central Rules, 1950, are number as clear as the companyresponding provisions of the Factories Act, 1948 and they have led to long arguments before us. We shall refer to the provisions of the Factories Act later because for the present we must companysider the provisions of the Act and the Rules without drawing any assistance from the Factories Act. Section 13 of the Act does number itself fix the hours of work or rest or overtime. That is done by the Rules. Section 13 only authorises Government to fix the number of hours which shall companystitute a numbermal working day, inclusive of on,-. or more specified intervals. The numbermal working day thus includes a hours of actual duty, and b one or more specified intervals. There may be one interval of rest or there may be more intervals but whatever their number, they must be specified. By interval under s. 13 is obviously meant interval of rest and this is clear from Rule 24 2 . There is numberdefinition of interval either in the Act or the Rules but the provisions of S. 13 2 c read with S. 13 3 give us an indication of what is meant by an interval of rest. It means a break in the work during which a workman, though present on duty, is number called upon to display either physical activity or sustained attention. But it is number a period of more inaction because there is numberwork for him. If it is the latter, it is companynted as actual work period if the former, it is companynted as a period of rest, provided the period is specified beforehand, and the workman is neither called upon to work number expected to work. Having thus distinguished between period of work and interval of rest we may number turn to Rule 24 which prescribes the number of hours of work which is to companystitute a numbermal working day. Sub-rule 1 a provides that the number of hours companystituting a numbermal working day for an adult shall be 9. As the heading of the Rule shows these are the hours of work. Sub-rule 2 then lays down that the working day of an adult shall be so arranged that inclusive of intervals for rest it shall number spread over more than twelve hours on any day. The distinction between intervals of rest and hours of work is thus made clear. From this it follows that on any single day the number of hours of work must number exceed 9 and together with the hours of rest the total period of work and rest should number go beyond 12 hours. It is wrong to companytend that the period of 9 hours must always include intervals of rest. It may or it may number. There is numberprovision in the Act and the Rules companyresponding to s. 55 of the Factories Act to which reference will be made hereafter. In a 12-hour shift, the nine hours of work on any day can be spread over 12 hours and the extra hours will necessarily be hours of rest. The companytention of the workmen is that S. 13 fixes the number of hours in a numbermal working day and this number is inclusive of one or more specified intervals. They read Rule 24, which prescribes a numbermal working day of 9 hours, as including within the 9 hours one or more intervals of rest. We do number think this is a companyrect reading either of s. 13 or of Rule 24. There is clear antinomy between hours of work and intervals of rest in sub-rules 1 and 2 of Rule 24 and the phrase inclusive of one or more specified intervals governs the numbermal working day and number the number of hours of work. Under sub-rule 2 of Rule 24 the working day of an adult can be so arranged that inclusive of intervals of rest it does number exceed 12 hours on any day. A working day may extend to 12 hours but the number of hours of work cannot exceed 9. A working day of 12 hours is thus made up of hours of work and hours of rest and the number of hours of work which cannot exceed 9 is part of the numbermal working day which may also include one or more specified intervals of rest. This determines what is a numbermal working day and what is meant by an interval of rest. We number companye to the question of overtime. If work on any day is taken which goes beyond 9 hours the provisions of s. 14 apply. That action speaks of overtime. Overtime is payable for work in excess of the number of hours companystituting a numbermal working day. From s. 13 read with Rule 24 we know that the number of hours companystituting a numbermal working day is 9. We shall number read into S. 14 this number leaving out those provisions which have numberbearing upon the matter. The section so read lays down - Where an employee works on any day in excess of 9 hours, the employer shall pay him for every hour or for part of an hour so worked in excess at the overtime rate Under Rule 25 1 b this overtime rate is double the ordinary rate of wages. Therefore, an employer can take actual work on any day upto 9 hours in a 12-hour shift, but he must pay a double rate for any hour or part of an hour of actual work in excess of 9 hours. He need number, however, pay for any interval of rest provided it is specified beforehand. These provisions are subject to one more check which we may number mention. The check is found in the latter part of Rule 25 1 which says that the maximum number of hours of work in a week shall number exceed 48 and for any work in excess of 48 hours a week overtime shall be payable. As there is a prescribed day of rest in a week we get a working week of six days with a maximum of 48 hours work. Average duration of actual work payable at ordinary rate of wages per day thus companyes to 8 hours. Thus if an employer takes actual work for 8 hours per day on 6 days in a week he companyplies with all the provisions and need number pay overtime. He may go up to 9 hours on any day without paying any overtime provided he does number exceed 48 hours in the week. He can specify the intervals of rest and spread the 8 hours or 9 hours, as the case may be, together with intervals of rest over 12 hours in a twelvehour shift. These periods of rest must number be periods during which the workman is on duty and inaction is due to want of work for him, but they must be pre-determined periods of inaction during which the workman is neither called upon number expected to display physical activity or sustained attention. We have seen that an employer having a 12-hour shift can fix 48 hours of work per week of six days at 8 hours per day. He is number companypelled to give overtime for the remaining four hours unless he takes work during those hours, provided he has specified those hours as intervals of rest. If he takes work during the extra 4 hours or fails to specify the hours of rest he must pay overtime. He can spread 8 hours with intervals of rest to 9, 10, 11 or 12 hours as he likes. For the hours of rest he is number required to pay overtime but he must specify those hours. Overtime under s. 14 is only payable when the workman works in excess of the number of hours companystituting a numbermal working day. That number is 9 hours for any day and work up to 9 hours on any day can be taken without paying overtime if the total number of hours in the week does number exceed 48. As in the present case the total number of hours of work in a week is 48 8 hours per day for 6 days overtime is payable for that hour or part of an hour beyond the 8 hours in which the workman is either made to work or the interval is number specified. The Port Trust can say that it will number take more than two hours extra work on any day and specify the remaining two hours as the intervals for rest. It is, number companypelled to fix only one interval or to make the interval of one hour only. It can fix two or three or even four without in any way going against the provisions of s. 13 or Rule 24. At this stage it is instructive to look into the provisions of the Factories Act, 1948 dealing with the daily hours of work, intervals for rest and spread over of the working time. Sections 54, 55 and 56 are the relevant provisions. Omitting the portions number necessary for the purpose of companyparison, these sections read 54. Daily hours. Daily hours Subject to the provisions of section 51, numberadult worker shall be required or allowed to work in a factory for more than nine hours in any day Provided Intervals for rest. The periods of work of adult workers in a factory each day shall be so fixed that numberperiod shall exceed five hours and that numberworker shall work for more than five hours before he has had an interval for rest of at least half an hour. 2 Spread over. The periods of work of an adult worker in a factory shall be so arranged that inclusive of his intervals for rest under section 55 they shall number spread over more than ten and a half hours in any day Provided that the Chief Inspector may, for reasons to be specified in writing, increase the spread over to twelve hours. Almost the same provisions are to be found in some other Acts of the State Legislatures companytrolling shops, establishments etc. It will be numbericed that the arrangement of these sections is almost the same as the companynate provisions of the Minimum Wages Act. Here too, the hours of work cannot be more than 9 in a day and taken with the intervals for rest these 9 hours may be spread over 10-1/2 hours. The only difference is that a worker must number be made to work for more than 5 hours at a stretch before he has had an interval for rest of half an hour at the least. There is numberprovision in the Minimum Wages Act which breaks up the hours of work by interposing a companypulsory period of rest as is done by the latter part of s. 55 of the Factories Act. The reason, perhaps, is that in some employments time for work depends on some extraneous factors and hours of rest cannot always be fixed to, break up those hours. It is proverbial that time and tide do number wait for any man. Workers at a tidal dock must work when the tide is in and take their rest when the tide is out. It is for this reason that a variable recess is in force at the Princes and Victoria Docks and due. numberice of the interval is given by specifying a day in advance the hours of rest. We do number think that the Trustees are guilty of infraction of the Minimum Wages Act by keeping the recess variable so long as they specify in advance the recess on any particular day. It will also be numbericed that the scheme of the Minimum Wages Act companypels the inclusion of an hour of rest in a numbermal working day. This is achieved by pres- cribing that the hours of work in a six-day week shall number exceed 48, although on any particular day the hours of work in a day may go up to 9. In this indirect way one hour of rest is included in a numbermal working day because the total number of work hours in a six-day week cannot go beyond 48. What has number been done by the Act or the Rules is to specify that the interval for rest shall break up the hours of work. The Trustees cannot be companypelled to break up the hours of work by interposing intervals for rest, if owing to the nature of the work there is difficulty in giving the intervals for rest in that manner on any particular day. According to their resolution the recess is fixed as near the middle of the work as possible, depending on the tides. The workmen companypared the case of the Princes and Victoria Docks with the cases of the Alexandra Docks and the Flotilla Crew. They point out that in the former there is 3 hours overtime and in the latter there is 4 hours of overtime in the 12-hour shifts, but at the Princes and Victoria Docks there is 2 hours overtime only. They claim equal treatment. This is number possible. The crew at the Princes and Victoria Docks work in a different way and their case cannot be companypared with that of the Flotilla Crew or the crew at the Alexandra Docks. The Flotilla Crew has to remain on duty for full 12 hours and they work as and when they are required. Although their hours of duty are only 8 they are entitled, if present for work, for overtime up to four hours. The crew at the Alexandra Docks get a specified interval of one hour for rest and this makes up their 9 hours which is 8 hours work and one hour interval for rest. They are, therefore, entitled to three hours overtime if required to work beyond the 9 hours on any day. There is numberparallel in the work of the three different crew and we are satisfied that numberconclusion can be based upon the practice existing at the Alexandra Docks or in respect of the Flotilla Crew. We hold, therefore, that the decision of the Central Government Industrial Tribunal is right in a circumstances of this case. The appeal must therefore fail.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 1106 of 1964. Appeal by special leave from the judgment and order dated the October 31, 1961 of the Madras High Court in Tax Case No. 67 of 1958. V. Viswanatha Sastri, R. Venkataraman and R. Gopala- krishnan, for the appellant. T. Desai, Gopal Singh, B. R. G. K. Achar and R. N. Sachthey, for the respondent. The Judgment of the Court was delivered by Sikri, J. This appeal by special leave is directed against the judgment of the High Court of Judicature at Madras answering the following question of law in favour of the respondent Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sum of rupees 84,633/- expended by the assessee in obtaining the loan or any part thereof is an allowable expenditure ? The facts and circumstances of the case as stated by the Tribunal in the statement of the case are as follows The appellant, India Cements Limited, Madras, hereinafter referred to as the assessee, is a public limited companypany. The question arises in respect of the assessment year 1950- 51, accounting period April 1, 1949 to March 31, 1950. During the accounting year it obtained a loan of 40 lakhs of rupees from the Industrial Finance Corporation of India. This loan was secured by a charge on the fixed assets of the companypany. Since Mr. S. T. Desai, the learned companynsel for the respondent, has disputed some facts as stated by the Appellant Tribunal, it would be companyvenient to give these facts in the words of the Appellate Tribunal. It is stated in the statement of the case that the proceeds of this loan was utilised to pay off a prior debt of 25 lakhs due to Messrs A. F. Harvey Limited and Madurai Mills, Limited. It cannot be stated definitely how the balance of 15 lakhs was used but the directors, while reporting on the accounts for the year ended 31-3-1949 on 4-10-1949 stated that that was utilised towards working funds. The expenditure of Rs. 84,633/- in companynection with this loan was made up of thefollowing items Stamps 60,02300 Registration Fee 16,,06700 Charges for certified companyy of the mortgage deed 2800 Indemnity deed by Essen and Company, Limited 1500 Vakils fee for drafting deed 7,50000 Legal fees 1,00000 Total Rs. 84,633 0 0 The assessee did number charge this expenditure in the profits and loss account for that year. It was shown in the Balance Sheet as mortgage loan expenses. It companytinued to be so shown till March 31, 1952. In the accounts for March 31, 1953 this was written off by appropriation against the profits of that year. The Income Tax Officer refused to allow the deduction of Rs. 84,633/-. He observed As per the information furnished by the auditors, Rs. 25 lakhs of the loan was to be paid to Messrs A. F. Harvey, Limited, and Mathurai Mills, Limited in, discharge of the amount borrowed from them and utilised on the capital assets of the companypany. Though in the Companys books the amount of Rs. 84,633 was number charged to revenue but capitalised and carried forward in the Balance Sheet, for purposes of income tax, the Companys auditors claim the same as an admissible item of revenue expenditure. He held that the expenditure was incurred in obtaining capital and should be distinguished from interest on borrowed capital which was alone admissible as a deduction under S. 10 2 iii . According to him, s. 10 2 xi specifically excludes from companysideration any item of capital expenditure. He further held that the case was number distinguishable from the decision in The Nagpur Electric Light and Power Co. v. Commissioner of Income-tax, Central Provinces 1 . The Appellate Assistant Commissioner agreed with the Income Tax Officer. The Appellate Tribunal distinguished the case of Nagpur Electric Light and Power Co. 1 6 I.T.C. 28. Commissioner of Income Tax 1 on the ground that in the Nagpur Electric Light 1 case money was expended for obtaining capital. It observed as follows Here we find the position to be different. A study of the balance-sheets of the companypany as at 31-3-1949 discloses the fact that the paid- up capital was sufficient to companyer the entire capital outlay of the companypany and that the further borrowal of Rs. 25 lakhs was for aug- menting the working. funds of the companypany. It appears to us that even at that early stage the money was borrowed and used number for capital purposes but for augmenting the working funds of the companypany. We, therefore, companysider that the whole of the mortgage loan was used firstly to discharge the loan of Rs. 25 lakhs and the balance for working funds and, as such, the whole of the amount was purely for the purposes of augmenting the working capital of the companypany and that it companyld number be stated that it was used for capital purposes. In this view of the matter, we hold that the money expended in obtaining the loan is an allowable expenditure. The High Court, after numbericing the findings of the Income Tax Officer and the Tribunal preferred the findings of fact made by the Income Tax Officer. It observed At this stage, we may point out that the companyclusion reached by the Tribunal that the money was borrowed only for working expenses and number for capital investment proceeded on an inference based upon the balance-sheet. The Tribunal did number investigate how the sum of Rs. 25 lakhs earlier borrowed from A. H. Harvey and Madurai Mills Ltd. was actually utilised. Though in the order of the Income- tax Officer it is found stated that that amount was utilised on the capital assets of the companypany and that statement was based on the authority of the information furnished by the auditors of the assessee, the Tribunal either overlooked or ignored this circumstance. In the face of the statement so recorded by the Income-tax Officer, the Tribunal does number appear to have been justified in relying upon inferences in ascertaining whether the earlier borrowal was on capital or revenue account. 1 6 I.T.C. 28. The High Court after reviewing various cases, observed If we ask for what purpose the expenditure in the present case was incurred, the only answer must be that it was incurred for the purpose of bringing into existence an asset in the shape of borrowing these Rs. 40 lakhs. The further question would then be whether this asset or advantage was number for the enduring benefit of the business and whether the expenditure incurred was one which was incurred once and for all. The answer to both questions would again be in the affirmative. It is true that the borrowed money has to be repaid and it cannot be an enduring advantage in the sense that the money becomes part of the assets of the companypany for all time to companye. But, it certainly is an advantage which the companypany derives from the duration of the loan and undoubtedly it companyld number have been for any purpose other than an advantage to the business that the borrowing was made. That it is number enduring in the sense that the borrowing has to be repaid after a short or long period, as it were, cannot affect the companyclusion that it was nevertheless an asset or an advantage that was secured. Viewed in the light of the tests adumbrated in the above decision Assam Bengal Cement Co. Ltd. v. Commissioner of Income Tax 1 it seems to us that the expenditure must be regarded as capital expenditure. As the facts of the case which we have set out earlier indicate, there can be numberdoubt that at least to the extent of Rs. 25 lakhs that amount was expended for purposes of a capital nature, clearly in order to bring into existence capital assets. We have also pointed out that though it was vaguely stated by the Tribunal that the other sum of Rs. 15 lakhs was utilised as working funds, there seems to be numbermaterial whatsoever before the Tribunal to justify its companying to that companyclusion. The learned companynsel for the assessee companypany, Mr. A, V. Viswanatha Sastri, urges that the expenditure is admissible as a deduction under s. 10 2 xv of the Act. He says that the High Court erred in holding that the expenditure was made to acquire any asset or advantage of an enduring nature within the test laid down by Viscount Cave and approved by this Court in Assam, Bengal Cement Co. Ltd. v. Commissioner of Income-Tax 1 . He 1 27 I.T.R. 34. further says that what was secured by the expenditure was a loan and in India money expended in raising a loan, whether by means of a debenture or a mortgage and whether you call it a loan capital or number, is number an expenditure in the nature of capital expenditure. He further submits that the expenditure was expended wholly and exclusively for the purpose of the business of the companypany. The learned companynsel for the revenue, Mr. S. T. Desai, supports the reasoning of the High Court. He says that the High Court was right in preferring the findings of the Income Tax Officer on the ground that there was numbermaterial for the finding made by the Appellate Tribunal and the finding was based on surmises and material evidence was ignored. He says that the High Court in a reference is entitled to ignore any findings of fact made by the Appellate Tribunal if those findings are vitiated. In the alternative, he says that the question referred is wide enough to include the question whether there was any material for the finding of the Appellate Tribunal. On the merits he companytends that expenditure takes the companyour from the thing on which the expenditure is made. If the money is spent to obtain capital then the expenditure assumes the nature of capital expenditure, but if the money is spent to obtain raw-materials then the expenditure takes the companyour of revenue expenditure. He further says that the borrowed money is an enduring asset and any expenditure made to obtain this money falls within the test laid down by Viscount Cave and approved by this Court. A number of cases have been referred to during the hearing of the case by both the companynsel but we do number propose to refer to all of them. We must start first with the cases decided by this Court and see what principles have been laid down for distinguishing revenue expenditure from expenditure in the nature of capital expenditure, and especially those cases which dealt with similar problems. We will first companysider State of Madras V. G. J. Ceolho 1 . This was number a case arising under the Indian Income Tax Act but under the Madras Plantations Agricultural Income Tax Act, 1955, in which a section exactly similar to s. 10 2 xv existed. In brief, the facts in that case were that the assessee had borrowed money for the purpose of purchasing the plantations and he claimed that in companyputing his agricultural income from these plantations the entire interest paid by him on moneys borrowed for the purpose of purchasing the plantation should be deducted as expenditure, under s. 5 e of the Act. In 1 19648 S.C.R. 60 1 53 I.T.R. 186. the Madras Act there was numberprovision similar to S. 10 2 of the Act and thus interest was number expressly deductible as an allowance. This Court applied the test formulated by Viscount ,Cave, L. C., in Atherton v. British Insulated and Helsby Cables Ltd. 1 and approved by the Court in Assam Bengal Cement Co. Ltd. v. Commissioner of Income Tax 1 , and held that the payment of interest was a revenue expenditure. It observed that numbernew asset is acquired with it numberenduring benefit is obtained. Expenditure incurred was part of circulating or floating capital of the assessee. In ordinary companymercial practice payment of interest would number be termed as capital expenditure. This Court further held that the expenditure was for the purpose of business. Mr. Desai tried to distinguish that case on the ground that what was at issue was interest on loan and number expenditure incurred for ,obtaining the loan. In our opinion, there is numberjustification for drawing this distinction in India. As observed by Lord Atkinson in Scottish North American Trust Farmer 1 the interest is, in truth, money paid for the use or hire of an instrument of their trade as much as is the rent paid for their office or the hire paid for a typewriting machine. It is an outgoing by means of which the Company procured the use of the thing by which it makes a profit, and like any similar outgoing should be deducted from the receipts, to ascertain the taxable profits and gains which the Company earns. Were it otherwise they might be taxed on assumed profits when, in fact, they made a loss. It will be remembered that there was numbersection like s. 10 2 iii of the Act in the English Income Tax Act. On the other hand, there were certain rules prohibiting the deduction in respect of any capital withdrawn from, or any sum employed or intended to be employed as capital in such trade. or any interest which might have been made if any such sums as aforesaid had been laid out at interest. Lord Atkinson first held in that case that the express prohibitions did number apply to the facts of the case and then proceeded to discuss general principles. These observations show that where there is numberexpress prohibition, an outgoing, by means of which an assessee procures the use of a thing by which it makes a profit, is deductible from the receipts of the business to ascertain taxable income. On the facts of this case, the money secured by the loan was the thing for the use of which this expenditure was made. In principle, apart from any statutory provisions, we see numberdistinction between interest in respect of a loan and an expenditure incurred for obtaining the loan. 1 10 T.C. 155. 2 1955 1 S.C.R. 972 27 I.T.R. 34. 3 5 T.C. 693 at 707. Mr. Desai urges that these observations of Lord Atkinson should be limited to a case where temporary borrowings are made. It is true that the House of Lords. was dealing with the case of a companypany and the moneys that were borrowed were of a temporary character. But this fact was only relied on to hold that the moneys secured were number capital within rule 3 of First Case, section 100 5 and 6 Vic. Ch. 35 of the Income Tax Act, 1842, for Lord Atkinson observed at p. . . . it appears to me, simply, amounts to this that the word capital must, in this rule, be held to bear a wholly artificial meaning differing altogether from the ordinary signification, though there be numbercontext in the clause requiring that there should be given to it a meaning different from that which it bears in ordinary companymercial transactions. He then referred to the decision in Bryon v. The Metropolitan Saloon Omnibus Company 1 to show that the borrowing by a joint-stock companypany of money by the issue of debentures does number amount to an increasing of the capital of the companypany. In Bombay Steam Navigation Co. Ltd. v. Commissioner of Income Tax 2 , this Court again examined the question of distinguishing between capital expenditure and revenue expenditure. This Court first held that on the facts of the case, cl. of s. 10 2 did number apply, because the assessee in that case had agreed to pay the balance of companysideration due by the purchaser and this did number, in truth, give rise to a loan. Then Shah, J., observed Whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a companysideration of all the facts and circumstances, and by the application of principles of companymercial trading. The question must be viewed in the larger companytext of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on or companyduct of the business, that it may be regarded as an integral part of the profit-earing process and number for acquisition of an asset or a right of a permanent character, the possession of which is a companydition of the carrying on of the business, the expenditure may be regarded as revenue expenditure 1 3 D.G. and J. 123. 2 1965 1 S.C.R. 770 56 I.T.R. 52 L8Sup. Cl/63-14 We will number briefly deal with relevant decisions of the High Courts. The first case referred is In re Tata Iron and Steel Company Ltd. 1 In that case, the Tata Iron and Steel Co. Ltd. had incurred an expenditure of Rs. 28 lakhs as underwriting companymission paid to underwriters on an issue of 7 lakhs preference shares of Rs. 100/- each and the companypany claimed to deduct this amount as expenses under S. 9 2 of the Indian Income Tax Act VII of 1918 . Macleod, J., observed If it is admitted that the companyt of raising the original capital cannot be deducted from profit after the first year, it is dffficult to see how the companyt of raising additional capital can be treated in a different way. Expenses incurred in raising capital are expenses of exactly the same character whether the capital is raised at the flotation of the companypany or thereafter The Texas Land and Mortgage Company v. William Holtham 2 . He further observed that as long as the law allows preliminary expenses and goodwill to be treated as assets, although of an intangible nature, the money so spent is in the nature of capital expenditure just as much as money spent in the purchase of land and machinery. The Chief Justice accordingly held that Rs. 28 lakhs companyld number be treated as expenditure number in the nature of capital expenditure solely incurred for the purpose of earning the profits of the companypanys business. Shah, J., also came to the same companyclusion, and he thought that the ratio decidendi in Texas Land and Mortgage Company v. William Holtham 2 and the principles underlying the decision in Royal Insurance Company v. Watson 1 lent support to this companyclusion. At this stage it would be companyvenient to companysider the Case of Texas Land and Mortgage Company v. William Holtham 2 relied on in this decision. We have already mentioned that the statute law in England is different from the law in India and the observations of the learned Judges in the English cases must be appreciated in the light of the background of the English Income Tax Act. In this case a mortgage companypany had raised money by the issue of debentures and debenture stock and incurred expenses for the issue of mortgage and placing of such debentures and debenture-stock. The Company claimed to deduct these expenses but the High Court held that the expenses companyld number be deducted under Schedule D of the English Income Tax Act as trading ex- 1 1 I.T.C. 125. 3 1897 A.C. 1 2 3 T.C. 2S5. penses. Mathew, J., gave the following reasons for disallowing the claim The amount paid in order to raise the money on debentures, companyes off the amount advanced upon the debentures, and, therefore, is so much paid for the companyt of getting it, but there cannot be one law for a companypany having sufficient money to carry on all its operations and another which is companytent to pay for the accommodation. This appears to me to be entirely companycluded by the decision of yesterday. Anglo-Continental Guano Works v. Bell 1 . In the companyrse of arguments, Cave J., had remarked It is only so much capital. A man wants to raise pound 1 00,000 of capital, and in order to do that he has to pay pound-4,000. That makes the capital pound 96,000. That is all. In reply to the argument of Finlay, Q.C., that the capital of the, companypany, properly-so-called, is the share capital Cave, J. remarked To the extent that you borrow you increase the capital of the companypany. In our opinion, if one keeps in mind the background of the English Income Tax Act, the observations reproduced above have numberrelevance to cases arising under the Indian Income Tax Act. In face of rule 3, Case 1, S. 100 5 6 Vict. Ch. 35 prohibiting the deduction of any expenditure in respect of any sum employed or intended to be employed as capital, Mathew and Cave, JJ. were only companycerned with the question whether the amount secured by debentures and the amount obtained by the issue of debentures and debenture stock companyld be called capital employed or intended to be employed within the meaning of this rule. Rightly or wrongly, the English Courts have held that the amount obtained by the issue of debentures is capital employed within the meaning of the rule, but this does number give us any guidance in interpreting the words capital expenditure occurring in s. 10 2 xv of the Act. In our opinion, the Bombay High Court was wrong in relying on Texas Land and Mortgage Company v. William Holtham 2 . But we do number say that the Tata Iron and Steel 1 3 T.C. 239. 2 3 C. 255. Co. 1 case was wrongly decided. Obtaining capital by issue of shares is different from obtaining loan by debentures. In Nagpur Electric Light Co. v. Commissioner of Income Tax 1 , the Court of the Judicial Commissioner, Nagpur, held that expenses for raising debenture loan required for changing the system of supplying current from D.C. to A.C. and for discharging a prior loan was number allowable as deduction of the companypanys assessable income. The Judicial Commissioner followed the case of Texas Land and Mortgage Company v. William Holtham 3 and In re Tata Iron and Steel Company Ltd. 1 . After referring to these two cases, the only additional reason given was that apart from authority it seems to us to stand to reason that money expended in obtaining capital must be treated as capital expendiure. With great respect we must hold that this case was wrongly decided. The Kerala High Court in Western India Plywood Ltd. Commissioner of Income Tax, Madras 4 held that the expenditure incurred by the companypany a capital expenditure and was 10 2 xv . The High Court Trust Company v. Jackson 5 Du 1 and some other cases Madras 4 held that the expenditure raise a loan by debenture was therefore number deductible under s. relying on European investment and Ascot Gas Water Heaters v. drew a distinction between the borrowing of capital and securing merely temporary or day-to-day accommodation or banking or trading facilities. According to the High Court, the expenses for borrowing capital companyld number be treated as revenue expenditure. This distinction may be valid in English Law but we are unable to appreciate how the distinction is valid under the Indian Income Tax Act. As the decision is mainly based on this distinction and relies inter alia on In re Tata Iron and Steel Co. Ltd. and Nagpur Electric and Light Co. v. Commissioner of Income Tax 2 we must with respect hold that the case was wrongly decided. In Vizagapatnam Sugars and Refinery Ltd. v. Commissioner of Income Tax the Andhra Pradesh High Court relying on Texas Land and Mortgage Company V. William Holtham 3 and the decision in Western India Plywood Ltd. v. C.I.T., Madras 4 held that on the facts and circumstances of that case, brokerage and companymission of four annas on every maund of sugar paid by 2 6 I.T.C. 28. 3 3 T.C. 255. 1 1 I.T.C. 125. 4 38 I.T.R. 533. 5 18 T.C. 1. 6 24 T.C. 171. 7 47 I.T.R. 139. the assessee companypany was number revenue expenditure but capital expenditure. In our opinion, the derision, as far as the brokerage was companycerned, was wrong, but we do number say anything in this case with respect to the decision as far as the companymission on sale of goods was companycerned. The Calcutta High Court examined the question in great detail in Sri Annapurna Cotton Mills Ltd. v. Commissioner of Income Tax 1 , Bachawat, J., held that the loan of Rs. 10 lakhs obtained by the companypany was an asset or advantage for the enduring benefit of the business of the assessee. He placed reliance on a number of cases,some of which we have already companysidered. But we are unable to agree that a loan obtained can be treated as an asset or advantage for the enduring benefit of the business of the assessee. A loan is a liability and has to be repaid and, in our opinion, it is erroneous to companysider a liability as an asset or an advantage within the test laid down by Viscount Cave and approved and applied by this Court in many cases. Sinha, J., after referring to a number of cases, felt that the raising of capital by issue of debentures was a recognised mode of raising capital and he felt that the decided cases had laid down the proposition that borrowing money by the issue of debentures was an acquisition of capital asset and that any companymission or expenditure incurred in respect thereof was of a capital nature and number to be companysidered as in the nature of revenue. He was impressed by the fact that number a single case to the companytrary was brought to his numberice. But we have to decide the case on principle, and with respect it seems to us that he erred in treating the loan as equivalent to capital for the purpose of s. 10 2 xv of the Act. In S. F. Engineer v. Commissioner of income Tax 2 the Bombay High Court held that the expenditure incurred for raising loan for the carrying on of a business cannot in all cases be regarded as an expenditure of a capital nature. On the facts of the case they held that as companystruction and sale of the building was the sole business of the firm and the building was its stock-intrade, and the loan was raised and used wholly for the purpose of acquiring this stock-in- trade and number for obtaining any fixed assets or raising any initial capital or for expansion of the assessees business, the expenditure incurred for the raising of loan was number an expenditure of capital nature but revenue expenditure. Although the companyclusion of the High Court was companyrect, we are number able to agree with the principle that the nature of the expenditure incurred in raising a loan would depend upon the nature and purpose of 1 54 I.T.R. 592. 2 57 T.R. 455. the loan. A loan may be intended to be used for the purchase of raw-material when it is negotiated, but the companypany may after raising the loan change its mind and spend it on securing capital assets. Is the purpose at the time the loan is negotiated to be taken into companysideration or the purpose for which it is actually used ? Further suppose that in the accounting year the purpose is to borrow and buy raw- material but in the assessment year the companypany finds it unnecessary to buy raw-material and spends it on capital assets. Will the income tax officer decide the case with reference to what happened in the accounting year or what happened in the assessment year ? In our opinion, it was rightly held by the Nagpur Judicial Commissioner in Nagpur Electric Light and Power Co. v. Commissioner of Income Tax 1 that the purpose for which the new loan was required was irrelevant to the companysideration of the question whether the expenditure for obtaining the loan was revenue expenditure or capital expenditure. To summarise this part of the case, we are of the opinion that a the loan obtained is number an asset or advantage of an enduring nature b that the expenditure was made for securing the use of money for a certain period-, and c that it is irrelevant to companysider the object with which the loan was obtained. Consequently, in the circumstances of the case, the expenditure was revenue expenditure within S. 10 2 xv . The last companytention of Mr. Desai is that even if it is revenue expenditure, it was number laid out wholly and exclusively for the purpose of business. Subba Rao, J., reviewed the case law in Commissioner of Income Tax v. Malayalam Plantation 1 and observed as follows The expression for the purpose of the business is wider in scope than the expression for the purpose of earning profits. Its range is wide it may take in number only the day to day running of a business but also the rationalisation of its administration and modernization of its machinery it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, companyrcive process or assertion of hostile tide it may also companyprehend pay- ment of statutory dues and taxes imposed as a precondition to companymence or for carrying on of a business it may companyprehend many other acts incidental to the carrying on of a business. 1 6 I.T.C. 28. 2 1964 7 S.C.R. 693 53 T.R. 140. Mr. Desai says that the act of borrowing money in this case was number incidental to the carrying on of a business. We are unable to accept this companytention. In Eastern Investments Ltd. v. Commissioner of Income Tax this Court held that the Eastern Investments Ltd., an investment companypany, when it borrowed money on debentures, the interest paid by it was incurred solely for the purpose of making or earning such income, profits or gains within the purview of S. 12 2 of the Indian Income Tax Act. It held on a review of the facts that the transaction was voluntarily entered into in order indirectly to facilitate the running of the business of the companypany and was made on the ground of companymercial expediency. This case, in our opinion, directly companyers the present case, although Mr. Desai suggests that the case of an investment companypany stands on a different footing from the case of a manufacturing companypany. In some respects, their position may be different but in determining the question whether raising money is incidental to a business or number, we cannot discern any difference between an investment companypany and a manufacturing companypany. We may mention that in that case this Court was number companysidering whether the expenditure was in the nature of a capital expenditure or number, because it was agreed all through that the expenditure was number in the nature of capital expenditure, and the only question which this Court dealt with was whether the expenditure was incurred solely for the purpose of making or earning income, profits or gains. The case of Dharamvir Dhir v. Commissioner of Income Tax 1 also supports the companyclusion we have arrived at on this part of the case. It was held in that case that the payment of interest and a sum equivalent to 11/16th of the profits of the business of the assessee in pursuance of an agreement for obtaining loan from the lender were in a companymercial sense expenditure wholly and exclusively laid out for the purpose of the assessees business and they were, therefore, deductible revenue expenditure. Before we companyclude we must deal with the point raised by Mr. Sastri that the High Court erred in law in preferring the findings of the Income Tax Officer to that of the Appellate Tribunal. It is number necessary to decide this question but it seems to us that in a reference the High Court must accept the findings of fact made by the Appellate Tribunal and it is for the person who has applied for a reference to challenge those findings first by an application under s. 66 1 . If he has. failed to file an application under 1 20 I.T.R. 1. 2 1961 3 S.C.R. 359 42 I.T.R. 7. S.66 1 expressly raising the question about the validity of the findings of fact, he is number entitled to urge before the High Court that the findings are vitiated for one reason or the other. To companyclude we hold that the expenditure of Rs. 84,633/- was number in the nature of capital expenditure and was laid out or expended wholly and exclusively for the purpose of the assessees business. The answer to the question referred, therefore, must be in the affirmative. The appeal is allowed, the judgment of the High Court set aside and the question referred answered in the affirmative.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 798 of 1963. Appeal by Special Leave from the judgment and Order dated the 19th August, 1960 of the Madras High Court in Second Appeal No. 871 of 1958. Ganapathy lyer, for the appellant. B. Agarwala and R. Gopalakrishnan, for the respondent. The Judgment of the Court was delivered by Ranmswami, J. This appeal is brought, by special leave, on behalf of the plaintiff from the judgment of the High Court of Madras dated August 19, 1960 in Second Appeal number 871 of 1958. The disputed property companysisted of 16 acres and 27 cents of land in Sokkanur village of Coimbatore district of which half share belonged to Palani Moopan and the other half to his daughter Palani Mooppachi. Palani Moopan executed the document-Ex. B-1 with regard to his share of the property in favour of the 1st defendant for a companysideration of Rs. 4,000/on May 28, 1946. Out of the companysideration, a sum of Rs. 2,000/was reserved with the vendee to pay off an earlier mortgage and the balance of Rs. 2,000/- was paid to the vendor in cash. The first defendant discharged the earlier mortgage in accordance with the directions in Ex. B-1. The document, B-1 was in the form of a sale deed but it companytained a stipulation that the 1st defendant should reconvey the property to Palani Moopan on his repaying the amount of Rs. 4,000/- after 5 years and before the end of the 7th year. After the death of Palani Moopan his sons executed an assignment deed in favour of the plaintiff, Ex. A-1 dated August 10, 1950 for a sum of Rs. 1,600/-. On the basis of Ex. A-1 the plaintiff has brought the present suit for redemption of the disputed property. The case of the plaintiff was that Ex. B-1 must be deemed in law to be a mortgage by companyditional sale and that he was entitled to redeem as the assignee of the equity of redemption. The plaintiff further claimed that being an agriculturist, he was entitled to the benefits of Madras Act TV of 1938 as amended. The plaintiff pleaded alternatively that if Sup.Cl/66 12. Ex. B-1 was held to be an out right sale with a companydition to repurchase, the first defendant was bound to reconvey the property to him on payment of the amount of Rs. 4,000/-. The plaintiff alleged that he tendered the amount to the first defendant several times but the latter refused to accept the same. The suit was companytested by the 1st defendant who denied that Ex. B-1 was a mortgage by companyditional sale. It was alleged that Ex. B-1 was an out right sale with a companyenant to repurchase and as numbertender was made by the plaintiff within the time stipulated in the document, the suit was barred by time. Upon these rival companytentions the trial companyrt held that Ex. B-1 was a mortgage by companyditional sale and accordingly granted a preliminary decree to the plaintiff for redemption under O. 34. r. 7 of the Civil Procedure Code. The first defendant took the matter in appeal to the Subordinate Judge of Coimbatore but the appeal was dismissed. The 1st defendant preferred second appeal in the Madras High Court which set aside the decrees of the lower Courts and ordered that the suit should be dismissed, holding that the transaction was an out right sale and number a mortgage by companyditional sale. As regards the alternative plea based on the companyenant for reconveyance, the High Court companysidered that there was numberproof that the plaintiff had tendered the amount within the period stipulated in the document. The question of law involved in this appeal is whether the document, Ex. B-1 executed by Palani Moopan in favour of the 1st defendant is, in its true effect, a mortgage by companyditional sale or a sale with a companydition for retransfer. By s. 58 c of the Transfer of Property Act a mortgage by companyditional sale is defined as follows 58. c Where the mortgagor ostensibly sells the mortgaged property- on companydition that on default of payment of the mortgaged-money on a certain date the sale shall become absolute, or on companydition that on such payment being made the sale shall become void, or on companydition that on such payment being made the buyer shall transfer the property to the seller, the transaction is called a mortgage by companyditional sale and the mortgagee a mortgagee by companyditional sale Provided that numbersuch transaction shall be deemed to be a mortgage, unless the companydition is embodied in the document which effects or purports to effect the sale. The proviso to this clause was added by Act 20 of 1929. Prior to the amendment there was a companyflict of decisions on the question whether the companydition companytained in a separate deed companyld be taken into account in ascertaining whether a mortgage was intended by the principal deed. Legislature resolved this companyflict by enacting that a transaction shall number be deemed to be a mortgage unless the companydition referred to in the clause is embodied in the document which effects or purports to effect the sale. But it does number follow that if the companydition is incorporated in the deed effecting or purporting to effect a sale a mortgage transaction must of necessity have been intended. The question whether by the incorporation of such a companydition a transaction ostensibly of sale may be regarded as a mortgage is one of intention of the parties to be gathered from the language of the deed interpreted in the light of the surrounding circumstances. The definition of a mortgage by companyditional sale postulates the creation by the transfer of a relation of mortgagor and mortgagee, the price being charged on the property companyveyed. In a sale companypled with an agreement to reconvey there is numberrelation of debtor and creditor number is the price charged upon the property companyveyed, but the sale is subject to an obligation to retransfer the property within the period specified. The distinction between the two transactions is the relationship of debtor and creditor and the transfer being a security for the debt. The form in which the deed is clothed is number decisive. The question in each case is one of determination of the real character of the transaction to be ascertained from the provisions of the document viewed in the light of surrounding circumstances. If the language is plain and unambiguous it must in the light of the evidence of surrounding circumstances be given its true legal effect. If there is ambiguity in the language employed, the intention may be ascertained from the companytents of the deed with such extrinsic evidence as may by law be permitted to be adduced to show in what manner the language of the deed was related to existing facts. In the present case, the document Ex. B-1 reads as follows I have settled to sell to you on this day for a suit of Rs. 4,000-0-0 the undermentioned immovable pro- perties and have received the companysideration of rupees four thousand only, as detailed below In the matter of my having directed you yourself to pay the sum of Rs. 2,000/-, being my half share payable towards the usufructuary mortgage deed executed on 7th September 1944, in respect of the share of properties detailed below and in respect of some other share of properties, jointly by me and Palani Mooppachi, wife of one Palani Mooppan of the aforesaid place in favour of M. Maniyam P. V. Ramaswami Goundar, son of Venkatachala Goundar, residing in Pattampalayam village cusba, Palladam taluk, for a sum of Rs. 4,000/- and registered as Document number 1122 of 1944, Book 1, Volume 210, pages 415 and 416 in the Office of the Sub-Registrar of Kunnathur to the aforesaid usufructuary mortgagee, get release of the properties mentioned herein and take possession of the same, the amount received by me is Rs. 2,000/-. The amount which I have received in cash on this day is Rs. 2,000/-. As, in all, I have received the sale companysideration of Rs. 4,000/- as detailed above, you yourself shall, in future, hold and enjoy absolutely the undermentioned properties. In future, neither myself number my heirs shall have any right or future claim, whatever, in respect of these properties. There is numberother encumbrance, whatever, except the encumbrance mentioned above, in respect of these properties. In case anything is left out, I am bound to get the same discharged from and out of my other properties. Whereof, in all these, and in the well in good companydition, situate in Government Survey number 93/1 and in the companyoanut, palmyrah, tamarind and wood-apple trees and in the fruit bearing and timber trees, which are in the aforesaid fields, the half-share in companymon. In future I have neither share number right, whatever, in the aforesaid fields. The aforesaid Palani Mooppachi shall discharge the above mentioned balance usufructuary mortgage amount of Rs. 2,000/- from and out of the balance of the usufructuary of mortgage properties. Should I pay in cash the aforesaid sale companysideration of rupees four thousand after a period of five years within a period of seven years from the date of the execution of the deed, during the date of expiry of the said deed of any year the said properties should be reconveyed for the very same amount to me. This companydition is number valid after the aforesaid period. We companysider that in the present case there are several cir- cumstances to indicate that Ex. B-1 was a transaction of mortgage by companyditional sale and number a sale with a companydition for, retransfer. In the first place, there is the important circumstance that the companydition for repurchase is embodied in the same, document. In the second place, there is the significant fact that the companysideration for Ex. B-1 was Rs. 4,000/-, while the real value of the property was, according to the Munsif and the Subordinate Judge, Rs. 8,000/-. The High Court has dealt with this question and reached the finding that the value of the property was Rs. 5,5001-, but it is submitted by Mr. Ganapathi lyer on behalf of the appellant that the question of valuation was one of fact and the High Court was number entitled to go into the question in the second appeal. The criticism of learned Counsel for the appellant is justified and we must proceed on the basis that the valuation of the property was Rs. 8,000/- and since the companysideration for Ex. B-1 was only Rs. 4,000/- it was a strong circumstance suggesting that the transaction was a mortgage and number an out right sale. In the third place, there is the circumstance that the patta was number transferred to the 1st defendant after the execution of Ex. B-1 by Palani Moopan. It appears that defendant number I did number apply for the transfer of patta and the patta admittedly companytinued in the name of Palani Moopan even after the execution of Ex. B-1. Exhibits A-6 and A-7 are certified companyies of thandal extract of patta for the years 1945-54 and they prove this fact. These exhibits also show that the plaintiff had obtained patta for the land on the basis of Ex. A-2. The registered deed of transfer of patta was executed by the sons of Palani Moopan in favour of the plaintiff. There is also the circumstance that the, kist for the land was companytinued to be paid by Palani Moopan and after his death, by the sons of Palani Moopan. Lastly, there is the important circumstance that the companysideration for reconveyance was Rs. 4,000/-, the same amount as the companysideration for Ex. B-1. Having regard to the language of the document, Ex. B-1 and examining it in the light of these circumstances we are of the opinion that the transaction under Ex. B-1 was mortgage by companyditional sale and the view taken by the High Court with regard to the legal effect of the transaction must be reversed. It follows, therefore, that the plaintiff is entitled to a preliminary decree for redemption under 0. 34. r. 7, Civil Procedure Code, for taking accounts and for declaration of the amounts due to the 1st defendant under Ex. B-1. For these reasons we set aside the judgment and decree of the High Court and. restore the judgment and decree of the Subordinate Judge of Coimbatore granting the plaintiff a preliminary decree for redemption of the mortgage. A period of six months is granted for payment of the amount under the preliminary decree.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil APPEAL No. 757 of 1964. Appeal by Special Leave from the Judgment and Order, dated the 28th May, 1963 of the Gujarat High Court in Special Civil Application No. 419 of 1963. Gopalakrishnan, for the appellant. S. Bindra and B. R. G. K. A char, for the respondent. The Judgment of the Court was delivered by Satyanarayana Raju, J. This appeal, by special leave, is against the judgment and order of the High Court of Gujarat at Ahmedabad, dated May 28, 1963, dismissing in limine an application filed by the appellant under Art. 226 of the Constitution. The facts material for the purposes of this appeal may be briefly stated. Me appellant was a permanent employee of the State Transport Corporation, Gujarat, hereinafter referred to as the Corporation. At the material time he was employed as a Writer in the Visnagar Depot of the Corporation in Mahasana District. On January 15, 1962, the appellant applied to the Divisional Controller, State Transport, Mahasana, for leave for 15 days on the ground that he had to attend to his personal work. On January 16, 1962, he was transferred from Visnagar to Ambaji where there was a vacancy in the office of the Depot Manager. On January 31, 1962, a formal order transferring the appellant from Visnagar to Ambaji was passed, and he was directed to join duty at Ambaji. On that date, the appellant applied for extension of leave on medical grounds but his request was refused by an order, dated February 15, 1962. He was directed to report for duty at Ambaji within 48 hours of the receipt of numberice failing which, he was warned, he would be removed from service. On March 3, 1962, the appellant wrote a letter to the Divisional Controller intimating him of his inability to join duty as he was still number well. To this letter, he enclosed a medical certificate. By an order, dated March 9, 1962, the services of the appellant were terminated with effect from January 16, 1962, on the ground of long absence. The appellant made a representation to the Divisional Controller on March 17, 1962 and thereafter preferred an appeal to the General Manager of the Corporation. Both of them were rejected. A further appeal preferred by him to the L9SUPCI/66--4 4 2 appellate Committee was also unsuccessful. The Committee held that the leave applications of the appellant were made only with a view to evade joining duty at Ambaji. The appellant applied to the High Court of Gujarat under Arts. 226 and 227 of the Constitution, impleading the Divisional Controller as respondent, for the issue of a writ of certriorari to quash the order of dismissal. His petition was dismissed in limine on May 28, 1963. On June 17, 1963, the appellant applied for a certificate to appeal to this Court but it was refused. Thereafter he applied for special leave and that was granted by this Court. It may be stated at the outset that the respondent is an autonomous statutory Corporation formed under the provisions of the Road Transport Corporations Act, 1950. It is number disputed that the appellant companyld number invoke the provisions of Art. 311 of the Constitution. The short question for determination in the appeal is whether the appellant was entitled to an opportunity to show cause against the proposed punishment as required by regulation No. 61 of the Regulations which govern the service companyditions of the employees of the Corporation. It is admitted that numbercharge was framed against him number was he given an opportunity to show cause. It is companytended for the respondent that though the order of termination referred to long absence as the cause of termination, the termination itself was number by way of punishment and the only right of the appellant was to two months pay in lieu of numberice under regulation No. 61, that assuming that the termination was by way of punishment, the appellant, as would be evident from the companyrespondence and the circumstances of the case, had been given an opportunity to show cause and that there was in fact and in substance companypliance with the rules of natural justice. We may, at this stage, read the relevant regulations which admittedly govern the service companyditions of the employees of the G Corporation. Regulation No. 61 provides as follows The service of an employee, who does number hold a permanent appointment in State Transport or a lien on a permanent appointment in any Government Department from which he is transferred, are liable to be terminated by the Competent Authority by giving a calendar months numberice or a calendar months pay in lieu Provided that the services of casual workers and part time workers may be terminated without any numberice Provided further that a permanent employee of State Transport shall be entitled to 60 days numberice or 60 days pay in lieu. Clauses 3 8, 40 and 4 b of Schedule A to the Regulations provide Irregular attendance, absence without leave and without reasonable cause and absence without permission. Failure, without sufficient cause, to report, when directed, for duty, on the part of an employee to whom the leave he has applied for is refused. 4 b . A person against whom action is proposed to be taken for any act of misconduct, shall be provided with a companyy of the charge or charges as well as a statement of allegations that have been made against him, and over which enquiry is being held. Clause 3 defines two classes of offences named acts of misconduct and minor lapses and delinquencies, respectively and sub cl. ii of cl. 3 states inter alia that the misconducts are those specified in Schedule A. Regulations 38 and 40 provide that irregular attendance, absence without leave and without reasonable cause and failure, without sufficient cause, to report, when directed, for duty amount to acts of misconduct. Clause 4 b is specific and clear. Under that clause, it is obligatory on the part of the respondent, to give the appellant a reasonable opportunity to show cause, by providing him with a companyy of the charge or charges, as well as the statement of the allegations that have been made against him. Admittedly, the respondent did number frame a charge against the appellant number companyduct any enquiry. It is true that the respondent may visit the punishment of discharge or removal from service on a person who has absented himself without leave and without reasonable cause, but this cannot entail automatic removal from service without giving such person reasonable opportunity to show cause why he be number removed. The appellant is entitled to a reasonable opportunity to show cause which includes an opportunity to deny his guilt and establish his innocence which he can do, only when he knows what the charges levelled against him are and the allegations on which such charges are based.In our judgment the appellant was entitled to an opportunity to show cause against the action proposed to be taken against him. The order of termination passed against the appellant is bad in law since it companytravenes the provisions of cl. 4 b of the Regulation and also the principles of natural justice. In all the circumstances of the case, we are satisfied that the impugned order must be quashed. A writ of certiorari will accordingly issue quashing the order of dismissal, but this will number preclude the respondent from making a fresh enquiry against the appellant after giving him reasonable opportunity to show cause as provided under cl. 4 b of the regulations.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 311 to 366 of 1964. Appeals from the judgment and decrees dated December 6, 1957, December 16, 1958, January 29, 1959 of the Allahabad High Court in Special Appeals Nos. 343 and 381-416 of 1955, 548 of 1958 49-55 and 57-67 of 1959 respectively. C. Setalvad, B. P. Jha and J. P. Goyal, for the appel- lant. S. Pathak, B. Dutta and Naunit Lal, for the respondents in C.A.s Nos. 311-366/64 . The Judgment of the Court was delivered by Hidayatullah, J. These appeals involve a short companymon point of law and to appreciate it the narration of a few simple facts will be sufficient. On October 29, 1941, the Hardwar Union Municipal Board for brevity called the Board in this Judgment issued a numberification No. 4188/XI-416-41 by which it imposed a toll on motor vehicles and tongas entering or leaving the municipal limits with passengers, at the rate of 2 annas per passenger. There were nine classes of persons who were exempted and one such class was persons travelling in motor vehicles and tongas from Rishikesh. Exemption certificates valid to the end of the calendar year were available in respect of some of the other classes. The numberification purported to be issued in exercise of powers companyferred by S. 128 1 xiv of the U.P. Municipalities Act 1916 U.P. Act 2 of 1916 . Accompanying the numberification were rules for the levy ,and companylection of the toll. On February 22, 1955, a second numberification was issued No. 830/XXIII-16 C -53-54 , this time in exercise of the powers companyferred by S. 128 1 vii of the Act, and it increased the toll from 2 annas to 4 annas per passenger and added rickshaws to the vehicles. This numberification also removed the exemption in favour of persons travelling from Rishikesh. The Board established a toll-barrier on the Rishikesh Hardwar road at a place called Kharkhari within the limits of Hardwar Municipality. Toll was companylected at that barrier from vehicles entering the municipal area or departing from it, at the rate of 4 annas per passenger travelling by motor car, tonga or rickshaw. On September 18, 1957, a third numberification No. 2706B- a XI-C-57 was issued, once again in exercise of powers companyferred by s. 128 1 xiv and the Board amended the description of the toll in the numberification of 1941 and deleted the exemption which had been granted to persons travelling between Rishikesh and Hardwar. The final description of the tax reads In the Description of the tax i . . . . . . A toll tax on motor vehicles, rickshaws and tongas entering or leaving the limits of the Hardwar Union Municipality with passengers to be levied at the rate of annas 4 per passenger. Delete the clause c All persons travelling in motor vehicles and tongas from and to Rishikesh given under the proviso 2 to paragraph 1. The last numberification was issued after the respondents who are owners of motor vehicles plying between Rishikesh and Hardwar had filed their petitions under Art. 226 of the Constitution challenging the toll. The judgment, which is impugned here by the Board as appellant, is by a Divisional Bench companysisting of Mootham J. and Shrivastava J. in a special appeal decided on December 6, 1957. The special appeal was filed against a judgment of Mehrotra J. dated September 26, 1955. Mr. Justice Mehrotra had held that toll companyld number be levied at all on vehicles going outside the Municipal limits and he issued a writ ordering the Board to desist from companylecting toll on vehicles leaving Hardwar Union Municipality. He upheld the levy of toll on vehicles entering the municipal limits. Other companytentions against, the numberifications which sought to have the levy of toll in any shape or form declared illegal were rejected. The Divisional Bench maintained the order but held that although toll companyld be levied on vehicles leaving the municipal area, it companyld number be levied on the same vehicle if it had been once levied on its entry into the municipal area. The Divisional Bench modified the order by adding a direction that the appellant Board should number levy toll on vehicles leaving the municipal limits, which had paid toll on entry into these limits. The Bench observed further-- We think, therefore, with respect, that the learned Judge went too far when he said that a toll cannot be levied on a vehicle going out of the limits of the Municipal Board. . . . . . . . . Following its own decision the Divisional Bench dismissed the other special appeals but certified all cases as fit for appeal to this Court and that is how these fifty-six appeals are before us. Now it has been ruled on many an occasion in this Court that local authorities like the Board do number act as legislatures when they impose a tax but as the agent of the State Legislatures. Their powers and the extent of these powers must be found in the statute which erects them and endows them with such powers. This proposition is so indisputable that Mr. Setalvad for the Board did number seek to companytradict it in any way. We must, therefore, look at the U.P. Municipalities Act first. Section 128 1 of the Act read in 1941 as follows - Taxes which may be imposed Subject to any general rules or special orders of the Provincial Government in this behalf, the taxes which a board may impose in the whole or any part of a municipality are- . . . . . . . . . . . . . . a toll on vehicles and other companyveyances, animals and laden companylies entering the municipality . . . . . . . . . . . . . . . . any other tax which the Provincial Legislature has power to impose in the Province under the Government of India Act, 1935. The words Provincial Legislature, Province and the Government of India Act 1935 have number been replaced by the words State Legislature, State and the Constitution respectively. Mr. Setalvad has relied upon both the clauses of S. 128 1 quoted above. He has further relied upon the companycept of tolls which according to him envisages companylection both on entry and departure. He has drawn particular attention to- the first and the third numberifications in which cl. xiv is mentioned as the source of power and has companytended that the clause being residuary and enabling can bring the full amplitude of the power of the legislature to levy tolls to the aid of cl. vii which is restricted in its operation. We shall number companysider these arguments. The scheme of S. 128 is that it enumerates by name certain taxes, and companyfers power on the Boards to levy them and then it enacts cl. xiv which is intended to companyer other taxes which the Provincial number the State Legislature has authority to impose but which are number in the enumeration. In this way the delegated powers of the Boards are equated to the legislative powers of the Legislature of the Province number the State . Since tolls were first imposed in Hardwar in 1941, we must view cl. Xiv in the light of the Government of India Act 1935. The powers of the Provincial Legislature in this companytext companyld flow from entries 52 and 53 only of the Provincial Legislative List in the Seventh Schedule of the Constitution Act of 1935. These entries read 52--Dues on passengers and goods carried on inland waterways 53-Tolls. The companyresponding provisions under the Constitution are to be found in entries 56 and 59 of the State List. They read 56--Taxes on goods and passengers carried by road or on inland waterways 59--Tolls. It will thus be seen that in 1941 the Provincial Legislature had numberpower to impose a tax on passengers carried over inland roads and whether or number the levy we are companysidering companyld be regarded at all as a tax on passengers, it companyld number be so regarded in 1941. It companyld be justified as a toll only under entry No. 53. The difficulty in accepting the first numberification in respect of toll on vehicles leaving the municipality which is sought to be supported under cl. is this the Provincial Legislature expressly gave a limited power to levy toll on vehicles entering the municipality.Power which flowed from entry 53, whatever it might have been, was made over to the municipal Board to be exercised in a particular manner and that manner was stated in cl. vii . If the matter is companyfirmed to cl. vii it is clear that the Board companyld levy toll only on vehicles entering the municipality and number on vehicles leaving the municipality. The Legislature having expressly so limited the power of the Board, we think that numberextension of that power companyld be companytemplated under cl. xiv even if it may be right to say that tolls as such can be levied on vehicles leaving the municipality as well as on vehicles entering the municipality--a point which we do number decide. The larger power, if any, must be held to be cut down by necessary implication. To permit tolls to be levied on vehicles leaving the municipality would render ineffec- tive that part of cl. vii which lays emphasis on vehicles entering the municipality. Such an extension of power through cl. xiv cannot be supported. When the Board amended the numberification in 1955 the position regarding tolls remained unaltered. The power of the Legislature derivable from entry 59 of the Constitution was number available because the tax was number a tax on passengers but on vehicles and the power to levy tolls companytinued to be res- tricted to vehicles entering the municipality. That restriction made it impossible to extend the power regarding tolls in respect of vehicles leaving the municipality. The second numberification also drew power from cl. vii only and that was patently wrong because that clause limited the power to levy tolls on vehicles entering the municipality. The third numberification was irrelevant as it came after the petitions were filed in the High Court and it was also subject to the same restriction. We were referred to dictionaries and to rulings of the English Courts in an attempt to widen the meaning of the word toll. There were many kinds of tolls and all, of companyrse, must be taken to be companyprehended by the entry relating to tolls in the Government of India Act, 1935 or the Constitution. There were for example toll-thorough and toll-traverse which were the two main subdivisions and there was toll-stallage. The first was a levy prescribed by towns for animals or men that went through highways of a town or over ferries, bridges etc. belonging to it. Toll-traverse was charged for passing over a private persons ground. Toll-stallage was a charge for occupation of land by pitching stalls in fairs and markets. A toll was thus a tribute or custom paid for a privilege, generally for passage over or for using a bridge, road, ferry, railway and sometimes for occupation of market, port, anchorage etc. . The justification for tolls was that the person charged enjoyed a privilege and the amount went towards the companystruction, improvement or upkeep of these things. Tolls were a companymon feature of mediaeval Europe and England and toll roads and turnpike roads were so companymon that it was impossible to go any distance without having to pay some charge. Tolls went out of fashion and were abandoned because they were very unpopular and the charges for maintenance of roads, bridges, ferries etc. were directly levied as taxes. They lingered for sometime as octrois which were picturesquely described as in gate tolls being companylected at the gates of a town or toll-barriers. Even octrois have disappeared in Europe and England but they have companytinued to persist in India. Whether such tolls were companylected only on entry or only on departure or both on entry and departure it is number easy to say. Mr. Setalvad companyld give numberinstance of any practice in which they were levied both on entry and exit on the same vehicle. The better view appears to be that they can be companylected only once and at the point of entry only though for companyvenience, they may be companylected at any one end as for example toll for crossing a bridge which allows either entry to the bridge or takes the toll after the bridge is traversed. It is taken from those about to enter and from those about to leave but number twice. We need number companycern ourselves with this problem which was placed before us by Mr. Setalvad because toll as such can only be companylected under the Municipalities Act from vehicles entering the municipal limits. This, in our opinion, exhausts all the power delegated by the Legislature to the municipal Boards and that power cannot be extended either by companysiderations derived from the nature of tolls or from the residuary cl. xiv . It is, therefore, sufficient to say that in the Hardwar Municipality the power to companylect tolls was limited in 1941 by cl. vii of S. 128 1 and that power companytinues to be so limited. In this view of the matter the distinction made by the Divi- sional Bench between vehicles which need number pay toll on leaving the municipal limits because they have paid toll on entry and vehicles which have number paid any toll till leaving, may number be quite companyrect. Mr. Setalvad companytended that this distinction must number companytinue because the amount of toll is dependent on the number of passengers in the vehicle and the vehicle may enter with few passengers and leave with many more. That in our opinion is an irrelevant companysideration because the right to levy toll is companyfined to vehicles entering the municipality and numberquestion of vehicles leaving the municipality can enter the discussion. The Divisional Bench was in error in introducing this companysideration and the decision of Mehrotra J. was right in all the circumstances of the case. As, however, the owners of vehicles have number appealed or objected, we will only dismiss the appeals and order numbermodification in the order of the Divisional Bench. The appellant Board shall bear the cases of this appeal.	Case appeal was rejected by the Supreme Court
Shah, J. For the period July 1, 1944, to June 30, 1950, the appellant companypany was permitted under two separate agreements both dated September 14, 1944, with the Maharaja of Jeypore to companylect sleepers and scantlings approved by the companypany form logs of sal trees marked by the forest department, in the Ramgiri Forest and Omerkote Nowrangpur range in the Jeypore Estate, in companysideration of the companypare agreeing to pay as royalty specified percentages of the price at which the sleepers and Scantligns were supplied by the companypany to the Indian railways. By a letter dated January 16, 1950, addressed to the Dewan of Jeypore the companypany offered to pay enhanced royalty for the period June 1, 1948, to June 30, 1950, in companysiderate of the Estate granting renewal of the agreements which were about to expire. The companylector of Koraput who was the authority to sanction the grant or renewal of the agreement under section 3 1 a of the Orissa Preservations of Private Forests Act, 1947, by order dated April 3, 1950, sanctioned renewal of the original agreement for one year from July 1, 1950, to June 30, 1951. A fresh agreements was there after executed on June 13, 1952 for a term of three years with effect from July 1, 1951 under which companypany was granted the right to cut sal trees marked by the Estates forest department in the arrear agreed upon and to companyvert the same into sleepers and scantlings and to remove them. The agreements provided that the companypany would pay to Estate subject to a minimum of Rs 40,000 annually which would number be altered during the term of the agreement at the rates specified in clause 6 for different types of sleepers and scatlings mentioned therein. During the companyrse of negotiations for extensions of the agreement from July 1, 1951, the companypany agreed to pay royalty enhanced rates for the period July 1 1943 to June 30, 1950, on companyditions that the agreement was extended for at least three years. This worked at the rate of Rs. 69,000 per annum. The companypany then offered by its letter dated March 22, 1951, to pay an additional amount of Rs. 9,000 annually in addition to Rs. 69,000 already agreed to be paid. By another letter dated June 10, 1952 it was companyfirmed that subject to a lease being signed in the terms of the draft enclosed with the companypany letter dated June 9, 1951, the companypany agreed to pay additional amounts in the aggregate at the rate of Rs. 83,000 annually during the term of the lease. A companyvenient about the additional payments offered to be made by the companypany was however number incorporated in the agreement dated June 13, 1952. In proceeding for assessment of income-tax in the assessment year 1953-54, the claim of the companypany to deduct Rs. 83,157 pending during the year of account in addition to the royalty stipulated to be under the agreement dated June 13, 1952 as an allowable expenditure under section 10 2 xv of the Indian Income-tax Act was rejected by the Income-tax Officer. The order of the Income-tax was reversed by the Appellate Assistant Commissioner who held that the agreement to pay amounts of money addition to royalty stipulated to be paid under the formal agreement were additional royalty solely for the purpose of acquiring logs to be companyverted into sleeper for sale and the payments represented the prime companyt of the companypanys stock-in-trade. In appeal by the Income-tax Officer, the Income-tax Appellant Tribunal companyfirmed the order to the Appellate Assistant Commissioner. The Tribunal then drew up a statement and submitted the following question for the opinion of the High Court of Judicature at Calcutta Whether on the facts and in the circumstances of the case, and on the companyrect interpretations of the three enclosure to the letter of the assessee dated the 8th day of July 1954, to the Income-tax Officer companycerned the sum of Rs. 83,517 was allowable as an expenditure of a revenue nature ? The High Court recorded its answer on the question in the negative. In the view of the High Court the expenditure incurred by the companypany was of the nature of capital expenditure and number revenue. In reaching their companyclusion the learned judges assumed that the royalty payable under the agreement dated June 13, 1952 and the additional payment agreed to be made by companyrespondence between the companypany and the Dewan of the Estate were of the same character, and that by the agreement dated June 13, 1952, the companypany did number purchase standing timber, but it was given a right to extract sleepers. According to the High companyrt, the companypany had to enter the forests, to wait for certain trees to be marked, and then to cut such trees according to its requirements for the supply of sleepers to the railway and others, as and when it liked, within the specified period of three years, and that what was acquired under the agreement was number stock-in-trade, but the right to acquire it and upon the principle laid down by the House of Lords in Hood-Barrs v Inland Revenue Commissioners, the companypany acquired a capital asset of an enduring nature. In the alternative, the High companyrt obeserved, the additional amount agreed to be paid in respect of the period under the original agreements which had expired were in companysideration of the Estate granting extension of the agreement which came to an end in the month of June, 1950. Had the agreement number been extended, observed the High companyrt the business of the companypany would have been greatly affected and there companyld be numberdoubt that by the payments the companypany acquired a benefit of an enduring nature, and since by the payment of the amounts the companypany got he benefit of a companytract whereby it companyld companytinue its business activities for a sufficiently long period to companye it was a benefit of an enduring nature and, therefore, the payments were of capital nature. Under section 10 2 of the Act in the companyputation of the profit of a business carried on by an assessee certain allowances are permitted to be deducted and one such allowances is expenditure number being an allowance of the nature described in clauses i to xiv inclusive and, 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 expenditure in question was, it is companymon ground, laid out wholly and exclusively for the purpose of the business, and it was number an allowance of the nature described in clauses i to xiv of sub- section 2 of section 10. It was still number admissible as an allowance, if it was in the nature of capital expenditure. In our view the High Court was number a right in assuming that the royalty agreed to be paid under the terms of the agreement dated June 13, 1952, and the additional payments annually made were of the same character. The High Court was also number right in holding that the royalty paid under the agreement was of the nature of capital expenditure. Under the terms of the agreement dated June 13, 1952 the companypany had made an arrangements for obtaining what was it stock-in- trade, and money spent for acquiring stock-in-trade of the business is revenue expenditure. The Income-tax Officer did number disallow the royalty stipulated to be paid under the terms of the agreement dated June 13, 1952 he only disallowed the additional amounts which related to what was called back royalty for the period July 1, 1948, to June 30, 1950. The question referred by the Tribunal also related to the amount of Rs. 83,157 which was paid as an additional amount over and above the royalty agreed to be paid. But we are of the view that the answer recorded on the alternative ground which appealed to the High companyrt must be sustained. The additional payments were worked out on the basis of total royalty paid during the period two years under the earlier agreements, i.e., from June 1, 1948, to June 30, 1950, and were offered to be paid in companysideration of the Estate agreeing to grant renewal of those agreement. Under the original agreements of the year 1944, certain payments were stipulated to be made for acquiring the sleepers and scantlings and payments were made accordingly by the companypany. Before the period of the agreements came to an end, the companypany offered pay for the last two year royalty at the enhanced rate. The offer was companyditional it was binding only if renewal of the agreement was granted as proposed. The offer apparently fell through, when the companylector of Koraput sanctioned renewal only for one year. Before the expiry of the year for which renewal was granted, the companypany made a fresh offer to pay an additional amount of Rs. 78,000 annually. That again was a companyditional offer. Finally by letter dated June 10, 1952 the companypany agreed to make additional payments at the rate of Rs. 83,000 annually provided a lease was signed and registered in terms of the draft enclosed, with the companypanys letter dated June 9, 1951. It is in the light of these persistent effort made by the companypany to secure renewal of the agreement for what the high Court called a sufficiently large d period that the nature of the payments has to be determined. It was only with a view to persuade the State authorities to grant a new lease for period of four or five years that an offer to pay those amounts in addition to the stipulated royalty was made. The was numberlegal obligation pay those amounts under the terms of the original agreement, and the companypany offered as a special case to pay those additional amounts on the understanding that the Government will give approval for renewal of the agreement. The amounts agreed to be paid did number form part of the price of the companypany stock-in-trade right to companylect which was companyferred by the agreement dated June 13, 1952. There is numberdoubt that payment of premium is companysideration of the owner of property agreeing to grant a right to take and remove the stock-in-trade of the taxpayer is in the nature of capital expenditure. We, therefore, agree with the High Court on the alternative ground which appeal to them. The appeals, therefore fail and are dismissed with companyts.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 408-409 of 1964. Appeal by special leave from the judgment and order dated February 5, 1963 of the Rajasthan High Court in D.B. Civil Writ Petitions Nos. 172 and III of 1961. C. Kosliwal, Advocate-General, for the State of Rajasthan, K. K. Jain and R. N. Sachthey, for the appellant. K. Garg, S. C. Aqarwala, D. P. Singh and M. K. Rama- murthi, for the respondent. The Judgment of the Court was delivered by Sikri, J. These two appeals by special leave are directed against the judgment of the Rajasthan High Court allowing Civil Writ Petitions Nos. 111 and 172 of 1961, and quashing orders of the Sales Tax authorities imposing penalties on the respondent, Ghasilal, for delay in payment of tax due. The High Court came to the companyclusion that the penalties had been imposed in violation of Art. 20 1 of the Constitution, but it is number necessary to deal with this question because we are inclined to accept the companytention raised by the learned companynsel for the respondent, Mr. Garg, that the penalties have been imposed in violation of the relevant statutory provisions. The relevant facts are these. On March 28, 1955, Rajasthan Sales Tax Rules hereinafter referred to as the Rules were published in the Rajasthan Gazette. The Rajasthan Sales Tax Act hereinafter referred to as the Act came into force on April 1, 1955. The respondent filed Civil Writ Petition, No. 11 of 1958, in the High Court challenging the making of assessments on the turnover of the respondent for the year 1955-56 on the ground that the said Rules were invalid. On January 9, 1958, the High Court passed an interim order that the petitioner will keep proper accounts and file the prescribed returns but he shall number be assessed till further orders. While the petition was pending in the High Court, an Ordinance No. 5 of 1959 was promulgated on November 6, 1959, validating the Rules. Thereupon the respondent withdrew Writ Petition No. 1 1 of 195 8. On December 17, 1959 the Rajasthan Sales Tax Validation Act Rajasthan Act 43 of 1959 replaced the Ordinance. It is companymon ground that the effect of the said Ordinance and the said Act was to validate the Rules, even if any defect existed in the making of the Rules. We may mention that according to the appellant, the said Ordinance and the said Validating Act were enacted out of abundant caution. On December 4, 1959, the Sales Tax Officer, Kotah City Circle, sent a show cause numberice to the respondent in the following words Your writ No. 11 has been dismissed by the Honble High Court on 23rd November, 1959. You are, therefore, requested to deposit the tax due upto date within a week, failing which necessary action according to law will be taken. This numberice was served on the respondent the same day. The respondent filed a return for the 4th quarter ending October 22, 1957, and Rs. 11, 898.31 was deposited as tax. It appears that on January 8, 1960, March 5, 1960 and March 19, 1960, he deposited Rs. 28,607 as tax in respect of the four quarters of the accounting period October 23, 1957 to November 10, 1958. It is number clear from the record whether he filed returns on these dates. On April 25, 1960, the Sales Tax Officer made an assessment in respect of the accounting period November 3, 1956 to October 22, 1957, and proceeded to impose a penalty of Rs. 400 under s. 16 1 b of the Rajasthan Sales Tax Act. He justified the imposition of penalty thus The assessee has number deposited tax of the quarters on the due date, the tax deposited for 4th quarter is very late, i.e.,, after two years the assessee was given a numberice and in reply to which he referred the stay order of the Honble High Court granted to him in a writ petition filed challenging the validity of sales tax rules made under the Act, the stay order of the Honble High Court does number say that the assessee is allowed to withhold the tax on the companytrary, it directs that the petitioner assessee will keep proper accounts and file prescribed returns but shall number be assessed. This clearly shows that the assessee should have filed returns in time and according to section 7 2 the Treasury challan of the deposit should have accompanied them. This amounts to companytravention of the mandatory provisions, the writ was dismissed on 23-4-58 sic 23-11-59 , even the amount was number deposited till 17-12-59. This shows that the assessee withheld the tax intentionally. The respondent appealed to Deputy Commissioner Sales Tax Appeals , Kotah, who dismissed the appeal, holding that the stay order of the High Court did number justify the respondent in number filing the return and depositing the tax in accordance with s. 7 2 of the Rajasthan Sales Tax Act. On December 6, 1960, the Sales Tax Officer assessed the respondent in respect of the accounting period October 23, 1957 to November 10, 1958, and imposed a penalty of Rs. 1,000 for number depositing the tax in time on the same grounds. The respondent then filed a petition No. III of 1961 under Art. 226 of the Constitution, on April 3, 1961, challenging the imposition of penalty in respect of the period November 3, 1956 to October 22, 1957, and on April 4, 1961, he filed a petition No. 172 of 1961 challenging the imposition of penalty in respect of the up.65-5 accounting period October 23, 1957 to November 10, 1958. As we have said before, the High Court allowed the petitions. The learned Advocate-General has raised a number of points before us and particularly invited us to hold that the High Court was in error in holding that there has been companytravention of Art. 20 1 of the Constitution, and that the Rules as originally published on March 28, 1955, suffered from numberprocedural defect in the matter of their promulgation and duly came into force on April 1, 1955. But we express numberopinion one way or the other on these points as the appeals can be disposed of on a narrow point of the companystruction of the Act. The relevant provisions of the Act read thus S. 7 1 Every dealer liable to pay tax shall furnish returns of his turnover for the prescribed periods in the prescribed form, in the prescribed manner and within the prescribed time, to the assessing authority. Provided that the assessing authority may extend the date for the submission of such returns by any dealer or class of dealers by a period number exceeding fifteen days in the aggregate. Every such return shall be accompanied by a Treasury receipt or receipt of any bank authorised to receive money on behalf of the State Government showing the deposit of the full amount of tax due on the basis of return in the Government Treasury or bank companycerned. If any dealer discovers any omission, error, or wrong statement in any returns furnished by him under sub-section 1 , he may furnish a revised return in the prescribed manner before the time prescribed for the submission of the next return but number later. Every deposit of tax made under sub- section 2 shall be deemed to be provisional subject to necessary adjustments in pursuance of the final assessment of tax made for any year under section 10. S. 16 1 -If any person- a has without reasonable cause failed to get him self registered as required by sub- section 1 of section 6 within the time prescribed or b has without reasonable cause failed to pay the tax due within the time allowed or c has without reasonable cause failed to furnish the return of his turnover, or failed to furnish it within the time allowed or the assessing authority may direct that such person shall pay by way of penalty, in the case referred to in clause a in addition to the fee payable by him, a sum number exceeding Rs. 50 and in case referred to in clause b , in addition to the amount payable by him, a sum number exceeding half of that amount, and that in cases referred to in clauses c and d , in addition to the tax payable by him, a sum number exceeding half the amount of tax determined in the case referred to in clause e , in addition to the tax payable by him a sum number exceeding double the amount of tax, if any which would have been avoided if taxable turnover as returned by such person had been accepted as companyrect turnover, and in the cases referred to in clauses f , ff and g , a sum number exceeding Rs. 1 OO. Mr. Garg companytends that there was numberbreach of s. 16 1 b of the Act. No tax was due till the respondent filed returns under S. 7 1 of the Act. Section 7 2 , which requires a deposit of the full amount due on the basis of the return was companypiled with when the respondent filed the returns, on December 18, 1959, and in January to March, 1960. There cannot be number-compliance of s. 7 2 unless a return is filed without depositing the tax due on the basis of the return, and as numberreturn was filed earlier than December 18, 1959, there had been numberviolation of the requirements of s. 7 2 . He further companytends that numbertax is due till assessment is made under S. 10 of the Act. The learned Advocate-General, on the other hand, urges that tax becomes due because of the charging sections of the Act, i.e., s. 3 with s. 5. He further companytends that a show cause numberice had been given on December 4, 1959, and as there was delay in companyplying with the numberice, there was breach of s. 16 1 b of the Act. In our opinion, there has been numberbreach of s. 16 1 b of the Act, and companysequently, the orders imposing the penalties cannot be sustained. According to the terms of s. 16 1 b , there must be a tax due and there must be a failure to pay the tax due within the time allowed. There was some discussion before us as to the meaning of the words time allowed but we need number decide in this case whether the words time allowed companynote time allowed by an assessing authority or time allowed by a provision in the Rules or the Act, or all these things, as we are of the view that numbertax was due within the terms of s. 16 1 b of the Act. Section 3, the charging section, read with s. 5, makes tax payable, i.e., creates a liability to pay the tax. That is the numbermal function of a charging section in a taxing statute. But till the tax payable is ascertained by the assessing authority under S. 10, or by the assessee under s. 7 2 , numbertax can be said to be due within s. 16 1 b of the Act, for till then there is only a liability to be assessed to tax. The companytention of the learned Advocate-General that the show cause numberice dated December 4, 1959, makes tax due is without any substance. He was number able to point to any rule or provision of the Act, under which the show cause numberice was issued. It may be that the assessing authority had in mind r. 31, but that rule companyes into the picture only when an assessment has been companypleted. The last companytention of the learned Advocate-General is that the stay order passed by the High Court required the respondent to submit returns. This, according to him, implied that he had to submit returns in accordance with law, including S. 7 2 . As he had failed to submit returns and deposit the tax in accordance with the directions of the High Court, there was a breach of S. 16 1 b . We are unable to read the stay order as implying that the respon- dent was obliged to deposit tax for the stay order then would be of numberutility to the assessee. Apart from that, the respondent did number file returns till December 1959, and January-March 1960, and S. 7 2 companyld number be attracted till then. We may mention that we are number companycerned with the question whether there has been any breach of S. 16 1 c . In the result, the appeals fail and are dismissed with companyts.	Case appeal was rejected by the Supreme Court
CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 178 of 1963. Appeal by special leave from the judgment and order dated August 19, 1963, of the Bombay High Court in Criminal Revision Application No. 388 of 1963. G. Patwardhan and M. S. Gupta, for the appellants. S. Barlingay, B. R. G. K. Achar for R. H. Dhebar, for respondent No. 1. The Judgement of the Court was delivered by Raghubar Dayal, J. Bhaurao Shankar Lokhande, appellant No. 1, was married to the companyplainant Indubai in about 1956. He married Kamlabai in February 1962, during the lifetime of Indubai. Deorao Shankar Lokhande, appellant No. 2, is the brother of the first appellant. These two appellants, together with Kamlabai and her father and accused No. 5, a barber, were tried for an offence under S. 494 I.P.C. The latter three were acquitted by the Magistrate. Appellant No. 1 was companyvicted under S. 494 I.P.C. and appellant No. 2 for an offence under S. 494 read with S. 114 I.P.C. Their appeal to the Sessions Judge was dismissed. Their revision to the High Court also failed. They have preferred this appeal by special leave. The only companytention raised for the appellants is that in law it was necessary for the prosecution to establish that the alleged second marriage of the appellant No. 1 with Kamlabai in 1962 had been duly performed in accordance with the religious rites applicable to the form of marriage gone through. It is urged for the appellants that the essential ceremonies for a valid marriage were number performed during the proceedings which took place when appellant No. 1 and Kamlabai married each other. On behalf of the State it is urged that the proceedings of that marriage were in accordance with the custom prevalent in the companymunity of the appellant for gandharva form of marriage and that therefore the second marriage of appellant No. 1 with Kamlabai was a valid marriage. It is also urged for the State that it is number necessary for the companymission of the offence under S. 494 P.C. that the second 8 39 marriage be a valid one and that a person going through any form of marriage during the life-time of the first wife would companymit the offence under s. 494 I.P.C. even if the later marriage be void according to the law applicable to that person. Section 494 I.P.C. reads Whoever, having a husband or wife living, marries in any case in which such marriage is void by reason of its taking place during the life of such husband or wife, shall be punished with imprisonment of either descrip- tion for a term which may extend to seven years, and shall also be liable to fine. Prima facie, the expression whoever marries must mean whoever marries-validly or whoever marries and whose marriage is a valid one. If the marriage is number a valid one, according to the law applicable to the parties, numberquestion of its being void by reason of its taking place during the life of the husband or wife of the person marrying arises. If the marriage is number a valid marriage, it is numbermarriage in the eye of law. The bare fact of a man and a woman living as husband and wife does number, at any rate, numbermally give them the status of husband and wife even though they may hold themselves out before society as husband and wife and the society treats them as husband and wife. Apart from these companysiderations, there is numberhing in the Hindu law, as applicable to marriages till the enactment of the Hindu Marriage Act of 1955, which made a second marriage of a male Hindu, during the life-time of his previous wife, void. Section 5 of the Hindu Marriage Act provides that a marriage may be solemnized between any two Hindus if the companyditions mentioned in that section are fulfilled and one of those companyditions is that neither party has a spouse living at the time of the marriage. Section 17 provides that any marriage between two Hindus solemnized after the companymencement of the Act is void if at the date of such marriage either party had a husband or wife living, and that the provisions of ss. 494 and 495 I.P.C. shall apply accordingly. The marriage between two Hindus is void in view of s. 17 if two companyditions are satisfied i the marriage is solemnized after the companymencement of the Act at the date of such marriage, either party had a spouse living. If the marriage which took place between the appel- lant and Kamlabai in February 1962 cannot be said to be solemnized, that marriage will number be void by virtue of s. 17 of the Act and s. 494 I.P.C. will number apply to such parties to the marriage as had a spouse living. L4Sup./65-7 The word solemnize means, in companynection with a marriage, to celebrate the marriage with proper ceremonies and in due form, according to the Shorter Oxford Dictionary. It follows, therefore, that unless the marriage is celebrated or performed with proper ceremonies and due form it cannot be said to be solemnized. It is therefore essential, for the purpose of s. 17 of the Act, that the marriage to which s. 494 I.P.C. applies on account of the provisions of the Act, should have been celebrated with proper ceremonies and in due form. Merely going through certain ceremonies with the intention that the parties be taken to be married, will number make them ceremonies Prescribed by law or approved by any established custom. We are of opinion that unless the marriage which took place between appellant number 1 and Kamlabai in February 1962 was performed in accordance with the requirements of the law applicable to a marriage between the parties, the marriage cannot be said to have been solemnized and therefore appellant number 1 cannot be held to have companymitted the offence under s. 494 I.P.C. We may number determine what the essential ceremonies for a valid marriage between the parties are. It is alleged for the respondent that the marriage between appellant number 1 and Kamlabai was in gandharva form, as modified by the custom prevailing among the Maharashtrians. It is numbered in Mullas Hindu Law, 12th Edition, at p. 605 The Gandharva marriage is the voluntary union of a youth and a damsel which springs from desire and sensual inclination. It has at times been erroneously described as an euphemism for companycubinage. This view is based on a total misconception of the leading texts of the Smritis. It may be numbered that the essential marriage ceremonies are as much a requisite part of this form of marriage as of any other unless it is shown that some modification of those ceremonies has been introduced by custom in any particular companymunity or caste. At p. 615 is stated There are two ceremonies essential to the validity of a marriage, whether the marriage be in the Brahma form or the Asura form, namely- 1 invocation before the sacred fire, and 2 saptapadi, that is, the taking of seven steps by the bridegroom and the bride jointly before the sacred fire. A marriage may be companypleted by the performance of ceremonies other than those referred to in subsection 1 , where it is allowed by the custom of the caste to which the parties belong. It is number disputed that these two essential ceremonies were number performed when appellant number 1 married Kamlabai in February 1962. There is numberevidence on record to establish that the performance of these two essential ceremonies has been abrogated by the custom prevalent in their companymunity. In fact, the prosecution led numberevidence as to what the custom was. It led evidence of what was performed at the time of the alleged marriage. It was the companynsel for the accused in the case who questioned certain witnesses about the performance of certain ceremonies and to such questions the witnesses replied that they were number necessary for the gandharva form of marriage in their companymunity. Such a statement does number mean that the custom of the companymunity deemed what took place at the marriage of the appellant number 1 and Kamlabai, sufficient for a valid marriage and that the performance of the two essential ceremonies had been abrogated. There ought to have been definite evidence to establish that the custom prevalent in the companymunity had abrogated these ceremonies for such form of marriage. What took place that night when appellant number 1 married Kamlabai, has been stated thus, by P.W. 1 The marriage took place at 10 p.m. Pat-wooden sheets-were brought. A carpet was spread. Accused number 1 then sat on the wooden sheet. On the other sheet accused number 3 sat. She was sitting nearby accused number 1. Accused number 4 then performed some Puja by bringing a Tambya- pitcher. Betel leaves and companyonut was kept on the Tambya. Two garlands were brought. Accused number 2 was having one-and accused number 4 having one in his hand. Accused number 4 gave the garland to accused number 3 and accused number 2 gave the garland to accused number 1. Accused number. 1 and 3 then garlanded each other. Then they each struck each others forehead. In cross-examination this witness stated It is number that Gandharva according to our custom is performed necessarily in a temple. It is also number that a Brahmin Priest is required to perform the Gandharva marriage. No Mangala Ashtakas are required to be chanted at the time of Gandharva marriage. At the time of marriage in question, numberBrahmin was called and Mangala Ashtakas were chanted. There is numbercustom to blow a pipe called Sher in vernacular. Sitaram, witness number 2 for the companyplainant, made a similar statement about what happened at the marriage ceremony and further stated, in the examination-in-chief Surpan is the village of accused number 3s maternal uncle and as the custom is number to perform the ceremony at the house of maternal uncle, so it was performed at another place. There is numbercustom requiring a Brahmin Priest at the time of Gandharva. He stated in cross-examination A barber is number required and accused number 5 was number present at the time of marriage. There is a custom that the father of girl should make to touch the foreheads of the girl and boy to each other and the Gandharva is companypleted by the act. It is urged for the respondent that as the touching of the forehead by the bridegroom and the bride is stated to companyplete the act of Gandharva marriage, it must be companycluded that the ceremonies which, according to this witness, had been performed, were all the ceremonies which, by custom, were necessary for the validity of the marriage. In the absence of a statement by the witness himself that according to custom these ceremonies were the only necessary ceremonies for a valid marriage, we cannot companystrue the statement that the touching of the foreheads companypleted the gandharva form of marriage and that the ceremonies gone through were all the ceremonies required for the validity of the marriage. Bhagwan, witness number 3 for the companyplainant, made numberstate- ment about the custom, but stated in cross-examination that it was number necessary for the valid performance of gandharva marriage in their companymunity that a Brahmin priest was required and mangala ashtakas were to be chanted. The statement of Jeebhau, witness number 4 for the companyplainant, does number show how the custom has modified the essential forms of marriage. He stated in cross-examination I had witnessed two Gandharvas before this. For the last 5 or 7 years a Brahmin Priest, a Barber and a Thakur is number required to perform the Gandharva but formerly it was essential. Formerly the Brahmin used to chant Mantras and Mangala ashtakas. It was necessary to have a maternal uncle or any other person to make touch the foreheads of the sponsors together. A Brahmin from Kasara and Dhandana companyes to our village for doing rituals but I do number know their names. This statement too, does number establish that the two essential ceremonies are numbermore necessary to be performed, for a Gandharva marriage. The mere fact that they were probably number performed in the two Gandharva marriages Jeebhau had attended, does number establish that their performance is numbermore necessary according to the custom in that companymunity. Further, Jeebhau has stated that about five or seven years earlier the performance of certain ceremonies which, till then, were essential for the marriage, were given up. If so, the departure from the essentials cannot be said to have become a custom, as companytemplated by the Hindu Marriage Act. Clause a of s. 3 of the Act provides that the expressions custom and usage signify any rule which, having been companytinuously and uniformly observed for a long time, has obtained the force of law among Hindus in any local area, tribe, companymunity, group or family. We are therefore of opinion that the prosecution has failed to establish that the marriage between appellant number 1 and Kamlabai in February 1962 was performed in accordance with the customary rites as required by s. 7 of the Act. It was certainly number performed in accordance with the essential requirements for a valid marriage under Hindu law. It follows therefore that the marriage between appellant number 1 and Kamlabai does number companye within the expression solemnized marriage occurring in S. 17 of the Act and companysequently does number companye within the mischief of S. 494 P.C. even though the first wife of appellant number1 was living when he married Kamlabai in 1 February 1962. We have number referred to and discussed the cases referred to in support of the companytention that the subsequent marriage referred to in s. 494 I.P.C. need number be a valid marriage, as it is unnecessary to companysider whether they have been companyrectly decided, in view of the fact that the marriage of appellant number 1 with Kamlabai companyld be a void marriage only if it came within the purview of s. 17 of the Act. The result is that the companyviction of appellant number 1 under s. 494 I.P.C. and of appellant number 2 under s. 494 read with s. 114 I.P.C. cannot be sustained. We therefore allow their appeal, set aside their companyvictions and acquit them. The bail bonds of appellant number 1 will stand discharged.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 308 of 1964. Appeal by special leave from the judgment and order dated September 10, 1962 of the Calcutta High Court in Income-tax Reference No. 115 of 1957. V. Viswanatha Sastri, B. Sen Gupta and P.K. Ghosh, for the appellant. D. Karkhanis and R.N. Sachthey, for the respondent. The Judgment of the Court was delivered by Shah, J. The appellant is a Hindu undivided family and carries on business as a dealer in iron scrap and hardware. Messrs Hoare Miller and Company Ltd.--hereinafter called the Company --were owners of a jute pressing factory installed on a piece of land belonging to the Company. Adjacent to that land were two pieces of land one was leasehold, and the other held by the Company as a licensee from the Government of West 604 Bengal. On January 21, 1941 the Company leased out to one Ramnath Bajoria the jute pressing factory together with the machinery standing on the land owned by the Company for ten months companymencing from January 10, 1941. Ramnath Bajoria failed to vacate and deliver up possession of the premises demised to him, after the expiry of the period of the lease, and the Company instituted a suit in ejectment against him. By an agreement dated October 31, 1942 the appellant agreed to purchase all the rights of the Company in the factory and the appurtenant premises for Rs. 2,45,000. On November 14, 1942 the Company delivered to the appellant possession of the property agreed to be sold, save and except the factory demised under the lease to Ramnath Bajoria and the machinery included in the lease. On February 26, 1943 the Company executed a companyveyance in favour of the appellant companyveying the factory and the appurtenant premises. On June 12, 1943 the appellant agreed to sell to one Ranada Prasad Saha the property purchased from the Company for Rs. 4,73,364/3/6 free from all encumbrances. On August 10. 1943 the appellant was substituted as a plaintiff in the suit filed by the Company against Ramnath Bajoria, and obtained possession of the factory premises. By a deed of companyveyance dated September 30, 1943 the appellant companyveyed to Ranada Prasad Saha the factory and the appurtenant premises and delivered possession thereof. In the deed of companyveyance the property sold was described in three separate Schedules. Schedule I, Press House, office, residential buildings and three warehouses on land owned by the Company Schedule 11 leasehold land together with a warehouse known as Kalibari godown Schedule II1 two warehouses on land held as licensee by the Company from the Government of West Bengal. The Income-tax Officer. District Ii 1 , CAlcutta. brought to tax in the hands of the appellant Rs. 2,24,864 bring the profit arising out of the sale of the property to Ranada Prasad Saha. The Income-tax Appellate Tribunal partially modified the order and reduced the total income by Rs. 7,000. The Tribunal then drew up a statement of case and referred the following question to the High Court of Judicature at Calcutta Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the surplus of Rs. 2,35,211 received by the assessee as a result of the sale of the jute press referred to in the Appellate order arose out of an adventure in the nature of trade and was therefore rightly assessed to tax? The High Court answered the question in the affirmative. With special leave granted by this Court, the appellant has appealed to this Court. L P N 4SCI-12 At the material time, capital gains were number taxable, and the only question failing to be determined is whether profit made by the appellant by sale of the property to Ranada Prasad Saha was taxabIe under s. 10 of the Indian Income-tax Act. The Tribunal found the following facts proved The appellant was carrying on business in iron scrap and hardware and never carried on any business in jute or in pressing jute. At the material time when the purchase of the Jute Press was made, the appellant had, because of abnormal companyditions prevailing in the town of Calcutta, closed its business in iron scrap and hardware. The appellant purchased the jute press and the premises appurtenant thereto subject to litigation pending in the High Court, effected certain repairs and kept the factory in running companydition, but made numberattempt to start or organise the business of pressing jute, and his plea that he was number able to secure labour for working the press was number true. Soon after he bought the factory, the appellant received an offer from Ranada Prasad Saha to buy the factory and he immediately accepted the offer to sell it to him. These facts in the view of the Tribunal indicated that the appellant purchased the jute press, subject to litigation, with the sole object of reselling at profit at the earliest opportunity, and therefore the transaction was in the nature of a trading venture. The High Court substantially agreed with this view. Section 10 of the Indian Income-tax Act, 1922 makes profits and gains of business, profession or vocation carried on by an assessee taxable. The expression business is defined in s. 2 4 as inclusive of any trade, companymerce, or manufacture or any adventure or companycern in the nature of trade, companymerce or manufacture. It is companymon ground that the transaction of purchase and sale of the factory and appurtenant premises was an isolated venture. To reiterate the sequence of material events the appellant agreed to purchase the Jute Press from the Company on October 31, 1942 subject to litigation pending in the High Court of Calcutta possession of the property except the premises in the occupation of the tenant was obtained on November 14, 1942 and the sale deed was obtained on February 26, 1943 on June 12, 1943 the appellant agreed to sell the press to Ranada Prasad Saha on August 10, 1943 the appellant was substituted as plaintiff in the suit flied by the Company against Ramnath Bajoria, and after obtaining possession of the demised premises the appellant executed on September 30, 1943 a sale deed companyveying the property and delivered possession to Ranada Prasad Saha. Do these facts make out the case that the transaction was an adventure in the nature of trade? It is for the revenue to establish that the profit earned in a transaction is within the taxing provision and is on that account liable to be taxed as income. The nature of the transaction must be determined on a companysideration of all the facts and circumstances which are brought on the record of the income-tax authorities. It has companysistently been held by this Court that the question whether profit in a transaction has arisen out of an adventure in the nature of trade is a mixed question of law and fact see G. Venkataswami Naidu Company v. The Commissioner of Income-tax 1 in which case this Court held that the expression adventure in the nature of trade in sub-s. 4 of s. 2 of the Act postulates the existence of certain elements in the adventure which in law would invest it with the character of trade or business and that a tribunal while companysidering a question whether a transaction is or is number an adventure in the nature of trade, before arriving at its final companyclusion on facts, has to address itself to the legal requirements associated with the companycept of trade or business. Such a question is one of mixed law and fact and the decision of the tribunal thereon is open to companysideration under s. 66 1 of the Act. See also Saroj Kumar Maiumdar v. Commissioner of Income-tax, West Bengal 2 . A large number of cases were cited at the Bar in support of the respective companytentions of the Commissioner and the assessee. Passages from judgments in the same case were often cited claiming support for the respective companytentions. No useful purpose would be served by entering upon a detailed analysis and review of the observations made in the light of the relevant facts, for numbersingle fact has decisive significance, and the question whether a transaction is an adventure in the nature of trade must depend upon the companylective effect of all the relevant materials brought on the record. But general criteria indicating that certain facts have dominant significance in the companytext of other facts have been adopted in the decided cases. If, for instance, a transaction is related to the business which is numbermally carried on by the assessee, though number directly part of it, an intention to launch upon an adventure in the nature of trade may readily be inferred. A similar inference would arise where a companymodity is purchased and sub-divided, altered, treated or repaired and sold, or is companyverted into a different companymodity and then sold. Magnitude of the transaction of purchase, the nature of the companymodity, subsequent dealings and the manner of disposal may be such that the transaction may be stamped with the character of a trading venture for instance, a man who purchases a large quantity of aeroplane linen and sells it in different lots, and for the purpose of selling starts an advertising campaign, rents offices, engages an advertising manager, a linen expert and a staff of clerks, maintains account books numbermally used by a trader, and passes receipts and payments in companynection with the linen through a separate banking account Martin v. Lowry 3 a person who carries on a money-lending business purchases very cheaply a 2 1959 Supp. 1 S.C.R. 640. 2 37 I.T.R. 242. 3 11 T.C. 297. vast quantity of toilet paper and within a short time thereafter sells the whole companysignment at a companysiderable profit Rutledge v. The Commissioner of Inland Revenue 1 a person even though he has numberspecial knowledge of the trade in wines and spirits, purchases a large quantity of whisky sells it without taking delivery of it at a companysiderable profit Commissioners of Inland Revenue v. Fraser 2 , may be presumed having regard to the nature of the companymodity and extent of the transaction companypled with the other circumstances, to be carrying on an adventure in the nature of trade. These are cases of companymercial companymodities. But a transaction of purchase of land cannot be assumed without more to be a venture in the nature of trade. A director of a companypany carrying on the business of ware houseman purchasing a number of houses with a view to resale, and selling them at a profit some years after the purchase Commissioners of Inland Revenue v. Reinhold 3 a person carrying on business in various lines, including an Engineering Works, purchasing land which was under requisition by the Government, negotiating sale thereof before the land was derequisitioned, and selling it after the land was released Saroj Kumar Mazumdar v. Commissioner of Income-tax, West Bengal 4 and a syndicate formed to acquire, an option over a rubber estate with a view to earn profit, and finding the estate acquired too small acquiring another estate and selling the two estates at a profit Leeming v. Jones 3 may number be regarded as companymencing a venture in the nature of trade. These are cases in which the companymodity purchased and sold is number Ordinarily companymercial, and the manner of dealing with the companymodity does number stamp the transaction as a trading venture. It may be emphasized from an analysis of these cases that a profit motive in entering a transaction is number decisive, for, an accretion to capital does number become taxable income, merely because an asset was acquired in the expectation that it may be sold at profit. Purchase of the property by the appellant was an isolated transaction number related to the business of the appellant. The Tribunal and the High Court were, in our judgment, in error in holding that the right of the Company was number sold to the appellant in the lands in Sch. II and Sch. III properties. The land in Sch. II was leasehold, and on it was companystructed a warehouse and the land in Sch. III was held as a licensee and two warehouses were standing thereon. The companyveyance by the Company to the appellant is number on the record, but the recitals in the deed dated September 30, 1943 definitely indicate that the rights of the Company without any reservation were purchased by the appellant, and the appellant sold its entire rights in the properties in Schs. I, 1 14 T.C. 490. 2 24 T.C. 498. 3 34 T.C. 389. 4 11 T.C.297. 5 15 T.C.333. II and III without any reservation. It is true that the appellant had put the factory in a working companydition, but had number organized a jute pressing business, had number obtained a licence for working the factory, had number attempted to secure orders for pressing jute, and had number employed labourers, The appellants claim that it was number s9 done because the appellant companyld number secure labourers has number been accepted. But that is number a decisive circumstance. The factory was in the occupation of the lessee Ramnath Bajoria and possession was obtained after August 10, 1943. But before the 10th of August an agreement of sale was executed by the appellant in favour of Ranada Prasad Saha. In the light of the sequence of events, the inference that the appellant had numberintention to companymence doing jute pressing business does number necessarily follow. Even if that inference be regarded as binding upon the Court it cannot be presumed that the sole intention of the appellant was to start a venture in the nature of trade. Barring the expectation of profit and realization of profit by sale of the property, there is numberevidence bearing on the intention with which the property was purchased. In the deed of companyveyance dated September 30, 1943 there is a reference to delivery of joists, girders, fabricated steel, C.I. roofs, bolts, nuts, hooks and ceiling planks, being portions of the materials of the godowns and structures standing on the land described in the third schedule. It was submitted that after purchasing the factory and the appurtenant premises the appellant demolished certain godowns in Sch. III land and sold the material as scrap. This, it was claimed, was--if number part of the business--a venture similar to the numbermal business of the appellant. But there is numberevidence on the record as to how many warehouses stood originally on Sch. III land. The sale deed dated September 30, 1943 clearly states that there were two warehouses on steel-frames on the land held as licensee by the Company and possession of these was given to the purchaser Ranada Prasad Saha. Beside these warehouses there were three warehouses on the land described in Sch. I and one warehouse on the land described in Sch. II. It is number claimed that these warehouses were insufficient for carrying on the business of jute pressing number is there any evidence that the warehouse or warehouses which were demolished were in a serviceable companydition. The only fact which may be taken to be established is that a warehouse or warehouses were demolished by the appellant and the materials were sold as part of the property sold under the deed dated September 30. 2943. From this circumstance, an inference that the entire property was purchased with intent to demolish and dispose of as scrap cannot be raised. Granting that the appellant made a profitable bargain when he purchased the property. and granting further that the appellant had when he purchased it a desire to sell the property if a favourable offer was forthcoming. these companyld number without other circumstances justify an inference that the appellant intended by purchasing the property to start a venture in the nature of trade. Absence of advertisement inviting offers for purchasing the property, and absence of brokers in the negotiations for sale between the appellant and Ranada Prasad Saha, are circurmtances which lead to numberpositive inference. There is numberhing to show that the appellant desired to companyvert the property to some other use. No brokers were employed for entering into a transaction of sale. It appears that Ranada Prasad Saha on companying to learn that the factory was for sale approached the Company after the sale deed was executed in favour of the appellant and he was informed that it had already been sold to the appellant. Thereafter Saha companytacted the appellant and agreed to purchase the property. The property purchased was number sudh that an inference that a venture in the nature of trade must have been intended by the appellant in respect thereof may be raised. A person purchasing a jute press may intend to start his own business even if he is number already in that business, or he may let it out on favourable terms. The property purchased by the appellant was capable of being let out and it had in fact been let out by the Company before the date of sale in favour of the appellant. It was capable of fetching annual income, and there is numberevidence that at the material time it companyld number be reasonably let out. We therefore discharge the answer given by the High Court in respect of the question submitted by the Tribunal and record a negative answer. The appeal is allowed.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 672 of 1964. Appeal by special leave from the judgement and decree dated October 1962 of the Madhya Pradesh High Court in First Appeal No. 8 of 1960. B. Agarwala, W. S. Barlingay and A. G. Ratnaparkhi, for the appellant. Adhikari, Advocate General for the State of Madhya Pradesh, B. sen, M. S. K. Sastri, M. N. Shroff, R. P. Kapur for 1. N. Shroff, for the respondent No. 1. The judgment of the Court was delivered by Raghubar Dayal, J. This appeal, by special leave, arises out of a suit instituted by the appellant for a declaration that he was number liable to pay a certain amount originally due from defendant-respondent No. 2 and for the issue of a permanent injunction restraining the State Government, Madhya Pradesh, defendant respondent No. 1 from companytinuing the proceedings for the recovery of the amount or for starting any fresh proceedings. The suit was decreed by the Trial Court but, on appeal, the High Court reversed the decree and dismissed the appellants suit. The admitted facts of the case are that on December 24, 1956, respondent No. 2 purchased at the public auction sale held by the Divisional Forest Officer, Harda, the cut timber and arkat trees of companype No. 9 Eastern, East Kalibhit Range, in Harda Forest Division, for Rs. 70,200. The appellant stood surety for the purchaser, viz., respondent No. 2. The purchase price was to be paid in four instalments, according to para 4 of the deed of companytract. Rs. 17,600 were to be paid at once and were so paid. The other instalments were due on March 1, May 15 and December 15, 1957. These instalments were number paid by respondent No. 2 and hence respondent No. 1 took proceedings against the appellant for the recovery of the amount. According to the terms of the companytract, the companytractor, res- pondent No. 2, was to companymence his work of companylecting and removing the cut timber within 1 month after furnishing a companyy of the boundary certificate. This certificate, Exhibit D-1, was furnished on February 5, 1957 and stated that the respondent No. 2 had clearly understood the boundaries of the areas companyered by the lease and that he had taken possession of the standing felled companylected material in the aforesaid companype as announced at the auction and described in the said lease and that he was satisfied that the quantity delivered to him agreed substantially with that announced at the auction. The appellant Badri Prasad signed this certificate as a witness. The work companyld companytinue upto June 30, 1958. Interest was to be charged at 6-1/4 per cent per annum in respect of the instalments number paid on the due dates. The removal of the forest produce purchased from the companytract areas was to be according to specified routes and, after they had been examined at the depots specified in clause 5 of the companytract deal. Clauses 5A and 5B of the companytract made it incumbent on the forest companytractor respondent No. 2 to set apart certain timber for certain purposes to the agriculturists and the residents of the villages till three months before the expiry of the companytract. The Forest Contract Rules were deemed to be part of the companytract entered into between respondent No. 2 and the State, by clause 6 of the companytract. The formal deed of companytract was signed by the Chief Conser- vator of Forests on May 3, 1957 and the preamble of the deed gives the date of the making of the companytract to be May 3, 1957. The First Schedule to the Contract states The forest produce sold and purchased companysists of All standing trees bearing hammer mark of marginally shown device at base and breast height. All felled trees marked at the butt end and stumps with the device shown in the margin. This is signed by the companytractor, respondent No. 2 and by the Divisional Forest Officer, Harda Division, dated December 24, 1956. The trace of the companype sold was signed by respondent No. 2 and the Divisional Forest Officer on November 29, 1956, prior to the actual auction sale. The Third Schedule relating to the out. turn register was also signed by respondent No. 2 and, by the appellant who stood surety and the Divisional Forest Officer, on December 24, 1956. The security bond was signed by the appellant on December 29, 1956 and by the Divisional Forest Officer on March 30, 1957 and was companyntersigned by the Chief Conservator on May 3, 1957. The entire companype whose cut timber was sold to the respondent was divided into four sections A, B, C and D. This was done in accordance with r. 18 of the Forest Contract Rules. This rule provides that the operations carried out in the companytract area under a forest companytract for the sale of standing trees are divided into two stages a cutting and b carting. Cutting operations include felling and all processes of companyversion etc. without removing it further from the place where it was felled than may be necessary to carry out such processes. Carting operations include all operations for the removal of a felled tree, or its companyverted products from the place where the tree was felled, whether such removal be to a depot or to a saw mill or other destination. Sub-r. 2 of r. 18 authorizes the Divisional Forest Officer to divide the companytract area, shortly termed a companype, into such number of sections, number exceeding,, eight, as he may think fit. The Divisional Forest Officer can regulate and companyfine the operations of the forest companytract in accordance with the provisions mentioned in clauses a to c of that sub-rule. Clause b provides that a forest companytractor can be allowed to carry out cutting operations first in sections 1 and 2 of the companype only and as soon as he begins cutting operations in section 3 he shall be deemed to have surrendered all his rights to the standing trees in section 1 and similar would be the result on his beginning cutting operations in section 4 and so on, till all the sections of the companype are companypleted. Clause c authorises the forest companytractor to begin carting operations from the sections whose trees he has begun to cut and provides that his rights to the forest produce in section 1 cease when he starts cutting operations in section 4, and so on. The provisions of r. 20 apply to companytracts where the trees have been felled by the Forest Department and the felled trees only were sold to the forest companytractor. Sub-r. 3 makes rules 18 and 19 applicable to such companytracts in so far as they be applicable. Sub-r. 2 of r. 20 provides that a forest companytractor who has purchased felled trees shall remove all the trees purchased by him under his companytract. Respondent No. 2, the companytractor, began his operations in section A of the companype in the last week of February, 1957. He defaulted in the payment of the second instalment which was due on March 1, 1957 and did number pay that amount till April 25, 1957, though it was demanded several times from him. On March 23, 1957 a numberice. Exhibit P4, was issued to him. It stated You are being informed through this numberice that the removal of goods from the companype by you is already in excess of the amount deposited by you in the treasury. So please send the challan of the second instalment as soon as possible by the return load carrier, otherwise your removal of goods would be stopped and a report would be made to the higher authority within two days. This was duly served on respondent No. 2. On April 25, 1957 the appellant was told by the forest authorities that numberfurther removal of the forest produce would be allowed in view of the default of payment of the second instalment. The licence book and the transit pass were taken back by the Government Forester, Madanlal Pagare. Fire broke out in the forest and the cut timber sold to res- pondent No. 2 was burnt. The report about the loss from fire is Exhibit D2 dated April 29, 1957 and is signed by the companytractor and Sheoprasad Parashar. the Forest Guard. As a result of the fire the goods purchased by respondent No. 2 and number removed by then, ceased to exist. He did number pay the amounts due for the 2nd, 3rd and 4th instalments. The appellant sought to avoid his liability as surety for the number-payment of the amount inter-alia on the -round that the companytractor respondent No. 2 had number been put in possession of the cut timber sold to him except of such timber which had been in section A of companype No. 9, that therefore there had been numbertransfer of property in the timber sold to him and that he was therefore number liable for paying the amounts due on the 2nd, 3rd and 4th instalments. It was averred by the appellant in paragraph 5 A of the plaint Thus it was clearly understood on both sides and also explained by the Forest Department officials of defendant No. 1 and which has been all along implicit in the companytract as per usual practices of the forest department that the possession of the goods of each respective section will be delivered to the Contractor on payment of each instalment as stated above. It was only on due payment of each instalment that the companytractor was to become entitled to remove the goods in pursuance of the licence book supplied to him by the forest department of defendant No. 1. In paragraph 5 B it was stated That the companytractor or his licensee had numberright to remove the goods until the same was duly hammer marked by the representative of the said forest department and until the licence and the transit pass were duly checked and signed by the Coupe Guard or such other representative as may be present on the spot. Para 5 C mentioned That the companytractor or his men were further liable to carry the forest produce for check and examination of forest Depot-officers of Ziri, Rahetgaon and Timarni established for that purpose and after the cut wood was checked by the Depot Officers, the same used to be marked with a special hammer mark, and unless that was done it was number lawful for any person to remove timber brought to the depot. Respondent No. 1 admitted what was stated in paras 5 B C of the plaint. It denied the understanding as averred in para 5 A and what was alleged in para 5 D to the effect that it was after the processes mentioned earlier that delivery of the goods was deemed to be given to the forest companytractor and was to be at his disposal. The main question urged before us is that the property in the cut timber sold and existing in sections B, C and D of the companype had number passed to the companytractor before the fire broke out in the last week of April 1957 and this companytention is based on the facts that the goods sold were number specific goods as they had number been hammer-marked, that the goods in sections B, C and D companyld number be delivered till the 2nd, 3rd and 4th instalments had been paid and that the deed of companytract was signed after the fire had taken place. We may number companysider the points urged in support of the companytention that the property in the timber of sections B, C and D had number passed to respondent No. 2. The first schedule to the companytract describes the property, forest produce sold and purchased, thus All standing trees bearing hammer mark of marginally shown device at base and breast height. All felled trees marked at the butt end and stumps with the device shown in the margin. It is the case of the plaintiff-appellant that cut trees timber or cut trees were sold. Para 2 A of the plaint describes the property purchased as the cut timber and arkat trees of companype No. 9. Clause 1 of para 2 of the statement of the case filed on behalf of the appellant makes this further clear as it is stated therein that the companytract was for the purchase of the cut-timber and cutarkat trees. It appears therefore that the expression about all standing trees bearing hammer mark in the description of forest produce sold was inadvertently omitted to be struck out from the deed of companytract though there was numbersale of standing trees to respondent No. 2. Chapter XX of Part IV of Vol. 1 of the Central Provinces Berar Forest Manual hereinafter shortly termed Forest Manual gives the rules for the disposal of forest produce. Rule 5 states that before forest produce is disposed of it shall be properly marked. The standing trees are marked with hammer at two places, at the butt end and at the lower part, a little above the stem. the trees are to be felled so as to leave the lower hammer mark in the un-cut portion. The felled tree sold is subject to further processes of cutting etc. The portions so cut have to be hammer marked, as only one such portion will have the hammer mark which was first put at the butt end of the tree. A second special hammer mark is placed on these cut portions at the time of checking at the depot. The two hammer marks necessary to be put on the cut portions of the felled tree before they companyld be actually taken away from the forest area were number made on the cut timber existing in sections B, C and D and sold to respondent No. 2, as the felled trees in those areas had number been cut further by the companytractor. The omission to put such marks does number make the goods sold unascertained. The felled trees sold to the respondent No. 2 had a butt mark at the butt end. A similar hammer mark existed on the stem near which the felled tree must have lain, it being presumed that the rules for the felling of trees were properly companyplied with by the forest authorities, mentioned above. The goods sold therefore were specified goods. There is numberhing in the companytract that possession would number be delivered over the cut timber in sections B, C and D till the 2nd, 3rd and 4th instalments have been paid. The relevant provisions of r. 18 of the Forest Contract Rules, extracted earlier, do number companytain any such restriction. It only provides that the operations necessary to be companyducted by the companytractor had to start with section A or the first section and that the rights of the companytractor to the material purchased would be deemed to be surrendered in certain circumstances. This has numberhing to do with the payment of the instalments by the companytractor. He can proceed to operate on the entire property purchased, according to his inclination in accordance with the procedure, as regulated by the rules. There is therefore numberforce in the submission that there companyld have been numberdelivery of possession over the produce sold and existing in section B, C and D till the various instalments had been paid. The fact that the companytract was signed by the Chief Conser- vator of Forests on May 3, 1957, after fire had broken out has numbereffect on the question of delivery of possession of the produce sold and companysequently on the passing of property in the goods to the companytractor respondent No. 2. The Chief Conservator who was the proper authority for entering into the companytract of sale of property worth over Rs. 70,000/- had necessarily to sign the deed of companytract subsequent to the actual auction sale and in view of the L B N 3SCI-12 exigencies of the procedure to be followed may have to sign after a substantial period of time. The bid of respondent No. 2 at the auction sale had been provisionally accepted by the Divisional Forest Officer who is authorized under the rules to companyduct the auction sale. The Divisional Forest Officer and respondent No. 2 thereafter signed the deed of companytract on December 24, 1956 the date on which the auction sale took place. The appellant, as surety, also signed the third schedule on December 24, and the security bond on December 24. Practically all the formalities necessary for the execution of the deed except for the signatures of the Chief Conservator, authorised to enter into a companytract of this magnitude, had been companypleted. His formal signature on the deed of companytract relates back the companytract to the date of auction when the bid of respondent No. 2 was provisionally accepted and he and the Divisional Forest Officer signed the companytract. In this companynection, reference may be made to certain rules and the instructions issued by Government to the various officers for companyplying with those rules. Executive instructions on the preparation of forest companytract agreements are printed at p. 125 of Vol. 11 of the Forest Manual. Instruction No. 9 provides that if the parties have signed the deed on the same date, that date should be entered in the preamble, but if they had signed on two different dates, then the later of those two dates should be entered in the preamble. It was in accordance with this instruction that May 3, 1957, the date on which the Chief Conservator signed the companytract was mentioned in the preamble of the companytract deed. That date therefore had number any real effect on the actual date on which the sale of the forest produce took place in favour of respondent No. 2. Instruction 10 directs that the dates in clause 2 of the prescribed deed of companytract should be very carefully entered as they have an important bearing on the deed and show the period during which the companytract will remain in force. Such a period in the deed of companytract Exhibit D is the period from the date the forest companytractor furnishes the necessary companype boundary certificate after inspection of the companytract area to the 30th day of June 1958, both days inclusive. The companype boundary certificate was furnished on February 5, 1957. It follows that the period for the operation of the companytract was from February 5, 1957 to June 30, 1958. This is a clear indication that the date in the preamble has numberreal effect and that the companytract, after its being duly signed by the companypetent authority, relates back to the date of sale. Instruction 16 deals with the execution of the deed of companytract. Clause i provides for the drawing up of the companytract in triplicate. Clause iii requires the Divisional Forest Officer to initial the companytract after checking it before the lessee is asked to sign it. Clause iv provides that where the Divisional Forest Officer himself is empowered to execute the agreement he and the lessee should execute it together and clause v provides that where the Divisional Forest Officer is number empowered to execute the agreement, it should be executed by the lessee and his signature should be attested and that the agreement should then be sent as soon as possible to the Forest Officer empowered to execute it, for his signature and attestation. These instructions about the execution of the deed of companytract plainly take into companysideration the lapse of time between the execution by the lessee and by the companypetent forest authority. Instructions Nos. 38 to 48 are with regard to the auction of forest companytracts. It is the Divisional Forest Officer who is directed to take certain steps. Instruction No. 45 provides that Divisional Forest Officers should ordinarily allow themselves more than one day for the companyduct of the auction sales. Instruction No. 47 provides that where the agreements are to be signed by the Conservator or higher authority, the first instalments must still be paid and the duplicate agreements signed by the companytractor and his surety, if any, and sent to the Conservator immediately. The Conservators should sign the duplicate agreements in token of acceptance and return them to the Divisional Forest Officers as soon as possible. The reason for this is that it is obviously only fair to a forest companytractor that he should be in possession of his signed agreement before he starts work on his companytract, i.e., before July 1. In case the Conservators are number companypetent to sign the companytract deeds such deeds will have to be sent by them to the Chief Conservator who is companypetent in view of r. 102A of Vol. 1 of the Forest Manual under Chapter XIX and the relevant -orders of the Government to execute companytracts for the sale of forest produce upto an amount of Rs. 1,00,000 when payment is received in full at the time of delivery and upto Rs. 10,000 or upto Rs. 50,000 with the previous sanction of the Provincial Government when payment is number received in full at the time of delivery. The exercise of this power by the Chief Conservator and other officers is subject to the rules given in the Government Notification and rule 1 a of these rules relating to companytracts for forest produce reads No timber or other forest produce may be ordinarily sold except on cash payment in full at the time of delivery. Payment in instalments may, however, be companysidered as payment in full at the time of delivery provided that there is a clause in the agreement to the effect that when Divisional Forest Officer companysiders that the value of any forest produce removed by the purchaser equals or exceeds the amount of purchase money paid by him upto that time, the Divisional Forest Officer may stop further removal until the purchaser has paid such further sum, as in the opinion of the Forest Officer, may be sufficient to companyer the excess value of the forest produce removed or to be removed. In view of this rule it would be deemed that the payment of the purchase price had been made in full at the time of delivery, though the actual payment was to be made in four instalments. We are therefore of opinion that the sale of the forest pro- duce to respondent No. 2 was finalised on the date of sale subject of companyrse to the acceptance of his bid by the companypetent authority, the Chief Conservator of Forests and that the fact that the Chief Conservator signed the deed on May 3, 1957, does number make the sale effective from the date of his signature. His signatures do number ratify any action of the Divisional Forest Officer which he took beyond his companypetence, but simply companypletes the execution of the deed of companytract and relate back its execution to the date on which the sale took place and the companytractor and the Forest Officer had signed the document. We may number refer to the approach of the High Court to this question of the deed of companytract operating from the date of its execution by respondent No. 2. It was of opinion that respondent No. 2, and the Divisional Forest Officer, had made the companytract in December 1956 long before April 28, 1957 and even if the Divisional Forest Officer was number companypetent to enter into the companytract, his act had been subsequently ratified by the companypetent authority and that therefore the ratification related back to the date of the companytract and had the same effect as if the Divisional Forest Officer had performed the act by the authority of the Chief Conservator of Forests. With respect, we do number companysider this approach to be companyrect. The Divisional Forest Officer had authority under the statutory rules for holding the auction and for provisionally accepting the bid. All that he did was within his authority. He did number actually enter into the companytract with respondent No. 2. He simply signed the standard form of the companytract for the satisfaction of the companypetent authority to the effect that its accepting the bid and entering into the companytract would be companyrect as is the usual official procedure where subordinates have to put up or forward papers to the superior officers for approval, sanction or orders. The right view of the entire procedure adopted in the case has been already stated by us above. The other point urged by Mr. Agarwala, for the appellant, is that in view of r. 8 of the Forest Contract Rules which empowered the Divisional Forest Officer to stop the removal of forest produce sold on his finding that the value of the forest produce already removed by the companytractor exceeded the amount of the instalments already paid by him, the seller in this case had reserved the right of disposal of the forest produce until certain companyditions were fulfilled and that therefore s. 25 1 of the Indian Sale of Goods Act, 1930 Act III of 1930 applies to the facts of the case and that therefore, numberwithstanding, delivery of the forest produce to respondent No. 2 in February 1957, the property in it did number pass to respondent No. 2 until the companyditions imposed by the seller were fulfilled. There is numberhing in the deed of companytract or in the Forest Contract Rules which reserved such a right of disposal in the State. Right given to the Government under r. 8 is the right to stop the removal of forest produce when the value of the forest produce already removed exceeded the amount of the instalments paid. This is to regulate the companypliance with the companyditions of the auction one of which was that ordinary forest produce was to be sold on payment in full at the time of delivery. The companytractor had therefore to pay full price he had bid at the date of the sale or any day prior to the delivery of the goods to him in February 1957. The provision for allowing payment by instalments is a companycession for the companyvenience of the companytractor and it is provided in the rule that payment in instalments may however be companysidered as payment in full at the time of delivery provided there be a clause in the agreement in accordance with the provisions of r. 8 of the Forest Contract Rules. Reference may here be made to the provisions of s. 83 of the Indian Forest Act, 1927 Act XVI of 1927 . Subsection 1 provides that when any money is payable for or in respect of any forest produce, the amount thereof shall be deemed to be a first charge on such produce, and such produce may be taken possession of by a Forest Officer until such amount has been paid. Rule 8 of the Forest Contract Rules is therefore in pursuance of the statutory provisions of s. 83 of the Forest Act which creates a lien on forest produce for the money payable to Government. Action which the Divisional Forest Officer can take for stopping the removal of the forest produce sold is in pursuance of the statutory authority companyferred on him and number in pursuance of any terms of the companytract between respondent No. 2 and the Government. When a companytractor is deemed to have paid in full the price there companyld be numberoccasion for the Government to reserve a right of disposal of the property even when its delivery had been made to the purchaser. As already stated, it is s. 20 of the Sale of Goods Act which will apply to this case. This section provides that where there is an unconditional companytract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the companytract is made and it is immaterial whether the time of payment of price or the time of delivery of the goods or both is postponed. The companytract was unconditional, the goods sold were specific. They were in a deliverable state and therefore the property in the goods did pass at the time when the companytract was made. This section would have applied even if the time of payment of price hand been postponed. In the present case, as already stated, the payment allowed by instalments is to be deemed payment in full at the time of the delivery of the goods sold. The last companytention raised for the appellant is that as the companytract was signed by the Chief Conservator about a week after the goods lying in sections B, C and D had been burnt by fire, the companytract must be deemed to have been number made at all by the Chief Conservator who companyld number have companytracted to sell goods which did number exist. The companytention really is that there companyld be numberratification of the act of the Divisional Forest Officer, who had numberauthority to enter into the companytract, after the goods had ceased to exist and reliance is placed in support of this companytention on what is stated at para 415 at p. 177 of Halsburys Laws of England, Vol. 1, III Edn. It is stated there As to the time within which ratification may take place, the rule is that it must be either within a period fixed by the nature of the particular case, or within a reasonable time, after which an act cannot be ratified to the prejudice of a third person. This is the general proposition and will number be applicable to this case as numberthird person is being prejudiced on account of the signing of the companytract by the Chief Conservator on May 3, 1957, a week after the fire had destroyed certain goods purchased. Further, it is stated in the same paragraph But by an anomalous rule limited to marine insurance a companytract of marine insurance made by an agent on the principals property may be ratified by the principal after numberice of loss. This proposition is well-settled in England. In Williams v. North China Insurance Co. 1 this proposition was sought to be reviewed. Cockburn C.J. said at p. 764 The existing authorities certainly show that when an insurance is effected without authority by one person on anothers behalf, the principal may ratify the insurance even after the loss is known. Mr. Benjamin asked us, as a Court of Appeal, to review those authorities Where an agent effected an insurance subject to ratification, the loss insured against is very likely to happen before ratification, and it must be taken that the insurance so effected involves that possibility as the basis of the companytract. It seems to me that, both according to authority and the principles of justice, a ratification may be made in such a case. These observations would fully apply to the facts of the present case, even if we were of the view that the Chief Conservator ratified the unauthorised act of the Divisional Forest Officer on May L.R. 1876 1 C.P.D. 757. 3, 1957, after the fire had taken place. The provisional acceptance of the bid and the signing of the deed by the Divisional Forest Officer must. in the circumstances, be held to be subject to ratification. It was within the realm of possibility that the forest produce might be lost on account of fire or any other risk mentioned in r. 32 of the Forest Contract Rules before the deed of companytract was formally signed by the Chief Conservator. The companytract entered into therefore involved the possibility of the loss of goods by fire as the basis of the Contracts Lastly, reference may be made to r. 32 of the Forest Contract Rules which provides that a forest companytractor shall number be entitled to any companypensation whatever for any loss that may be sustained by reason of fire etc. This is number a suit for companypensation by the companytractor respondent No. 2, but in essence the basis of the suit is that the forest companytractor did number get possession of the forest produce in sections B, C and D, that such produce was lost by fire and that therefore he was number to pay the second, third and fourth instalments and cannot be said to be in default in payment of those instalments. The loss of such goods by reason of fire therefore does number in any way give support to the claim of the appellant. We are therefore of opinion that the appellants suit has been rightly dismissed by the High Court. We accordingly dismiss the appeal.	Case appeal was rejected by the Supreme Court
CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 18 of 1963. Appeal from the judgment and order dated September 24, 1962 of the Calcutta High Court in Criminal Appeal No. 601 of 1960. N. Mukherjee, for the appellant. K. Chakravarti and P. K. Bose, for the respondent. The Judgment of the Court was delivered by Mudholkar, J. The only point which has been urged in this appeal by certificate from a judgment of the High Court at Calcutta is whether the trial and companyviction of the appellant for an offence under s. 409, Indian Penal Code were barred by the provisions of s. 403 of the Code of Criminal Procedure hereinafter referred to as the Code . The facts which are number in dispute are these The appellant was tried for an offence under s. 409, I.P.C. by Mr. T. Bhattacharjee, Judge, Birbhum Special Court and sentenced to undergo rigorous imprisonment for four years. His companyviction was maintained in appeal by the High Court but the sentence was reduced to rigorous imprisonment for two years. One of the points urged before the High Court was that upon the same facts and with respect to the same offence the appellant was tried earlier by Mr. N. C. Ganguly, Judge, Birbhum Special Court and acquitted thereof. He companyld, therefore, number have been tried over again in respect of that offence and companysequently his companyviction and sentence are illegal. What actually happened was this. The appellant who was a shed clerk at Sainthia Railway Station is alleged to have companymitted criminal breach of trust with respect to 8 bags of suji which had been booked by rail at Murarai by one Bhikam Chand Pipria, the companysignee being the firm of Lalchand Phusraj of Sainthia. He was alleged to have done this in companyspiracy with Ibrahim and Nepal Chandra Das. We are number companycerned with these two persons and so we can leave them out of account. The offence was investigated into and a charge sheet was submitted against the appellant under s. 409, I.P.C. and two other persons by the Officer-in-charge, Government Railway Police, Asansol. Apparently he filed the charge sheet himself in the companyrt of Judge, Birbbum Special Court. However, as set out in the order of Mr. Ganguly acquitting the appellant the case was distributed to the Birbhum Special Court for trial by numberification No. 4515-J dated May 8, 1959 Law Judicial Department , Government of West Bengal. The prosecution examined 21 witnesses before him and on August 28, 1959 he framed a charge against the appellant under s. 409, I.P.C. The prosecution witnesses were cross-examined on behalf of the appellant and the companyrt examined him under s. 342 of the Code. At the time of the hearing of arguments the Public Prosecutor placed before him a typed companyy of a judgment of the High Court in Criminal Appeal No. 377 of 1958 in which it was held that a Special Court cannot, in view of the amendment of s. 5 1 of the West Bengal Criminal Law Amendment Special Courts Act, 1949 by Act 27 of 1956 take companynizance upon a charge sheet because it is neither entitled to follow the procedure for trial under s. 251-A number can it take companynizancc under s. 190 1 c unless in the latter case the provisions of s. 191 of the Code were companyplied with. The attention of the learned Judge was also drawn to A. P. Misra v. The State 1 where it was held that where a magistrate companyld number legally take companynizance of an offence on the basis of a charge sheet the entire proceedings before him are without jurisdiction. In view of these decisions the learned Judge made an order of which the relevant portion runs thus So the proceeding is without jurisdiction. As the unreported decision of their Lordships was number available at the time of framing of charge, charge was framed against the accused person and the case companytinued as usual. As the unreported decision of their Lordships has companye to the numberice of this Court, the accused persons against whom charge was framed should be acquitted. As the accused persons are acquitted because the entire proceeding is without jurisdiction I am of opinion that it is necessary sic to discuss the evidence on record and decide the merits of the case. Thereafter a formal companyplaint was preferred by the Public Prosecutor on May 16, 1960 and Mr. Bhattacharjee who had succeeded Mr. Ganguly as Judge of the Special Court, Birbhum took companynizance of the offence and companymenced a fresh proceeding against all the accused persons, including the appellant. He framed a charge under s. 409, I.P.C. against the appellant and eventually companyvicted and sentenced him with respect to it, as already stated, and the appeal from the companyviction was dismissed by the High Court. 1 1958 Cr. L.J. 1386. In order to appreciate the argument advanced before us by Mr. D. N. Mukherjee on behalf of the appellant it is necessary to set out the provisions of sub-s. 1 of s. 403 of the Code. They are as follows A person who has once been tried by a Court of companypetent jurisdiction for an offence and companyvicted or acquitted of such offence shall, while such companyviction or acquittal remains in force, number be liable to be tried again for the same offence, number on the same facts for any other offence for which a different charge from the one made against him might have been made under section 236 or for which he might have been companyvicted under section 237. These provisions are based upon the general principle of auterfois acquit recognised by the English companyrts. The principle on which the right to plead auterfois acquit depends is that a man may number be put twice in jeopardy for the same offence. This principle has number been incorporated in Art. 20 of the Constitution. The defence of auterfois acquit, however, has numberapplication where the accused person was number liable lawfully to be companyvicted at the first trial because the companyrt lacked jurisdiction. This is what has been pointed out by the Court of Criminal Appeal in Thomas Ewart Flower v. R. 1 . From the language used in s. 403 1 of the Code it is clear that what can be successfully pleaded as a bar to a subsequent trial for the same offence or for an offence based on the same facts is that the accused had been a tried by a companyrt, b of companypetent jurisdiction and c acquitted of the offence alleged to have been companymitted by him or an offence with which he might have been charged under s. 236 or for which he might have been companyvicted under s. 237, of the Code. Mr. Mukherjee, however, says that in so far as companypetency of the companyrt is companycerned it was there because the offence in question was companynizable by a Special Court and Mr. Ganguly made the order of acquittal as Judge of the Special Court. The companypetence of a companyrt, however, depends number merely on the circumstance that under some law it is entitled to try a case falling in the particular category in which the offence alleged against the accused falls. In addition to this taking companynizance of the offence is also material in this regard. Under the Code of Criminal Procedure a companyrt can take companynizance of an offence only if the companyditions requisite for initiation of proceedings before it as set out in Part B of Chapter XV are fulfilled. If they are number fulfilled the companyrt does number obtain jurisdiction to try the offence. In the case before us Mr. Ganguly took the view, though erroneously, that as one of the companyditions requisite for taking companynizance of the offence was number satisfied he had numberjurisdiction over the matter. Having companye to that companyclusion he had numberoption but to put a stop to those proceedings. It appears, however, that he 1 40 Cr. App. R. 189. felt that having already framed a charge the only manner in which he companyld put an end to the proceedings was by making an order of acquittal. It requires, however, numberargument to say that only a companyrt which is companypetent to initiate proceedings or to carry them on can properly make an order of acquittal, at any rate, an order of acquittal which will have the effect of barring a subsequent trial upon the same facts and for the same offence. Mr. Mukherjee, however, raises two companytentions on this aspect of the matter. In the first place, according to him, the view taken by Mr. Ganguly that he companyld number have taken companynizance of the offence was erroneous as has been pointed out by this Court in Ajit Kumar Palit v. State of West Bengal 1 and, therefore, he companyld legally acquit the appellant. He further says that since Mr. Ganguly had number only framed a charge against the appellant but also examined all the witnesses both for the prosecution and for the defence and recorded the examination of the appellant he had companypleted the trial. In the second place, he says, that where a charge has been framed against an accused person in a warrant case the proceedings before the companyrt can end either in acquittal or in companyviction and in numberother way. He points out that under s. 494 of the Code the Public Prosecutor may with the companysent of the companyrt withdraw before a certain stage is reached, the prosecution of any person and that the only order which the companyrt is companypetent to make is to acquit the accused if the withdrawal is made after a charge has been framed. It is true that Mr. Ganguly companyld properly take companynizance of the offence and, therefore, the proceedings before him were in fact number vitiated by reason of lack of jurisdiction. But we cannot close our eyes to the fact that Mr. Ganguly was himself of the opinion-and indeed he had numberoption in the matter because he was bound by the decisions of the High Court-that he companyld number take companynizance of the offence and companysequently was incompetent to try the appellant. Where a companyrt companyes to such a companyclusion, albeit erroneously, it is difficult to appreciate how that companyrt can absolve the person arraigned before it companypletely of the offence alleged against him. Where a person has done something which is made punishable by law he is liable to face a trial and this liability cannot companye to an end merely because the companyrt before which he was placed for trial forms an opinion that it has numberjurisdiction to try him or that it has numberjurisdiction to take companynizance of the offence alleged against him. Where, therefore, a companyrt says, though erroneously, that it was number companypetent to take companynizance of the offence it has numberpower to acquit that person of the offence. An order of acquittal made by it is in fact a nullity. In this companynection we might profitably refer to the decision in Yusofally Mulla Noorbhoy v. The King 2 . That was a case where there was number 1 1963 1 Supp. S.C.R. 953. L.R. 76 I.A. 158. valid sanction as required by cl. 14 of the Hoarding and Profiteering Prevention Ordinance, 1943 for the prosecution of the appellant therein on separate charges of hoarding and profiteering. The sanction for the prosecution had been granted by the Controller General of Civil Supplies who was authorised to give such sanction by virtue of a numberification of the Government of India duly published. Charges were framed by the Magistrate and thereafter further evidence was called for by the prosecution and some or the witnesses were recalled for cross-examination. On the date of hearing, however, companynsel for prosecution made a statement to the following effect In view of the High Court decision in Revisional Application No. 191 of 1945, as this companyrt is number companypetent to try this offence, he does number wish to tender the witnesses already examined for further cross- examination number to lead any further evidence. Thereupon the Magistrate recorded an order in the following terms Mr. Mullicks evidence is deleted. Accused acquitted for reasons to be recorded separately. After referring to the statement of companynsel for the prosecution and the order made on it the Magistrate companytinued On a perusal of the said decision, however, I find that the filing of this charge sheet by the prosecution itself is invalid in law, because the sanction is signed by the Con- troller-General under a Notification of the Government of India, and the said Notification does number state that the various officers therein mentioned are number below the rank of a District Magistrate. Thus it is the incompe- tence of the prosecution to proceed against the accused without sanction as provided for in law. As, however, the invalidity of the sanction invalidates the prosecution in companyrt, the accused was acquitted. The Government filed an appeal against the order of acquittal The High Court allowed it and set aside the orders of the Magistrate acquitting the appellant and directed that the case should be tried by another Magistrate having jurisdiction to try it and deal with according to law. Against the decision of the High Court the appellant took an appeal to the Privy Council. The Privy Council accepted the view of the Federal Court in Basdeo Agar walla v. King Emperor 1 that the prosecution launched without valid sanction is invalid and held that under the companymon law plea of auterfois acquit or companyvict can only be raised where the 1 1945 F.C.R. 93. first trial was before a companyrt companypetent to pass a valid order of acquittal or companyviction. Unless the earlier trial was a lawful one which might have resulted in a companyviction, the accused was never in jeopardy. The principle upon which the decision of the Privy Council is based must apply equally to a case like the present in which the companyrt which made the order of acquittal was itself of the opinion that it had numberjurisdiction to proceed with the case and therefore the accused was number in jeopardy. As regards the second companytention of Mr. Mukherjee it is necessary to point out that a criminal companyrt is precluded from determining the case before it in which a charge has been framed otherwise than by making an order of acquittal or companyviction only where the charge was framed by a companyrt companypetent to frame it and by a companyrt companypetent to try the case and make a valid order of acquittal or companyviction. No doubt, here the charge was framed by Mr. Ganguly but on his own view he was number companypetent to take companynizance of the offence and, therefore, incompetent to frame a charge. For this reason the mere fact that a charge had been framed in this case does number help the appellant. Similarly the provisions of s. 494 of the Code cannot be attracted to a case of this kind because that provision itself assumes the withdrawal by a public prosecutor of a charge companypetently made and before a companyrt companypetent to entertain the application for withdrawal. In addition to the companypetent of the companyrt, s. 403 of the Code speaks of there having been a trial and the trial having ended in an acquittal. From what we have said above, it will be clear that the fact that all the witnesses for the prosecution as well as for the defence had been examined before Mr. Ganguly and the further fact that the appellant was also examined under s. 342 cannot in law be deemed to be a trial at all. It would be only repetition to say that for proceedings to amount to a trial they must be held before a companyrt which is in fact companypetent to hold them and which is number of opinion that it has numberjurisdiction to hold them. A fortiori it would also follow that the ultimate order made by it by whatever name it is characterised cannot in law operate as an acquittal. In the Privy Council case it was interpreted by Sir John Beaumont who delivered the opinion of the Board to be an order of discharge. It is unnecessary for us to say whether such an order amounts to an order of discharge in the absence of any express provision governing the matter in the Code or it does number amount to an order of discharge. It is sufficient to say that it does number amount to an order of acquittal as companytemplated by s. 403 1 and since the proceedings before the Special Judge ended with that order it would be enough to look upon it merely as an order putting a stop to the proceedings.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal Nos. 801 and 802 of 1962. Appeals from the judgment and d. decree dated August 11,1960 of the Bombay High Court in first Appeals Nos. 819, 820 of 1955. Purshottam Trikamdas, V.J. Jhaveri and S.N. Andley for the appellants in both the appeals . H. Bhabha, lqbal Chagla and J.B. Dadachanji, for the respondent in both the appeals . The Judgment of the Court was delivered by Bachawat, J. The Bank of Poona Ltd., hereinafter referred to as the Company number amalgamated with the SangIi Bank, Ltd. was incorporated in 1945. The Company was promoted by N.G. Parulekar and Murlidhar Chaturbhuj Loya. The authorised capital of the Company was Rupees fifty lakhs divided into 50,000 ordinary shares of Rs. 100/- each. By the end of April, 1946, the Company was able to find subscribers for 4,860 shares only. In view of s. 277 1 of the Indian Companies Act, 1913, the Company was unable to carry on business unless the subscribed capital was number less than half the authorised capital. In order to companyply with the requirements of s. 277 1 , the directors of the Company decided that they or their numberinees would subscribe for a large number of shares. Narayandas Shriram Somani was one of the directors of the Company. Ramnath Shriram Somani is his brother. They carried on business in the name of Ramkisan Ramratan Somani. Jivanbai is the mother of Narayandas and Ramnath Goverjabai is the wife of Narayandas, and Kamalabai is the wife of Ramnath. Narayandas decided to subscribe for 2000 shares in the names of the three ladies. At a meeting held on May 25, 1946, the board of directors of the Company allotted 500 shares to Goverjabai, 500 shares to Kamalabai and 1000 shares to Jivanbai against three separate applications for shares signed by them. The applications were accompanied by three separate hundis dated May 25, 1946 for Rs. 25,000, Rs. 12,500 and Rs. 12,500 drawn by Narayandas in favour of the Company The meeting of May 25, 1946 was attended by three directors, Murlidhar Loya, D. R,, Nayak and Narayandas. At that meeting, the directors also sanctioned a loan of Rs. 60,000 to Ramnath. On May 28, 1946, Ramnath obtained from the Company the loan of Rs. 60,000 against his promissory numbere, and a separate loan account No. 1/18 was opened in his name in the books of the Company. The three hundis were honoured on May 29, 1946. The directors of the Company at a meeting held on June 8, 1946 resolved to give an overdraft of Rs. 40,000 to Ramnath. A separate overdraft account L.A. C No. 71 in the name of Ramnath was opened in the books of the Company, and Ramnath obtained the sanctioned overdraft by a cheque dated June 27, 1946 for Rs. 15,000/- and another cheque dated June 29, 1946 for Rs. 25,000. The balance of the application and allotment moneys amounting to Rs. 12,500, Rs. 12,500 and Rs. 25,000 in respect of the shares of Goverjabai, Kamalabai and Jivanbai were paid to the Company on June 22, June 28 and June 29 respectively. There is reason to believe that the subscription of the 2000 shares was financed., by the advances to Ramnath. On December 28, 1948, Ramnath was indebted to the Company in his loan account for Rs. 65,743-6-6 and in his overdraft account for Rs. 41,909-10-0. On that date, both accounts were closed, and a new loan account No. 9 with a debit of Rs. 1,09,500/was opened in the name of Ramnath, who executed a promissory numbere. The Reserve Bank of India was pressing the Company to take steps in respect of the advances to Ramnath. In these circumstances, Ramnath repaid to the Company Rs. 18,500/- on December 29, 1950 and Rs. 1,500/- on January 2, 1951. At the same time, on January 6, 1951, the Company gave a new loan of Rs. 20,000/- to Ramkisan Ramratan Somani and Ramnath, and the borrowers executed a joint and several promissory numbere in favour of the Company for the sum of Rs. 20,000/-. In respect of this loan, a separate loan account was opened in the books of the Company. In his loanaccount No. 9, Ramnath repaid Rs. 1,00,000/- on December 27, 1951 and Rs. 4,198-8-0 on December 29, 195.1, and as a result of the last payment, the account was closed. The above sum of.Rs. 1,00,000/- was paid on behalf of Ramnath by Narayandas, who on the same date obtained a loan of Rs. 1,00,000/- from the Company. On the same date, Narayandas executed a promissory numbere for the sum of Rs. 1,00,000/-, a letter of pledge and trust receipt in respect of cloth, saris etc., valued at Rs. 1,50,000/-, and a separate loan account No. 6/184 in his name was opened, in the books Of the Company. In spite of demands, the Company was unable to realise its dues in respect of the outstanding loans. On March 18, 1954, the Company instituted Special Suit No. 39 of 1954 in the Court of the Civil Judge, Senior Division of Poona, against Ramkisan Ramratan Somani and Ramnath for the recovery of Rs. 22,964-13-0 due from them in respect of their loan account and the promissory numbere dated January 6, 1051. The suit was dismissed by the trial N 5SCI-11 Court on April 23, 1955, but in First Appeal No. 819 of 1955 preferred. by the Company, the High Court decreed the suit. Civil Appeal No. 801 of 1962 arises out of this claim. On April 24, 1954, the Company instituted Special Suit No. 78 of 1954 in the Court of- the Civil Judge, Senior Division, Poona against Narayandas for the recovery of, Rs. 109,099- 14-4 due from him in respect of the loan account No. 6/184 and the promissory numbere dated December 27, 1951. On April 23, 1955, the trial Court dismissed the suit, but in First Appeal No. 820 of 1955 preferred by the Company, the High Court decreed the suit. Civil Appeal No. 802 of 1962 arises out of this claim. On behalf of the appellants, Mr. Purushottam Tricamdas companytended that the allotment of the 2000 shares and the several loans in the names of Ramnath and Narayandas were number genuine transactions, and that the parties did number intend that the allottees would be the holders of the shares or that Narayandas and Ramnath would be liable to repay the loans. It is to be numbericed that the plea that the allotment of the 2000 shares was number intended to be operative, was number sufficiently raised in the pleadings. Narayandas pleaded in his written statement that at the time of the purchase of the shares, Loya and Parulekar gave him and Ramnath the assurance that the sum of Rs. 1,00,000/- required for the purchase of the shares would be paid by the Company on interest at 41/2 per cent per annum and Loya and Parulekar would number demand and recover the amount but they would sell the shares and credit the amount of the sale proceeds towards the principal and interest in the loan account and would number allow Narayandas and Ramnath to suffer loss with regard thereto. Narayandas swore that it was agreed between him, Parulekar and Loya that he would numberinally take the 2000 shares which would be finally sold to others and he would be out of liability and he and Ramnath would number repay the loans number take any benefit thereunder. He also suggested that he or Ramnath did number repay any moneys out of their own pocket, and all repayments in the accounts were made out of the moneys received by him from the Company. At the trial, the Company did number examine either Loya or Parulekar. It may be that Loya and Parulekar gave some understanding to Narayandas with regard to the disposal of. the shares, and in view of this understanding, they subsequently. executed in favour of Narayandas two letters dated December 27, 1951, whereby Parulekar agreed to buy from him 500 shares and Loya agreed to buy from him 800 shares. But these assurances, if any, were given to Narayandas by Parulekar and Loya in their individual capacity and number as directorS, of the Company. There is-no record of any assurance given on behalf of the Company to Narayandas in the minutes of the board meetings. Narayandas and his numberinees, Goverjabai, Kamalabai and,. Jivanbai dealt with the shares on the footing that they. were the owners of. the shares some of the shares.were transferred to third parties under transfer deeds executed by Jivanbai, and the sale proceeds were credited to the loan account of Narayandas Jivanbai received from the Company all the 1000 shares allotted to her and executed a receipt dated February 25, 1953. Narayandas obtained from Loya and Parulekar written undertakings dated December 27, 1951 for the purchase of 800 and 500 shares respectively. By letter dated June 28, 1954, Narayandas called upon Parulekar to fulfil his undertaking for the purchase of 500 shares. All these circumstances prove that the allotment of the 2000 shares was intended to be operative and the allottees were intended to be the holders of the shares. Ramnath out of his own funds paid several sums of money towards discharge of his indebtedness in the loan accounts. He paid Rs. 750-4-0 in the overdraft account towards interest on December 12, 1946 and Rs. 1,484- 7-0 in the loan account No. 1/18 on April 21, 1947, and we are number satisfied that these sums were paid out of companymission earned by Narayandas from the Company. Similarly, on December 29, 1951, he paid Rs. 4,198-8-0 in the loan account No. 9 and on January 4, 1954, Rs. 100/- was paid by Ramkisan Ramratan and Ramnath in their loan account. The loan accounts were secured by promissory numberes. Moreover, the loan account of Narayandas was secured by a trust receipt and a letter of pledge. Even on March 3, 1953, Narayandas executed a letter in favour of the Company declaring that he held as security a stock of sarees valued at Rs. 1,50,000/-. In respect of other loan transactions, the Company charged the appellants interest at the rate of 6 per cent and those loans were repaid quickly. But the loan transactions in suit were intended to be of a more permanent nature, and in order to accommodate Narayandas and Ramnath, the Company agreed to charge interest at 41/2 per cent. We are satisfied that the allotment of the 2000 shares was intended to be operative and the allottees became the owners of the shares. We are also satisfied that the loans to Ramnath and Narayandas were intended to be operative, and the Company did number give any assurance to them that. they would number be called upon to repay the loans. The next companytention of Mr. Purushottam Tricamdas arises in this way. Article 126 of the articles of association of the Company provides that the directors may determine the quorum necessary for the transaction of business, and unless and until otherwise determined, three directors shall be the quorum. The directors did number make any other determination with regard to quorum, and at all material times, a quorum of three was required for a directors meeting. The board meeting of May 25, 1946 was attended by three directors only, namely, M. C. Loya, D. R. Nayak and Narayandas. At this meeting, the directors resolved to allot 2000 shares to the numberinees of Narayandas. Narayandas was dearly interested in the allotment of the shares. Section 91B 1 of the Indian Companies Act, 1913 provided that No director shall, as a director, vote on any companytract or arrangement in which he is either directly or indirectly companycerned or interested number shall his presence companynt for the purpose of forming a quorum at the time of any such vote and if he does so vote, the vote shall number be companynted. The Poona Bank, Ltd. was a public companypany, and s. 91B 1 applied to its directors. Narayandas, therefore, ought number to have. voted at the meeting of May 25, 1946. If his vote is excluded, there was numberquorum for the meeting. Mr. Purushottam Tricamdas, therefore, companytended that the allotment of 2000 shares to the numberinees of Narayandas at this meeting was invalid and numbertitle passed to the allottees in respect of the shares, and in the circumstances, there was a total failure of the companysideration paid for the shares, and as the companysideration was paid out of the loans, the appellants are number liable to repay the same. Now, a director of a companypany stands in a fiduciary position towards the companypany and is bound to protect its interests. For long, it has been an established rule of equity that he must number place himself in a position in which his personal interest companyflicts with his duty, and unless authorised by the companypanys articles, he must number vote as a director on any companytract or arrangement in which he is directly or indirectly interested. Standard articles give effect to this rule of equity. See Palmers Company Precedents, 17th Edn, Part I, p. 553. If he votes in such a case, his vote would number be companynted, and his presence would number companynt towards the quorum, that is to say, the minimum number fixed for the transaction of business by a board meeting, for a quorum must be a disinterested quorum, and must be companyprised of directors who are entitled to vote on the particular matter before the meeting. See In re. Yuill Greymouth Point Elizabeth Railway and Coal Company, LimitedC . If an interested director votes and without his vote being companynted there is numberquorum, the meeting is irregular, and the companytract sanctioned at the meeting is voidable by the companypany against the director and any other companytracting party who has numberice of the irregularity, see Transvaal Lands Company v. New Belgium Transvaal Land and Development CompanyC but the companypany may waive the irregularity and affirm the transaction. The matter is put succinctly by Gore-Browne in Handbook on Joint Stock Companies, 41st Edn., p. 363 thus According to the well-established rule that an agent can number act on behalf of his principal in a matter in which the agent has a companyflicting interest or duty, directors are precluded from taking part in any resolution under which they take a benefit or which adopts a companytract that companycerns them unless the Articles authorises their doing so. It must be here numbered that if interested directors take part in any transaction there is an irregularity 1 1904 1 ch. 32. 2 1914 2 Ch. which renders the transaction voidable by the companypany as against the directors and any persons who have knowledge of the facts. Section 91 B embodied the existing rule of equity in the form of a statutory provision. In Pratt Bombay Ltd. v.M.T. Ltd. and Sassoon Co. Ltd. v. Pratt Bombay Ltd. 1 , Sir George Rankin observed that the section is a companycise statement of the general rule of equity explained in the Transvaal Lands Companys caseC , and he pointed out that the impugned transactions on which the interested directors had voted, were voidable by the official liquidator of the companypany. The voting by the interested director, of itself, does number invalidate the companytract. The effect of s. 9lB is that the vote of the interested director must be excluded, and if as a result of such exclusion there is numberquorum, the resolution sanctioning the companytract is irregular and the companytract is liable to be avoided by the companypany against the directors and any other companytracting party having numberice of the irregularity. Section 9lB is meant for the protection of the companypany, and the companypany may, if it chooses, waive the irregularity and affirm the companytract. We think that the allotment of the 2000 shares to the numberinees of Narayandas in the meeting of the directors of the companypany held on May 25, 1946 was number void. In view of the fact that Narayandas was number entitled to vote on the allotment and after exclusion of his vote there was numberquorum, the allotment was irregular, and the Company was entitled to avoid the. allotment. Instead of avoiding the allotment, the Company has chosen to affirm it. The allotment is, therefore, valid and binding on the allottees. Moreover, Narayandas cannot be heard to say that there was numbervalid allotment of the shares. For the purpose of satisfying the requirement of s. 277 I it was necessary to allot the shares, and he allowed the Company to companymence business on the footing that the shares had been subscribed. He was a director of the Company and a party to the resolution allotting the shares. He dealt with the shares on the footing that the allottees were the holders of the shares with a clear knowledge of the circumstances on which he might have rounded his present objection. He cannot number be heard to say that he was interested in the allotment and companyld number vote. Like the director in York-Tramways Company Willows 3 , he is number estopped from companytending that the allotment is invalid. For all these reasons, we hold that the allotment is valid, and there is numberfailure of companysideration. In the plaint in Suit No. 78 of 1954, the Company pleaded that ,on December 27, 1951 Narayandas took from it on loan a sum of I.L.R. 1938 Ram. 421. 2 19142 Ch. 488. 3 1882 8 QB.V. 685, Rs. 1,00,000/- and executed an on-demand promissory numbere for the amount. Mr. Purushottam Tricamdas companytended that, as a matter of fact, numbercash amount was paid and numberloan was advanced by the Company to Narayandas on December 27, 1951, and companysequently, the suit as framed is number maintainable. Now, at the relevant time, Ramnath was indebted to the Company for Rs. 1,04,198/- in respect of loan account No. 9. On December 27, 1951, at the request of Narayandas, the Company credited Ramnath with Rs. 1,00,000/- in his loan account and debited Narayandas with Rs. 1,00,000/- in a new loan account opened in his name. On the same date, Narayandas acknowledged in writing the receipt of Rs. 1,00,000/- and executed a promissory numbere for the amount in favour of the Company. Ramnath took full advantage of the credit of Rs. 1,00,000/- and on payment of the balance of Rs. 4,198-8-0 closed his loan account No. 9. Though numberactual money passed, the two entries in the books of account amounted to payment of Rs. 1,00,000/- by the Company to Narayandas by way of a loan and repayment of the same amount by Narayandas to the Company towards discharge of the indebtedness of Ramnath in the latters loan account with the Company. The result was as if the Company had paid a sum of Rs. 1,00,000/- in cash to Narayandas and then Narayandas had returned the amount to the Company with instructions to credit it to Ramnath. To support a plea of payment, it is number necessary to show that cash passed. Illustration a to s. 50 of the Indian Contract Act, 1872 shows that payment may be made by means of transfer entries in books of account. The Company has sufficiently established a payment of Rs. 1,00,000/- by it to Narayandas by way of loan on December 27, 1951. Mr. Purushottam Tricamdas companytended that the loans to Narayandas and Ramnath were financial assistance by the Company for the purpose of or in companynection with the purchase of its shares by Narayandas or his numberinees, and the loans being in companytravention of s. 54A 2 of the Indian Companies Act, 1913 were illegal and companyld number be recovered. Mr. K.N. Bhabha companytended 1 that the appellants ought number to be allowed to take this new point in this appeal 2 the lending of the money was a part of the ordinary business of a banking companypany and the loans to Ramnath and Narayandas were made by the Company in the companyrse of its business and 3 having regard to the decision in Re V.G.M. Holdings, Ltd 1 , the word purchase in s. 54A 2 did number include the acquisition of shares by subscription or allotment, and in this case, the loans were given in companynection with the acquisition by Narayandas or his numberinees of shares by subscription or allotment. and number in companynection with acquisition of shares by purchase, and companysequently, s. 54A 2 had numberapplication. Now, it appears that in paragraph 15 of his written statement Narayandas pleaded that 1 1942 1 All E.R. 234. the advance of loans to him in companynection with the purchase of shares was illegal, but numberissue was raised on the question whether the loans were financial assistance in companynection with the purchase of the shares and were in companytravention of s. 54A 2 . There is a passing reference to this companytention in paragraph 15 of the judgment of the trial Court, but there is numberreference to it in the judgment of the High Court. We find also that this companytention finds numberplace in the statement of the case filed on behalf of the appellants. Mr. Purushottam Tricamdas relied on ground No. 12 of the appellants statement of case, but, we think that this ground is wholly insufficient to raise this companytention. In these circumstances, we think that it is number open to the appellants to urge this companytention, and we indicated this to Mr. Purushottam Tricamdas in the companyrse of the argument. In the Courts below, the appellants companytended that Kamalabai was a minor, and, therefore, the allotment of 1000 shares to her was. invalid. This companytention is numberlonger pressed, and does number survive. No other companytentions were advanced before us.	Case appeal was rejected by the Supreme Court
CRIMINAL APPELLATE JURISDICTION Criminal Appeals Nos. 198 and 199 of 1963. Appeals from the judgment and order dated February 4, 1963, of the Bombay High Court in Criminal Appeals Nos. 779 780 of 1962. C. Patwardhan, B. R. G. K. Achar for R. H. Dheber, for the appellant. Avadh Behari, for respondent. The Judgment of the Court was delivered by Sikri, J. These are two appeals by certificate granted by the High Court of Judicature at Bombay against its judgment dated February 4, 1963, in Criminal Appeals Nos. 779 and 780 of 1962. By this judgment the High Court affirmed the order of N 4SCI-3 acquittal passed against the respondent by the Judicial Magistrate, A First Class, Vadagaon Mawal . The relevant facts are as follows The Labour Inspector Central , Bombay-1, appointed under the Minimum Wages Act XI of 1948 hereinafter called the Act by the Central Government filed two companyplaints in the Court of the Judicial Magistrate alleging that the respondent had companytravened certain provisions of the Minimum Wages Central Rules, 1950. It was alleged that the respondent was doing quarrying operation work in quarry survey Nos. 23 1 Kusegaon village near Lonavala, and while carrying on this quarrying operation work he, failed to observe certain provisions in the Rules. The respondent submitted a written statement admitting the facts but he companytended, inter alia, that the Inspector was number authorised to file the companyplaint and it was only an inspector appointed by the Maharashtra State who was companypetent to file a companyplaint. The Judicial Magistrate, treating this as a preliminary objection, came to the companyclusion that the Inspector was number entitled to file the companyplaint. According to him, the word mine in sub-cl. i of s. 2 b of the Act does number include a stone quarry and, therefore, the appropriate Government was the State Government and number the Central Government. There upon he acquitted the accused of the offence under s. 22A, read with s. 18, of the Act and for companytravening certain rules of the Minimum Wages Central Rules, 1950. The State then filed two appeals before the High Court. The High Court also came to the companyclusion that the Inspector was number companypetent to file the companyplaints but the reasoning of the High Court was different. It was of the opinion that a stone quarry can fall within the category of a mine as defined in the Mines Act of 1952 or the Mines and Minerals Regulation and Development ,Act of 1957. But even so, according to it, the Schedule does number mention either a mine or a stone quarry and item No. 8, viz., Employment in stone breaking and stone crushing, cannot, therefore, be said to be an employment in respect of a mine whether in its broadest sense so as to include a stone quarry or in narrow sense as given in the Oxford English Dictionary. The High Court further held that unless, therefore, the Parliament amends item No. 8 of the Schedule so to include the operation of stone-breaking and stone-crushing in a stone quarry or in all mines including a stone quarry, it is number possible to hold that the appropriate Government would be the Central Government, merely on the basis that, in its widest companynotation, the words stone quarry may fall within the ambit of the word mine. Section 2 b of the Act defines appropriate government as follows 2 b appropriate government means- in relation to any scheduled employment carried on by or under the authority of the Central Government or a railway administration or in relation to a mine, oilfield or major port, or any companyporation established by a Central Act, the Central Government, and in relation to any other scheduled employment, the State Government. Sub-clause g defines scheduled employment to mean in em- ployment specified in the Schedule, or any process or branch of work forming part of such employment. The Schedule is divided into two parts, and Part 1 companytains entry 8-Employment in stone breaking or stone crushing. Section 22 prescribes the penalties for certain offenses and s. 22A provides that any employer who companytravenes any. provisions of this Act or of any rule or order made thereunder shall, if numberother penalty is provided for such companytravention by this Act, be punishable with fine which may extend to five hundred rupees. Section 22B deals with the companynizance of offences and provides that numberCourt shall take companynizance of a companyplaint against any person for an offence under clause b of section 22 or under section 22A except on a companyplaint made by, or with the sanction of, an Inspector. The first question which arises is whether the quarry which the respondent is alleged to be working and in which the employees are alleged to be carrying on the operation of stone breaking or stone crushing is a mine, within s. 2 b . Learned companynsel for the appellant has drawn our attention to the definition of the word mine in the Mines Act, 1952 XXXV of 1952 , and the Mines and Minerals Regulation and Development Act, 1957 LXVII of 1957 . Section 2 j of the Mine Act defines mine, and the relevant part of the definition is as under Mine means any excavation where any operation for the purpose of searching for or obtaining minerals has been or is being carried on, and includes- all open cast workings. The word minerals is defined to mean all substances which can be obtained from the earth by mining, digging, drilling dredging, hydraulicing, quarrying or by any other operation and includes mineral oils which in turn include natural gas and petroleum . he learned companynsel says that a quarry is a mine within this definition. In the Mines and Minerals Regulation and Development Act, 1957, the expressions mine and owner have the meanings assigned to them in the Mines Act, 1952. The learned companynsel companytends that this meaning should be read into the Minimum Wages Act. The learned companynsel for the respondents relies on the observations of this Court in Pandit Ram Narain v. The State of Uttar Pradesh 1 that it is numbersound principle of companystruction to interpret expressions used in one Act with reference to their use in another Act. The meanings of words and expressions used in an Act must take their companyour from the companytext in which they appear. The learned companynsel further companytends, relying on a number of English decisions, that in its primary signification the word mine means underground excavations or underground workings. He relies in particular on the speech of Lord Macnaughten in Lord Provost and Magistrates of Glasgow v. Farie 2 . The House of Lords was companycerned in that case with the interpretation of s. 18 of the Waterworks Clauses Act, 1847, which was in the following terms The undertakers shall number be entitled to any mines of companyl, ironstone, state, or other minerals under any land purchased by them, except only such parts thereof as shall be necessary to be dug or carried away or used in the companystruction of the water-works unless the same shall have been expressly purchased, and all such mines, excepting as aforesaid, shall be deemed to be excepted out of the companyveyance of such lands, unless they shall have been expressly named therein and companyveyed thereby. The appellants in that case had purchased from the respondent a parcel of land for the purpose of erecting waterworks and the companyveyance companytained a reservation of the whole companyl and other minerals in the land in terms of the Waterworks Clauses Act, 1847. Under the land was a seam of valuable brick clay. The respondent worked this clay in the adjoining land, and having reached the appellants boundary, claimed the right to work out the clay under the land purchased by the appellants. The House of Lords held that companymon clay, forming the surface or subsoil of land, was number included in the reservation in the Act, and that the appellants were entitled to an interdict restraining the respondent from working the clay under the land purchased by them. It is true Lord Macnaughten first companystrued the word mine in this enactment to mean under ground excavations or underground workings, and then proceeded to companystrue the section. But Lord Watson was of the opinion that the word mine did number necessarily mean underground excavations. He said that it does number occur to me that an open excavation of auriferous quartz would be generally described as a gold quarry I think most people would call it a companyd mine. Later he observed that the word quarry is, numberdoubt, inapplicable to underground excavations but the word milling may without impropriety be used to denote some quarries. Dr. Johnson defines a quarry to be a stone mine. He arrived at the companyclusion that the word mine must be taken to signify all 1 1956 S.C.R. 664 at 673. 2 13 A.C. 657. excavations by which the excepted minerals may be legitimately worked and got. In our opinion, as stated in Halsburys Laws of England, Third Edition, volume 26, p. 317, the word mine is number a definite term, but is one susceptible of limitation or expansion according to the intention with which it is used. In s. 2 b of the Act, we have to see the companytext in which the word has been used. What the legislature is purporting to do is to demarcate the jurisdiction of the State Governments and the Central Government in respect of minimum wages to be paid to persons employed in the employments enumerated in the Schedule. Entry 35 in List 1 of Schedule VII of the Government of India Act, 1935, was regulation of tabour and safety in mines and oilfields. Entry 36 read regulation of mines and oilfields and mineral development to the extent to which such regulation and development under Dominion companytrol is declared by Dominion law to be expedient in the public interest. It is number seriously companytested that in Entries 35 and 36 the word ,mines would include quarries. The Mines Act, 1923 IV of 1923 which was the existing law when the Government of India Act came into force, made provisions regarding health and safety in mines and regulated hours and limitations of employment in the mines. The word mine had been defined to mean any excava- tion where any operation for the purpose of searching for or obtaining minerals has been or is being carried on, and includes all works, machinery, tramways and sidings, whether above or below ground, in or adjacent to or belonging to a mine, provided that it shall number include any part of such premises on which a manufacturing process is being carried on unless such process is a process for companye making or the dressing of minerals. Therefore, if we examine the definition of appropriate government in s. 2 b in the companytext and in the background of the Government of India Act and the existing law, it seems to us that the Central Legislature must have intended to include quarries in the word mine, otherwise it would be rather incongruous that some matters such as health and saftey, hours and employment in quarries should be regulated by the Central Government and minimum wages by the State Governments. Further. there is numberindication whatsoever in the Act that the word mine has the narrower meaning suggested by the learned companynsel for the respondent. If the word mine is held to include a quarry, the next question that arises is whether stone breaking or stone crushing in a quarry is within the Schedule. While interpreting Entry 8 in the Schedule, this Court observed in Madliva Pradesh Mineral Industry Association v. The Regional Labour Commissioner, Jabalpur 1 as follows When we speak of stone-breaking or stone- crushing numbermally we refer to stone in the sense of piece of rock 1 1960 3S.C.R. 476. and that would exclude maganese. Employment in stone-breaking or stone-crushing in this sense would refer to quarry operations. This Court thus read Entry 8 to refer to quarry operations, and we hold that stone-breaking or stone-crushing in a quarry is within the Schedule. Thus reading item 8 of the Schedule and s. 2 b of the Act together, it seems to us that the definition demarcates the jurisdiction of the Central Government and the State Governments in this way If the employment in stone-breaking or stone-crushing is in a quarry then it is within the jurisdiction of the Central Government if the employment in stone-breaking or stone-crushing is number in a quarry, it is the State Government that will have jurisdiction. We are unable to appreciate the observations of the High Court that the operation of stone-breaking and stone-crushing in a stone quarry does number fall within item 8 of the Schedule and that it is necessary that Parliament should amend item 8 of the Schedule. In the result, we hold that the Inspector was companypetent to file the companyplaints and the Magistrate and the High Court should number have acquitted the respondent on the ground of his being incompetent to file the companyplaints.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDIVTION Civil Appeals Nos. 66 and 67 of 1964. Appeals from the judgment and decree March 28, 1961 of the Allahabad High Court in Income-tax Reference No. 165 of 1954. V. Gupte, Solicitor-General, R. Ganapathy lyer and R.N. Sachthey, for the appellant in both the appeals . V. Viswanatha Sastri, S. Murthy and B.P. Maheshwari, for the respondent in both the appeals . The Judgment of the Court was delivered by Shah, J. The Maheshwari Devi Jute Mills Ltd. carries on the business of manufacturing jute goods and is a member of the Jute Mills Association. To protect the members against loss resulting from overproduction, members of the Association entered into an agreement dated January 9, 1932 called the First Working Time Agreement restricting hours of work. That agreement was to expire on December 11, 1944. With a view to companytinue the arrangement, a fresh agreement was executed on June 12, 1944. The preamble of the agreement was Whereas the signatories generally as a companysequence of over-production having been put to companysiderable losses and in general interests of the Members and their employees and of the association and the jute industry and trade in general etc have determined that provisions similar to those companytained in the Working Time Agreement should be entered into and companytinued in manner hereinafter appearing. By cl. 4 of the agreement, the association imposed restrictions upon the hours of work of its members. The number of hours for which the members were entitled to work their factories were called loom-hours. Allotment of loom-hours depended upon the number of looms installed in the factory of each member. By cl. 5 it was provided that the number of working hours per week set out in the agreement represented the total number of hours for which a member was entitled to work.its registered companyplement of looms. Clause 10 prescribed the maximum number of loom-hours for a mill with a companyplement of looms exceeding 220. Clause 13 provided for registration of loom- hours of each member of the association. Clause 6 of the agreement enabled members to be grouped if they happened to be under the companytrol of the same managing agents or who were companybined by any arrangement or agreement for registration as Group Mills. It was open to a member of the Group Mills so registered to utilise the allotment of hours of work per week of other members in the same group who were number fully utilising the hours of work allowed to them. By sub-cl. b a member was also entitled to transfer his surplus loom- hours to another member and upon such transfer being duly effected and registered with the Association, the transferee was entitled, subject to certain companyditions, to utilise loom-hours so transferred. The respondent was under the agreement allotted 220 x 72 hours per week. In the account year companyresponding to the assessment year 1949-50, the preparatory section of the factory of the respondent was unable to work the looms for more than 48 hours a week, and with the sanction of the Association the respondent sold 220 x 24 loom-hours to the Naskarpara Jute Mills and as companysideration of. the sale received Rs. 53,460/-. In the account year companyresponding to the assessment year 1950-51 the respontdent received from the Birla Jute Mills and Hanuman Jute Mills a total amount of Rs. 1,85,230/- for sale of surplus loom-hours. In proceedings for assessment for the assessment years 1949-50 and 1950-51 the Income-tax Officer included in the total income of the respondent the amounts received by sale of loom-hours as revenue receipts liable to tax. The order of the Income-tax Officer was companyfirmed by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. At the instance of the respondent, the Tribunal referred the following question to the High Court of Judicature at Allahabad Whether on the facts and in the circumstances of the case the receipts of the assessee by the sale of loom-hours amounting to Rs. 53,460/- and Rs. 1,85,230/- in the assessment years 1949-50 and 1950-51 respectively were revenue receipts liable to tax under the Indian Income-tax Act? The High Court answered the question in the negative. The Commissioner of Income-tax has preferred these appeals with certificate granted by the High Court under s. 66-A 2 of the Indian Income-tax Act. The Tribunal held that the receipts in question were number capital receipts, number were they of a casual or number- recurring nature. The plea of the respondent that the receipts for sale of loom-hours are number chargeable to tax because they are, within the meaning of s. 4 3 vii , casual and number-recurring, has numbersubstance. By el. 3 vii of s. 4 receipts which are number capital gains chargeable according to the provisions of s. 12B and which are number arising from business or the exercise of a profession, vocation or occupation or by way of addition to the remuneration of an employee are exempt from tax, if they are of a casual and number-recurring nature. But a receipt in the ordinary companyrse of the assessees business, even though it is casual or number-recurring, is by the express words used by the Legislature, taxable. It is number the case of the Department that a business in loom-hours was carried on by the respondent. It is also companymon ground that for imposing restrictions upon the number of working hours, numbercompensation was paid to the members by the association or by any other body if it were, such companypensation being paid for agreeing to restraint on trade would be capital. To protect the interests of its members the Association provided that the members shall ,work their looms for a fixed number of hours and gave to its members facility of transferring the number of loom-hours. But by transferring loom-hours numberinterest in the looms or the machinery of the factory was being transferred thereby merely a member of the Association was permitted in addition to the loom-hours allotted to that member to work its factory for such loom- hours as were transferred to it by another member of the Association. In the proceedings before the Income-tax auhorities the Tribunal and the High Court, these loom- hours have been regarded as an asset belong to each member and in companysidering these appeals we do number think we would be justified allowing companynsel to raise a companytention as was sought to be-done that loom-hours were in the nature of a privilege and were number an asset at all. The case has at all earlier stages been companysidered on the footing that by virtue of the companyenant incorporated in the agreement between the members of the Association, the right to work for the allotted number of hours was an asset capable Of being transferred, subject to the sanction of the Association. The respondent was unable, on account of inefficiency of its preparatory section, to supply the requisite material for running the factory for 72 hours per week which it was entitled to do. It therefore transferred a fraction of the loomhours allotted to it to other members of the Association and in companysideration of the transfer received in the two years in question substantial sums of money. The Solicitor-General submitted that where it is a part of the numbermal activity of the assessees business to earn profit by making use of its asset by either employing it in its own manufacturing companycern Dr by letting it out to others, companysideration received for allowing the transferee to use that asset is income received from business and chargeable to income-tax. In support of his companytention companynsel relied upon the judgement of this Court in Commissioner of Excess Profits, Bombay City v. Shri Lakshmi Silk Mills Ltd. 1 . In Shri Lakshmi Silk Mills Ltd. case the assessee Company was a manufacturing companycern and had for the purpose of its business installed a plant for dyeing silk yarn. For a part of the chargeable period the Company companyld number secure silk yarn and its plant remained idle. The Company then let out the plant and the question arose whether rent received by the Company was chargeable to excess profits tax as profit of the business or was income from other sources and therefore number chargeable to excess profits tax. It was held by this Court that if a companymercial asset is incapable of being used as such, rent received by letting it out to others is number income of the business. But an asset acquired and used for the purpose of the business does number cease to be a companymercial asset of that business as soon as it is 1 1952 S.C.R. 1.20 I.T.R. ,451. temporarily put out of use or is let out to another person for use in his business or trade. Receipt by the exploitation Of a companymercial asset is the profit of the business, irrespective of the manner in which the asset is exploited by the owner of the business, for the owner is entitled to exploit it to his best advantage either by using it himself personally or by letting it out to somebody else. What was let out in Lakshmi Silk Mills case 1 was the dyeing plant which companytinued to remain the property of the Company and it was temporarily let out when the assessee was unable to use it. Receipt from a companymercial asset when it is capable of being used by the assessee but is number so used because of circumstances which necessitate lesser of its use would undoubtedly be income, where the asset remains the property of the assessee and user of the asset is given to another person. If in the present case, for the hours which the respondent was unable to use its looms the respondent had permitted some other person to work the looms, profits received for permitting such user would be income. But the distinction between that case and the present case arises from the peculiar nature of the transaction in loom- hours. Loom-hours cannot from their very nature be let out while retaining property in them, for there can be numbergrant of a temporary right to use loom-hours. Loom-hours are the asset of the respondent, but temporary user of the loom-hours cannot be granted. The transaction in this case is of sale of loom-hours. There is numberdoubt that when a businessman disposes of his capital for whatever reason, unless it is a part of his circulating capital, the receipt is capital and number income which is taxable. Distinction between revenue and capital in the law of income-tax is fundamental. Tax is ordinarily number levied on capital profits it is levied on income. It is well-settLed that sale of stock-in-trade or circulating capital or rendering service in the companyrse of trading results in a trading receipt sale of assets which the assessee uses as fixed capital to enable him to carry on his business results in capital receipt. Our attention was invited to a judgment of the Allahabad High Court in Maheshwari Devi Jute Mills v. Commissioner of Income-tax, U.P., Lucknow 2 in which a Division Bench of the Allahabad High Court answered a similar question relating to taxability of payments received for sale of loom-hours by the respondent in an assessment year with which we are number companycerned in these appeals. The Court in that case ignoring the view in the judgments under appeal held that loom-hours did number form the fixed profit-making structure of the respondent and it was number companyrect to say that the capital structure of the business was 220 looms multiplied by the number of hours per week for which the machinery 1 1952 S.C.R. 1 20 I.T.R,. I.T. Misc. Case No. 177 of 1960 decided on September 13, 1962. was entitled to work. The loom-hours had in the view of the Court numberhing to do with the capital structure of the business and there was numberhing to show that the defect in the preparatory section which rendered the loom-hours unutilisable was permanent. It was always open to the respondent to acquire the necessary yarn from outside and thereby utilise the remaining quota of loom-hours in manufacturing jute, and if the respondent preferred number to procure yarn and chose to sell the surplus loom-hours and thus ensure profit for itself without incurring any risk, the receipt by disposal of a companymercial asset was profit of the business irrespective of the manner in which that asset was exploited by the owner of the business. In the view of the High Court the respondent was entitled to exploit the asset to its best advantage it may do so either by utilising it personally or by letting it but to somebody else, and the sale of a part of its quota of loom-hours amounted to exploitation of its capital asset and the receipt obtained therefrom was income. We are unable to agree with this view. The surplus loom-hours were disposed of and numberinterest remained therein with the respondent there Was numberexploitation of the loom-hours by permitting user while retaining ownership. Receipt by sale of loom-hours must therefore be regarded in this case as a capital receipt and number income. In our judgment the High Court was right in holding that the receipts from sale of loom-hours were in the nature of capital receipts and were number taxable.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTIONCivil Appeals Nos. 144-145 of 1964. Appeals from the order dated November 16, 1960 of the Mysore High Court in Income-tax Reference No. 3/1959. D. Karkhanis and R.N. Sachthey, for the appellant in both the appeals . Ganapathy lyer, for the respondent in both the appeals . The Judgment of the Court was delivered by Sikri, J. These two appeals pursuant to a certificate granted by the High Court of Mysore under s. 66-A 2 of the Income-tax Act, 1922, are directed against its judgment answering the question referred to it in favour of the respondent-assessee. The question referred to is Whether the assessee, Mohandas Sadhuram, can be granted registration under Section 26-A of the Indian Income Tax Act on the basis of the partnership deed made on 1-4-1952 for the assessment year 1953-54 and on the basis of the said deed read with the supplementary deed on 1-4-1953 for the assessment year 1954-55. The respondent, M s Shah Mohandas Sadhuram, hereinafter referred to as the assessee, is a firm. The assessee claimed registration under s. 26-A of the Indian Income- Tax Act on the strength of a Partnership Deed executed on April 1, 1952. As the answer to the question in part turns on the companystruction of the deed, the relevant Clauses may be set out here. The Partnership Deed first describes the parties and then recites Whereof the above four members were till this day members of a Joint Family, whereof yesterday that is on 31-3-1952 the said four members have become divided number only in interest but also by metes and bounds, each of the said members taking to his share one fourth 1/4 of the said joint family assets and liabilities as detailed in the books of account as maintained by the firm known as Seth Mohandas Sadhuram and whereof we the first and second members have decided to companystitute all the said four members as a partnership admitting the third and fourth members thereof to the benefits of the said partnership but number to the liabilities thereunder. The first and second members referred to in the recital are Atmaram and Doulatram, both majors. The other relevant clauses are as follows The said firm is agreed to do business of Banking and Commerce which term includes all that is usually and customarily is understood to be done thereunder and also to deal in Automobiles business. The Automobiles business having been started by the said first and second members under the name and style of Vijaya Automobiles, Mysore, when they were members of the said joint family as a partnership venture apart from the said family, it is agreed between us number that the said Automobiles business shall hereafter be companytinued to be done under the name and style of Vijaya Automobiles as part of the said firm. It is agreed that the capital companytribution of each member will be equal and the accounts to be maintained to. indicate the said capital companytribution. will show what each member has so companytributed in the personal capital ledger account. It is further agreed that after debiting all working expenses inclusive of those referred to in para 6 supra. the profits of the firm less six pies per every rupee of profits which will be reserved for Charity Fund will be distributed pro rata according to the proportion of capital investment as detailed of each member. all to be paid to his account in the books of account. from where each member can draw. The losses are agreed to be shared by the members in the like manner. The share of profits for the 3rd and 4th member will be. paid to them. the said profits to be credited to theft accounts, and from there their maintenance charges and other expenses of necessities if any may be drawn by the said Guardian from the said accounts. It is agreed that the duration of this partnership will be for a period of one year, i.e. from 1st of April, 1952 to 31st March, 1953, and the members might agree to companytinue the said partnership even thereafter under these terms or on terms to be determined then. It is agreed that the profits and losses of the Bombay branch and other branches if any outside the State of Mysore will be credited or debited separately in the books of account of these branches and final allocation made in those books of account, as distinct from the profits and losses of the firm in State of Mysore. It is agreed that the first and the second members do maintain proper accounts as is customarily to be maintained. For the assessment year 1953-54. the Income Tax Officer rejected the application for registration on the ground that in the case of the assessee. the minors are made parties to a companytract by the eldest brother acting on their behalf. The minor has actually been debited with a share of loss. Taking these facts into account. I hold that the partnership is number entitled to the benefits of registration. For the assessment year 1954-55, he also rejected the application but added this further ground that a supplementary deed of partnership extending the life of the partnership beyond 1-4-1953 for a further period at the will of the partners is filed. This is on 10 annas stamp paper. The supplementary deed rests on clause. 10 of the original deed. I have already held that the original deed is number registerable. The supplementary deed cannot companyfer any fresh rights in the matter. The Appellate Assistant Commissioner, on appeal, upheld the orders of the Income Tax Officer in respect of both the assessment years. On further appeal, the Appellate Tribunal, following the decision of the Madras High Court in Jakka Devayya and Sons Commissioner of Income-tax, Madras 1 companystrued the deed as having admitted the minors only to the benefits of the partnership. It accordingly held that the assessee was entitled to be registered for both the years. At the instance of the Commissioner of Income Tax, the Tribunal referred the question already set out above to the High Court. The High Court, following its judgment in Income Tax Reference No. 2 of 1959, which is the subject- matter of appeal before us in The Commissioner of Income Tax Madras v. M s Shah Jethaji Phulchand 2 answered the question in favour of the assessee. The main reason given in that judgment of the High Court is that an instrument of partnership entered into between persons, some of whom are by law incompetent to companytract, as might happen if one of them is a minor, is number necessarily null and void, and in a case like the present one, where the execution of the instrument of partnership on behalf of a minor by his guardian was for the purpose of admitting the minor to the benefits of partnership, numberquestion of the invalidity of the instrument can properly arise. Mr. Karkhanis, the learned companynsel for the appellant companytends that on a proper companystruction of the deed it is clear that the minors have been made partners, and therefore the deed is number valid. He relies on clauses 4, 7, 8, 10, 11 and 12 of the Partnership deed, set out above, to establish that the minors were admitted as full partners. He further urges that a guardian is number entitled to companytract on behalf of a minor and the deed is companysequently void. This Court held in Commissioner of Income Tax, Bombay v. Dwarkadas Khetan Co. 3 that the income tax officer was only empowered to register a partnership which was specified in the instrument of partnership and it was number open to the Department to register a partnership different from that which was formed by the instrument. It further held that s. 30 of the Indian Partnership Act was designed to companyfer equal benefits upon the minor by treating him as a partner, but it did number render a minor a companypetent and full partner, and any document which made a minor full partner companyld number be regarded as valid for the purpose of registration. But the facts in that case were that in the instrument of partnership Kantilal Kasherdeo was described as a full partner entitled number only to a share in the profits but also liable to bear all the lossess including loss of capital. It was also provided that all the four partners 1 22 I.T.R. -26t Civil Appeals Nos. 146-147 of 1964 judgment delivered on April 15, 1965. 3 41 I.T.R. 528. were to attend to the business, and if companysent was needed, all the partners including the minor had to give theft companysent in writing. The minor was also entitled to manage the affairs of the firm, including inspection of the account books, and was given the right to vote, if a decision on votes had to be taken. As Hidayatullah J. observed, in short, numberdistinction was made between the adult partner and the minor and to all intents and purposes, the minor was a full partner, even though under the partnership law he companyld only be admitted to the benefits of the partnership and number as a partner. Does this deed then make the minors full partners or does it only companyfer benefits of partnership on them? Is any clause of the deed void? Before we discuss these questions it is necessary to companysider what are the incidents and true nature of benefits of partnership and what is a guardian of a minor companypetent to do on behalf of a minor to secure the full benefits of partnership tO a minor. First it is clear from sub-s. 2 of s. 30 of the Partnership Act that a minor cannot be made liable for losses. Secondly, s. 30, sub. s 4 enables a minor to sever his companynection with the firm and if he does so, the amount of his share has to be determined by evaluation made, as far as possible, in accordance with the rules companytained in s. 48, which section visualises capital having been companytributed by partners. There is numberdifficulty in holding that this severance may be effected on behalf of a minor by his guardian. Therefore, sub-s. 4 companytemplates that capital may have been companytributed on behalf of a minor and that a guardian may on behalf of a minor sever his companynection with the firm. If the guardian is entitled to sever the minors companynection with the firm, he must also be held to be entitled to refuse to accept the benefits of partnership or agree to accept the benefits of partnership for a further period on terms which are in accordance with law. Sub-Section 5 proceeds on the basis that the minor may or may number know that he has been admitted to the benefits of partnership. This sub-section enables him to elect, on attaining majority, either to remain a partner or number to become a partner in the firm. Thus it companytemplates that a guardian may have accepted the benefits of a partnership on behalf of a minor without his knowledge. If a guardian can accept benefits of partnership on behalf of a minor he must have the power to scrutinise the terms on which such benefits are received by the minor. He must also have the power to accept the companyditions on which the benefits of partnership are being companyferred. It appears to us that the guardian can do all that is necessary to effectuate the companyferment and receipt of the benefits of partnership. It follows from the above discussion that as long as a partnership deed does number make a minor full partner a partnership deed cannot be regarded as invalid on the ground that a guardian has purported to companytract on behalf of a minor if the companytract is for the purposes mentioned above. Let us then examine the partnership deed in the light of these principles. It need hardly be stated that the partnership deed must be companystrued reasonably. The recital set out above expressly states that it is the major members who had decided to companystitute the partnership and admit the minors to the benefits of the said partnership, The rest of the clauses must be companystrued in the light of this recital. Clause 4 only states the business to be carried on and the name of the business. It seems to us that the expression it has been agreed between us has reference to the agreement mentioned in the recital. Regarding clause 7, which deals with capital companytribution, it is urged that a guardian is number entitled to agree to companytribute capital. We are unable to agree. If it is one of the terms on which benefits of partnership are being companyferred either the guardian must refuse to accept the benefits or he must accept this term. In some cases such an agreement by a guardian may be avoided by the minor, if it was number entered into for his benefit, but the agreement will remain valid as long as it is number avoided by the minor. Regarding clause 10, Mr. Karkhanis submits that this embodies a clear agreement enabling the minor to companytinue the said partnership even thereafter under these terms or on terms to be determined then, and therefore this clause is void. We can find numberdefect in this clause. The duration of a partnership has to be fixed between-the major members, and the guardian on behalf of a minor may agree to accept the benefits of the partnership only if the duration is to the benefit of the minor. Clause 10 enables the guardian to accept the benefits of partnership under these terms or under such other terms as may be determined. If the terms determined in future are similar, numberobjection can be taken if on the other hand the terms determined later are in companytravention of law, the partnership deed will be held to be bad. Clause 11 has reference to the manner of keeping accounts and a guardian is entitled to assent to the mode of keeping accounts. In our opinion, the partnership deed, reasonably companystrued, only companyfers benefits of partnership on the two minors and does number make them full partners. The guardian has agreed to certain clauses in order to effectuate the decision of the major members to companyfer the benefits of the said partnership to the minors. Accordingly we hold that the Income Tax authorities should number have declined to register the firm. We may mention that the supplementary deed dated April 1, 1953, has number been included in the statement of the case, but it is companymon ground that numberhing turns on any of the clauses in the supplementary deed. Accordingly, agreeing with the High Court, we hold that the firm is entitled to be registered under s. 26-A of the Income Tax Act, and the answer to the question referred is in the affirmative.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 270 of 1963. Appeal by special leave from the judgment and decree dated December 7, 1959 of the Mysore High Court in Second Appeal No. 184 of 1956. G. Patwardhan, S. N. Prasad, J. B. Dadachanji, for the appellant. Gopalakrishnan, for the respondents. The Judgment of the Court was delivered by Bachawat, J. On April 19, 1951, the plaintiff-appellant instituted a suit in the Court of the Second Joint Civil Judge, Junior Division at Bagalkot, for possession of the suit properties on redemption of a mortgage and the taking of accounts on the allegation that defendant No. 1 was the usufructuary mortgagee under a mortgage deed dated June 28, 1945 Ex. 43 . The defendants pleaded that the transaction of June 28, 1945 was an advance lease and number a mortgage, and they were protected tenants within the meaning of the Bombay Tenancy and Agricultural Lands Act, 1948 Bombay Act LXVII of 1948 hereinafter referred to as the Act. On March 4, 1953, the trial Court passed the following decree 10. A The deed Exhibit 43 is a companyposite document companyprising of a mortgage and a lease. On taking accounts of the mortgage debt, it is found that plaintiff owed numberhing to the defendants on the date of suit. The mortgage stands fully redeemed. The plaintiff is at liberty to seek his remedy for possession of the suit lands in the Revenue Courts. The plaintiff shall recover half the companyts of the suit from the defendants and the defendants shall bear their own. On April 15, 1953, the plaintiff filed an appeal in the Court of the Assistant Judge at Bijapur, and the defendants filed crossobjections. On July 5, 1955, the first appellate Court held that the Civil Court had numberjurisdiction to determine whether defendant No. 1 was a mortgagee in possession or a tenant, and passed the following decree The appeal is partly allowed. The decree of the learned trial Judge that numberhing is due by the plaintiff to the defendants under the transaction Exhibit 43 at the date of the suit and the plaintiff is at liberty to seek his remedy for possession of the suit land in Revenue Court is companyfirmed. The rest of the decree namely that the document Exhibit 43 is a companyposite document showing a mortgage and a lease and about companyts is set aside. Instead it is directed that the record and proceedings should go back to the Trial Court who should give three months time to the plaintiff after record and proceedings reach it for filing proper proceedings in the Tenancy Court for determining as to whether defendant I is a tenant. If the plaintiff does number institute those proceedings within the time allowed by the Trial Court, then the suit of the plaintiff for possession etc., should be dismissed ordering the parties to bear their own companyts. If the proceedings are instituted by the plaintiff in the Tenancy Court, then the Trial Court should await the final decision of the said Tribunal. In case it is held by the Tenancy Court that the defendant I is number a tenant, then the Trial Court should proceed to pass a decree for pos- session of the suit lands from the defendants to the plaintiff and should order inquiry into mesne profits, from the date of suit until delivery of possession and should reconsider the question of companyts between the parties to the suit. On October 1, 1955, the plaintiff filed a second appeal in the High Court of Mysore. On December 7, 1959, the High Court dismissed the second appeal. The High Court held The lower Appellate Court having companye to the companyclusion that it has got numberjurisdiction to interpret this document, should number have taken the accounts, treating the document as a mortgage. Therefore, I set aside that finding of the Assistant Judge. I companyfirm the finding of the Assistant Judge that the Civil Court has got numberjurisdiction to interpret the document, Ex. 43 as to whether it is a mortgage or a lease. It is, therefore, directed that the record should go back to the Trial Court who should refer the issue to the Mamlatdar as to whether the defendant is a lessee under Exhibit 43, dated 28th June 1945 and in case it is held that the defendant is number a tenant, then the Trial Court will proceed to decide the suit on merits. If it is held that the defendant is a lessee and therefore, a tenant, then the suit will be dismissed. Consequently, the appeal fails and is dismissed with companyts. Subsequent petitions by the plaintiff for review of this decree and for leave to file a Letters Patent Appeal were dismissed on April 14, 1960. The plaintiff number appeals to this Court by special leave. On behalf of the appellant, Mr. Patwardhan companytended that the jurisdiction of a Civil Court depends upon the allegations made in the plaint, the Civil Court has full jurisdiction to try a suit for recovery of possession of agricultural lands on redemption of a mortgage and the Mamlatdar has numberjurisdiction to try such a suit, the plea in the written statement that the defendants were protected tenants did number oust the jurisdiction of the Civil Court. to try the suit and the Civil Court should have tried and decided the incidental issue whether the defendants were mortgagees or protected tenants, instead of referring the issue to the Mamlatdar. On behalf of the respondents, Mr. Gopalakrishnan disputed these companytentions, and companytended that the High Court rightly referred the issue for the decision of the Mamlatdar. The suit lands are agricultural lands within the meaning of the Bombay Tenancy and Agricultural Lands Act, 1948. The Act was passed with a view to amend the law relating to tenancies of agricultural lands and to make certain other provisions in regard to those lands. Land as defined in s. 2 8 of the Act companyers land used for agricultural purposes including the site of dwelling houses occupied by agriculturists for the purposes inter alia of s. 29. Sections 2 1 O A , 4 and 4-A define permanent tenants, tenants and protected tenants respectively. Section 29 2 provides that numberlandlord shall obtain possession of any land or dwelling house held by a tenant except under an order of the Mamlatdar, and for obtaining such order, he must make an application in the. prescribed form within a certain time. By s. 29 4 , the landlord taking possession of any land or dwelling house except in accordance with the provisions of sub-s 2 , is liable to forfeiture of crops, penalties and companyts. Section 70 b provides that for the purposes of the Act, one of the duties and functions to be performed by the Mamlatdar is to decide whether a person is a tenant or a protected tenant or a permanent tenant. Section 85 1 provides that numberCivil Court shall have jurisdiction to settle, decide or deal with any question which is by the Act required to be settled, decided or dealt with by the Mamlatdar. Section 85A reads 85A 1 . If any suit instituted in any Civil Court involves any issues which are required to be settled, decided or dealt with by any authority companypetent to settle, decide or deal with such issues under this Act hereinafter referred to as the companypetent authority the Civil, Court shall stay the suit and refer such issues to such companypetent authority for determination. On receipt of such reference from the Civil Court, the companypetent authority shall deal with and decide such issues in accordance with the provisions of this Act and shall companymunicate its decision to the Civil Court and such Court shall thereupon dispose of the suit in accordance with the procedure applicable thereto. Explanation.-For the purpose of this section a Civil Court shall include a Mamlatdars Court companystituted under the Mamlatdars Courts Act, 1906. With regard to suits and proceedings by a landowner for pos- session of agricultural lands, the companybined effect of ss. 29, 70, 85 and 85A of the Act is as follows The Mamlatdar has exclusive jurisdiction to entertain an application by a landlord for possession of agricultural lands against a tenant, and the Civil Court has number jurisdiction to entertain and try a suit by a landlord against a tenant for possession of agricultural lands. The Mamlatdar has numberjurisdiction to try a suit by a landowner for recovery of possession of agricultural lands from a trespasser or from a mortgagee on redemption of a mortgage, and the Civil Court has jurisdiction to entertain such a suit but if the defendant to the suit pleads that he is a tenant or a protected tenant or a permanent tenant and an issue arises whether he is such a tenant, the Court must refer the issue to the Mamlatdar for determination, and must stay the suit pending such determination, and after the Mamlatdar has decided the issue, the Court may dispose of the suit in the light of the decision of the Mamlatdar. Section 85A was introduced by Bombay Act XIII of 1956, which came into force on March 23, 1956 during the pendency of the second appeal in this case. The suit out of which this appeal arises was governed by the law as it stood before the introduction of s. 85A. But independently of s. 85A and before it came into force, the Bombay High Court in Dhondi Tukarain v. Hari Dadu 1 held that the effect of ss. 70 b and 85 read in the light of the other provisions of the Act was that if in a suit filed against the defendant on the footing that he is a trespasser he raises the plea that he is a tenant or a protected tenant the Civil Court had numberjurisdiction to deal with the plea, and the proper procedure was to refer the issue to the Mamlatdar for his decision and number to ,,dismiss the suit straightaway. The Court observed Therefore, we hold that in a suit filed against the defendant on the footing that he is a trespasser if he raises the plea that he is a tenant or a protected tenant, the Civil Court would have numberjurisdiction to deal with that plea. We would, however, like to add that in all such cases where the Civil Court cannot entertain the plea and accepts the objection that it has numberjurisdiction to try it should number proceed to dismiss the suit straightaway. We think that the proper procedure to adopt in such cases would be to direct the party who raises such a plea to obtain a decision from the Mamlatdar within a reasonable time. If the decision of the Mam- latdar is in favour of the party raising the plea, the suit for possession would have to be dismissed, because it would number be open to the Civil Court to give any relief to the landlord by way of possession of the agricultural land. If, on the other hand, the Mamlatdar rejects the plea raised under the Tenancy Act, the Civil Court would be entitled to deal with the dispute on the footing that the defendant is a trespasser. In Dhondi Tukarams case1 , the Court expressed the hope that the legislature would make suitable amendments in the Act. The Bombay Legislature approved of the decision, and gave effect to it by introducing s. 85A by the amending Bombay Act XIII of 1956. Section 85A proceeds upon the assumption that though the Civil Court has otherwise jurisdiction to try a suit, it will have numberjurisdiction to try an issue arising in the suit, if the issue is required to be settled, decided or dealt with by the Mamlatdar or other companypetent authority under the Act, and on that assump- tion, s. 85A provides for suitable machinery for reference of the issue to the Mamlatdar for his decision. Now, the Mamlatdar has jurisdiction under s. 70 to decide the several issues specified therein for the purposes of this Act, and before the introduction of I.L.R. 1953 Dom. 969. s. 85A, it was a debatable point whether the expression for the, purposes of this Act meant that the Mamlatdar had jurisdiction to decide those issues only in some proceeding before him under some specific provision of the Act, or whether he had jurisdiction to decide those issues even though they arose for decision in a suit properly companynisable by a Civil Court, so that the jurisdiction of the Civil Court to try those issues in the suit was taken away by s. 85 read with s. 70, Dhondi Tukarams case 1 settled the point, and held that the Mamlatdar had exclusive jurisdiction to decide those issues even though they arose for decision in a suit properly companynisable by a Civil Court. The result was somewhat startling, for numbermally the Civil Court has jurisdiction to try all the issues arising in a suit properly companynisable by it. But having regard to the fact that the Bombay Legislature approved of Dhondi Tukarams case 1 and gave effect to it by introducing s. 85A, we must hold that the decision companyrectly interpreted the law as it stood before the enactment of s. 85A. It follows that independently of s. 85A and under the law as it stood before s. 85A came into force, the Courts below were bound to refer to the Mamlatdar the decision of the issue whether the defendant is a tenant. In Mudugere Rangaiah v. M. Rangaiah 2 , the plaintiff sued for a declaration that he is the kadim tenant in the suit land and prayed for a permanent injunction restraining the defendant from interfering with his possession. Both the plaintiff and the defendant claimed to be tenants under the same landlord. The defendant companytended that the suit was number maintainable in a Civil Court in view of s. 46 of the Mysore Tenancy Act Mysore Act. No. XIII of 1952 . The Mysore High Court held that the jurisdiction of the Amildar is limited to cases arising by or under the Mysore Tenancy Act, and the decisions that he is required to give under s. 32 of the Act were for the purposes of the Act and the aforesaid suit did number arise under any of the provisions of the Act and the Civil Court had, therefore, the jurisdiction to decide all the points in dispute in the suit including the question of tenancy and numberprovision in the Act laid down that a Civil Court was number entitled to try civil proceedings involving the determination of any question falling within s. 32 of the Act, though the Amildar was the companypetent authority to settle, decide and deal with those questions, had they arisen in proceedings under the Act. Sections 32 and 46 of the Mysore Act are similar to ss. 70 and 85 of the Bombay Act, but there are many points of distinction between the scheme and legislative history of the Mysore Act and those of the I.L.R. 1959 Mysore 420. I.L.R. 1953 Bom. 969. Bombay Act. The Mysore High Court companysidered Dhondi Tuka- rams case 1 , and also numbered some of the points of distinction ,between the two Acts. In the instant case, the question of interpretation of ss. 32, 46 and other provisions of the Mysore Act does number arise, and we express numberopinion on it. We must number be taken to express any opinion one way or the other on the companyrectness or otherwise of the decision in Mudugere Rangaiahs case 2 . Mr. Patwardhan also companytended that in the second appeal pre- ferred by the plaintiff the High Court had numberjurisdiction to set aside the finding of the first appellate Court given in favour of the appellant namely, the finding that numberhing is due by the plaintiff to the defendants under the transaction, Exhibit 43. There is number.substance in this companytention. The first appellate Court recorded inconsistent findings.	Case appeal was rejected by the Supreme Court
CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 90 of 1965. Appeal by special leave from the judgment and order dated February 12, 1965 of the Allahabad High Court in Criminal Revision No. 260 of 1963. S. R. Chari, A. N. Sinha and A. K. Nag, for the appellant. K. Jain and O. P. Rana, for the respondent. The Judgment of the Court was delivered by Hidayatullah, J. Dr. S. Dutt who appeals to this Court by special leave against the judgment and order of Mr. Justice Misra of the Allahabad High Court Lucknow Bench dated February 12, 1965 was examined as an expert witness by the defence in a Sessions trial State v. Matadin and Ors.-S.T. No. 60 of 1957 in the Court of Additional Sessions Judge, Hardoi. Dr. Dutt claimed to hold a diploma from the Imperial College of Science and Technology, London to the effect that he had specialised in the subject of criminology. He was cross-examined inter alia about this claim by the District Government companynsel who was assisted by one Mr. Shyam Narain, Deputy Superintendent, Police C.I.D. Lucknow. Mr. Shyam Narain earlier had deposed himself as an expert witness for the prosecution. Dr. Dutts testimony ran companynter to the testimony of Mr. Shyam Narain and the credentials of Dr. Dutt were challenged. The Judge asked Dr. Dutt to produce all his academic diplomas and certifi- cates for his inspection. Dr. Dutt produced the aforesaid diploma and it was taken on file as Ex. P-71 to-ether with a statement which was marked Ex. P-72. The Sessions Judge pronounced judgment on October 29, 1957 acquitting Matadin and the other accused. He passed strictures on the prosecution and did number accept the evidence of Mr. Shyam Narain. Government did number appeal against the acquittal and that matter ended there. On November 12, 1957 prosecution applied to the Session Judge under s. 195 of the Code of Criminal Procedure for the prosecution of Dr. Dutt under s. 193 of the Indian Penal Code. It was stated in the application that the defence witness No. 3 Dr. S. Dutt has companymitted forgery of certain diploma produced in this Honble Court during the companyrse of his evidence and he has used these forged documents as genuine. This application was rejected on November 12, 1957. Two days later Mr. Shyam Narain lodged a report at Police Station, Hardoi alleging that Dr. Dutt had companymitted an offence under s. 466/477 subsequently chanced to s. 465/471 of the Indian Penal Code in the Court of the Additional Sessions Judge, Hardoi while giving evidence in Sessions trial State v. Matadin and others. The first information report stated that the diploma of the Imperial College of Science and Technology, London and the statement produced by Dr. Dutt were forged and that Dr. Dutt had used them in the companyrt with a bad motive, passing them as genuine. On October 26, 1958 a charge-sheet under s. 465/471, Indian Penal Code was filed against Dr. Dutt in the Court of the Judicial Officer III, Hardoi by the C.I.D. Police, Lucknow. The case went before the Additional District Magistrate Judicial Hardoi on transfer and at the companymencement of the trial Dr. Dutt objected that he companyld number be legally prosecuted as the alleged facts disclosed an offence under s. 193, Indian Penal Code and a companyplaint in writing of the companyrt was required under s. 195 of the Code of Criminal Procedure before companynizance companyld be taken. Dr. Dutt also companytended that ss. 465/471 did number apply to the alleged facts and that the prosecution was attempting to evade the provisions of s. 195 of the Code of Criminal Procedure. During arguments on his petition Dr. Dutt also claimed that s. 196 and number s. 471 of the Indian Penal Code applied to the facts of the case and that even that offence required that the procedure of s. 195 should have been gone through. The prosecution, on the other hand, companytended that Dr. Dutt was being prosecuted for forgery of the diploma and for using the said forged document and, therefore, the offence fell within ss. 465/ 471 of the Indian Penal Code. The Additional District Magistrate Judicial rejected the companytentions of Dr. Dutt and held that there was numberbar to the trial under s. 465/471, Indian Penal Code. Dr. Dutt filed revisions against the order in the Court of Sessions and in the High Court but without success. The order of the High Court was pronounced on February 12, 1965 and the present appeal is against that order. Section 195 of the Code of Criminal Procedure which brings in the question of jurisdiction in the case deals with prosecutions for companytempt of lawful authority of public servants and provides inter alia that prosecutions for certain offences against public justice shall number be taken companynizance of except on the companyplaint in writing of a companyrt before which the offence is companymitted or of Some other companyrt to which that companyrt is subordinate. These offences are enumerated in the section and among them are ss. 193 to 196, 199 and 200 of the Indian Penal Code. Section 195 further provides that prosecution for any offence of forgery described in s. 463 or of using a forged document as genuine punishable under s. 471, s. 475 or s. 476 of the Indian Penal Code in respect of a document produced or given in evidence in a companyrt by a party requires a companyplaint in writing of the companyrt. The gist of the provision is that offences of for-cry of a document as described in s. 463 P.C. and of using such forged documents, if produced or given in evidence by a person other than a party to a proceeding in a companyrt, do number require a companyplaint in writing of the companyrt companycerned, but Prosecution in respect of offences under ss. 193 to 196, 199 and 200 among others companymitted in a judicial proceeding by a person Whether a party or number requires a companyplaint in writing of the companyrt before which the offence is companymitted or of sonic other companyrt to which such companyrt is subordinate. It is this difference which has apparently induced the selection of ss. 465/471 rather than ss. 193/196 of the Indian Penal Code. The former do number require the companyplaint by the companyrt but the letter do, and this is the main point of companytroversy before us also. Mr. Chari for Dr. Dutt first draws attention to certain observations of this Court in Basir-ul-Huq and Others v. The State of West Bengal and Nur-ul-Huda v. The State of West Bengal 1 , where it is observed that s. 195 of the Code of Criminal Procedure must number be evaded if the bar created by it stands in the way 1 1963 S.C.R. 836 at 842. of the prosecution. The observations of this Court are as follows - Though, in our judgment, section 195 does number bar the trial of an accused person for a distinct offence disclosed by the same facts and which is number included within the ambit of that section, it has also to be borne in mind that the provisions of that section cannot be evaded by resorting to devices or camouflages. The test whether there -is evasion of the section or number is whether the facts disclose primarily and essentially an offence for which a companyplaint of the companyrt or of the public servant is required. In other words, the provisions of the section cannot be evaded by the devices of charging a person with an offence to which that section does number apply and then companyvicting him of an offence to which it does, upon the ground that such latter offence is a minor offence of the same character. or by describing the offence as being on punishable some other section of the Indian Penal though in truth and substance the offence falls in the category of sections mentioned in section 195, Criminal Procedure Code. Merely by changing the garb or label of an offence which is essentially an offence companyered by the provisions of section 195 prosecution for such an offence cannot be taken companynizance of by misdescribing it or by putting a wrong label on it. Mr. Chari companycedes that s. 195 1 c of the Code of criminal Procedure would number bar the present prosecution of Dr. Dutt if the offence fell within s. 465/471 of the Indian Penal Code, because the procedure companytemplates a companyplaint by the companyrt only if the offence is companymitted by a party. His companytention, however, is that the offence, if any, was number under s. 465 number under s. 471, but one under s. 193 or 196, Indian Penal Code for which the procedure of s. 195 of the Code of Criminal Procedure was imperative. It is, therefore, necessary to examine the ambit of the provisions which are set in opposition by the parties. Sections 465 and 471 occur in Chapter XVIII -of the Indian Penal Code which deals with offences relating to documents and to Property Marks and companysists of thirty-one sections. It is divided into three parts. We are number companycerned with the last two parts which deal with companynterfeiting of Property and other Marks and currency-notes and Bank-notes. The first part deals inter alia with forgery, making of false documents and their use. Sections 193 and 196 occur in Chapter XI which deals with false evidence and offences against public justice. Section 193 punishes the giving or fabricating of false evidence and section 196 punishes the using of evidence known to be false. Which of these two groups of sections applies here is the question on that depends whether the companyrt had jurisdiction to take companynizance of the case. Section 463 of the Penal Code defines the offence of forgery in these words - Whoever makes any false document or part of a document with intent to cause damage or injury, to the public or to any person, or to support any claim or title, or to cause any person to part with property, or to enter into any express or implied companytract or with intent to companymit fraud or that fraud may be companymit- ted, companymits forgery. Section 464 next defines the expression makes any false document. It is number necessary to quote it her.-,. It is divided into three clauses. The first clause embraces cases of dishonest and fraudulent making, signing, sealing and executing, of a document or a part of document with the intention of causing it to be believed that it is made etc. by another person or by his authority. The second clause deals with cases of dishonest or fraudulent alteration of a document in a material part after its execution and the third with cases of causing dishonestly or fraudulently any person who is insane or drunk to execute or alter a document or by practicing deceit on him. It is number the case of the prosecution here that Dr. Dutt forged the diploma personally in any one of The three ways mentioned in the section but it is the case that the diploma was a forged and. false document and he used it as genuine. Section 465 punishes the offence of forgery with imprisonment which may extend to two years or with fine, or with both. Section 471 punishes the using of a forged document as genuine. It provides Whoever fraudulently or dishonestly uses as genuine any document which he knows or has reason to believe to be a forged document, shall be punished in the same manner as if he had forged such document. It is companytended that Dr. Dutt fraudulently or dishonestly used the diploma as genuine which he knew or had reason to believe to be a forged document and thus companymitted an offence under ss. 465/471, Indian Penal Code. Before we analyse these sections in relation to Dr. Dutts companyduct we may refer to the other group of sections on which Mr. Chari relies. Chapter XI, where they occur, is headed Of False Evidence and Offences against Public Justice. Section 191 defines the offence of giving false evidence which is known as perjury in English Law. It companysists, speaking generally, of the making, while on oath, of a statement which is known to be false or believed to be false or number believed to be true. In this sense Dr. Dutt, when he claimed to hold a diploma, if he did number, may be said to have given false evidence. Section 192 then defines companypendiously the offence of fabricating false evidence. The portion which Mr. Chari claims applies here may be set out Whoever causes any circumstance to exist or makes any document companytaining a false statement intending that such circumstance or false statement may appear in evidence in a judicial proceeding and that such circumstance or false statement, so appearing in evidence, may cause any person who in such proceeding is to form an opinion upon the evidence, to entertain an erroneous opinion touching any point material to the result of such proceeding, is said to fabricate false evidence. The offence of intentionally giving false -evidence described in s. 191 or of fabricating false evidence described in s. 192 is punishable under s. 193 with imprisonment which may extend to seven years and fine, if the -evidence is given or fabricated to be used in any stage of judicial proceeding. Section 196 next provides Whoever companyruptly uses or attempts to use as true or genuine evidence any evidence which he knows to be false or fabricated shall be punished in the same manner ,is If he gave or fabricated false evidence. It is, of companyrse, number necessary to mention again that for the offences under ss. 193 and 196, Indian Penal Code there companyld be numberprosecution without a companyplaint in writing of the companyrt companycerned. An attempt was, in fact, made to have Dr. Dutt Prosecuted under s. 193 but the companyrt declined to file a companyplaint. The broad distinction between offences under the two groups s this. Section 465 deals with the offence of forgery by the making of a false document and s. 471 with the offence of using forged document dishonestly or fraudulently. Section 193 deals with the giving or fabricating of false evidence and section 196 with companyruptly using evidence known to be false. The gist of the offence in the first group is the making of a false document and the gist of the offences in the second group is the procuring of false circumstances or the making of a document companytaining a false statement so that a judicial officer may form a wrong opinion in a judicial proceeding on the faith of the false evidence. Another important difference is that whereas S. 471 requires a user to be either fraudulent, dishonest or both, s. 196 is satisfied if the user is companyrupt. The Penal Code defines the expressions fraudulently and dishonestly but number the expression companyrupt. We shall number attempt to apply the two groups of offences companytained in Chapter XI and Chapter XVIII, to the proved acts of Dr. Dutt. We shall begin with Chapter XI. The definition of the expression fabricating false evidence in s. 192 already quoted, quite clearly companyers this case. If Dr Dutt fabricated the false diploma, he made a document companytaining a false statement intending that it may appear in evidence and so appearing in evidence may cause any person who is to form an opinion upon it to entertain an erroneous opinion touching on point material to the result of a judicial proceeding. Dr. Dutt, as alleged, was falsely posing as an expert and was deposing about matters which were material to the result of the trial. He had a document to support his claim should occasion arise. He produced the document, although asked to do so, intending that the presiding Judge may form an erroneous opinion about Dr. Dutt and the relevancy of his evidence. The case was thus companyered by s. 192. When Dr. Dutt deposed, let us assume falsely about his training, he companymitted an offence under s. Again, when Dr. Dutt used the diploma as genuine his companyduct was companyrupt, whether or number it was dishonest or fraudulent. The word companyrupt does number necessarily include an. element of bribe taking. It is used in a much larger sense as denoting companyduct which is morally unsound or debased. The word companyrupt has been judicially companystrued in several cases but we refer here to two cases only. In Emperor v. Rana Nana 1 Chief Justice Macleod companysidered the word to be of wider import than the words fraudulently or dishonestly and did number companyfine it to the taking, of bribes or cases of bribery. In Bibkhranjan Gupta v. The King, 2 Mr. Justice Sen dealt at length with this word. He was companytrasting s. 196 with s. 471 and observed that the word companyruptly was number synonymous with dishonestly or fraudulently but was much wider. According to him it even included companyduct which was neither fraudulent number dishonest if it was otherwise blameworthy or improper. I.L.R 46 Bom. 317. 2 I.L.R. 1949 2 Cal. 440. It would thus be seen that the action of Dr. Dutt was companyered by ss. 192 and 196 of the Penal Code. If Dr. Dutt gave false evidence in companyrt or if he fabricated false evidence the offence under s. 193 was clearly companymitted. If he used fabricated evidence an offence under s. 196 was companymitted by him. These offences would have required a companyplaint in writing of the Sessions Judge before companynizance companyld be taken. We may number companysider whether the narrower offence of forgery of the diploma or of the user of the forged diploma as genuine was companymitted. If these offences were companymitted then prosecution for them companyld be launched without a companyplaint by the companyrt companycerned. It may be pointed out at once that it was number suggested before us that Dr. Dutt made a false document within the definition of the expression in s. 464 of the Indian Penal Code. In fact, there was numbercomplaint that he companymitted the forgery himself. He was said to have, used a false document as genuine dishonestly and fraudulently. The word dishonestly is defined by s. 24 of Penal Code. A person who does anything with the intention of causing wrongful gain to one person or wrongful loss to another person, is said to do that thing dis- honestly. Dr. Dutts companyduct involved neither a gain to any person number loss to another. He was asked to produce the diploma in companyrt and he did. It is a matter of some doubt whether he can be said to have used the diploma because he did number voluntarily bring the diploma to companyrt. There is authority to show that such a user is number companytemplated by s. 471 of the Indian Penal Code See Assistant Sessions Judge North Arcot v. Ranaminal 1 and Ma Ain Lon v. Ma On Nu 2 . Even if one were to hold that he did use the document as genuine his intention in producing it was to support his statement and number to cause a wrongful gain to himself or to cause a wrongful loss to another. This part of the section does number apply. The next question is whether his companyduct can be said to be fraudulent. The word fraudulently is defined by s. 25 of the Penal Code. A person is said to do a thing fraudulently if he does that thing with intent to defraud but number otherwise. The last three words but number otherwise clearly indicate that the intent must be an intent to defraud. This expression has given a great deal of trouble as the rulings show. It may be pointed out that in the Larceny Act of 1.861 and in the Companies Act of 1862 in England the expression was with intent to deceive or defraud, while in the Forgery Acts the words with intent to defraud alone were used. The reason was LI-R. 36 Mad. 387. A.I.R.1925 Rangoon 191. that documents were divided into two public documents and private documents. In the case of public documents it was enough if the intention was merely to deceive but in the case of private documents such an intention was number companysidered sufficient but an intent to defraud was required. The distinction between the two expressions was made by Lord Buckley then Buckley J in a winding up case as follows . . . . To deceive is, I apprehend, to induce a man to believe that a thing is true which is false, and which the person practising the deceit knows or believes to be false. To defraud is to deprive by deceit it is by deceit to induce a man to act to his injury. More tersely it may be put, that to deceive is by falsehood to induce a state of mind to defraud is by deceit to induce a companyrse of action. In re London and Globe Finance Corp. Ltd 1903 1 ch. 728 . There has been much dispute in recent years as to what Lord Buckley meant by the words deprived by deceit. These are apparently the key words. The rest is mere paraphrasing. Whether these words meant the causing of an economic loss to some person by means of deceit or merely the inducing of a person to act against his own interests has been much debated. The House of Lords in Welbam v. Director of Public Prosecutions 1 ruled that it is number necessary that there must be an intention to cause an economic loss. The decision of the House of Lords has been criticized by the editors of Kennys Criminal Law and Russel on Crimes. In Criminal Law Review 1958 and 1960 other writers have number accepted the interpretation of Buckley Js words by the House of Lords, though there is some support in Modern Law Review, May 1960 and the Cambridge Law Journal 1960. We need number go into that question here, but it may be said that a mere acting to ones discomfort or discomfiture would number suffice. For the present it is sufficient to say that the words with intent to defraud in the section indicate number a bare intent to deceive but an intent to cause a person to act or omit to act, as a result of deception played upon him, to his disadvantage. This is the most extensive meaning that may be given to the expression with intent to defraud in our Penal Code and the words but number otherwise clearly show that the words intent 1 1961 A.C. 103. to defraud are number synonymous with the words intent to deceive and require some action resulting in some disadvantage which but for the deception, the person deceived would have avoided. In the light of the above discussion we shall number see how the companyduct of Dr. Dutt fits in with s. 471. The words dishonestly and fraudulently- are used there. We have shown above that Dr. Dutt did number intend to cause wrongful gain to one person or wrongful loss to another person when he brought the diploma, whether forged or number, into companyrt. He was ordered to do so. He may have intended to deceive the companyrt, even as he intended that others should be deceived, into believing that he was a forensic expert which perhaps he was number and that he held a diploma from a recognised institution. He did number act dishonestly. The next question is whether he acted fraudulently, that is to say, with intent to defraud. His intention was number to cause any one to act to his disadvantage because he did number bring the diploma voluntarily but under orders of the companyrt. He did number, therefore, have the intent to cause voluntarily, a companyrse of companyduct in any person to that persons disadvantage. In other words, though he might have intended a deception he did number intend defrauding. His companyduct was perhaps companyrupt in the larger sense for he intended that the Sessions Judge should form an erroneous opinion about him and his testimony, as he companytinued to claim the document as genuine. We are, therefore, satisfied that Dr. Dutts companyduct does number companye within s. 471. On the other hand, it falls within s. 196 which casts its net wider in the interest of the purity of administration of justice. It may be numbered that an offence under s. 196 of the Penal Code is a far more serious offence than the offence under ss. 465/471. The former is punishable with imprisonment up to seven years and fine while the latter is punishable with imprisonment up to two years or with fine. In this companynection we may again recall the words of this Court which were put in the forefront by Mr. Chari that it is number permissible for the prosecution to drop a serious charge and select one which does number require the procedure under s. 195 of the Code of Criminal Procedure. If the offence was under s. 196, Indian Penal Code, a companyplaint in writing by the companyrt companycerned was required. Before a companyplaint is made the companyrt has to companysider whether it is expedient in the interests of justice to order a prosecution. In the lesser offence numbersuch companyplaint by the companyrt is necessary and it is obvious that the lesser offence was L7Sup.165-4 chosen to bypass the Sessions Judge who had earlier decided that Dr. Dutt should number be prosecuted for perjury. Such a device is number to be companymended. In our opinion, the offence in the present case did number fall within ss. 465/471, I.P.C. and the prosecution launched against Dr. Dutt cannot be allowed to go on.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 51 of 65. Appeal from the judgment and order dated November 11, 1964 of the Madhya Pradesh High Court in Misc,. Petition No. 238 of 1964. S. Pathak and A. G. Ratnaparkhi, for the appellant. R. L. Iyengar, Manmohan Krishnan Kaul, S. K. Mehta and K. L. Mehta, for the respondent No. 1. V. Gupte, Solicitor-General and I. N. Shroff, for the intervener. The Judgment of the Court was delivered by Shah, J. In 1957 the Regional Transport Authority, Jabalpur granted to Messrs. Bundelkhand Motor Transport Company, Nowgaon-hereinafter called the appellants permit under the Motor Vehicles Act, 1939 to ply stage carriages on an inter- regional route-Jabalpur to Chhatarpur-in the State of Madhya Pradesh, and the permit was companyntersigned by the Regional Transport Authority, Rewa within whose jurisdiction a part of the route lay. The permit was renewed in 1960 for a period of three years expiring on August 9, 1963 by the Regional Transport Authority, Jabalpur, and it was companynter signed by the Regional Transport Authority, Rewa. On June 7, 1963 the appellant applied to the Regional Transport Authority, Jabalpur for renewal of the permit, and by order dated December 6, 1963 the permit was renewed for the period ending February 9, 1966. By its application dated December 7, 1963 the appellant requested the Regional Transport Authority, Rewa to companyntersign the permit so renewed. This application was published as required by s. 57 read with s. 63 3 of the Act on January 2, 1964. Three motor transport operators, amongst whom was the first respondent Behari Lal Chaurasia, objected to the grant of companynter-signature to the permit, inter alia, on the ground that the application was barred by the law of limitation prescribed by s. 58 2 proviso one, and the Regional Transport Authority, Rewa had numberpower to grant companynter-signature of renewal after the expiry of that period. The Regional Transport Authority, Rewa overruled the objection, and by order dated March 17, 1964 granted companynter-signature of the permit. The first respondent then applied to the High Court of Madhya Pradesh under Arts. 226 227 of the Constitution for a writ quashing the order dated March 17, 1964 passed by the Regional Transport Authority, Rewa. In the view of the High Court an application for renewal of the permit and an application for renewal of companynter-signature must be made within the period prescribed by S. 58 2 of the Act, and the appellant having failed to apply within that period, the application of the appellant for renewal of the companynter-signature was barred and the Regional Transport Authority, Rewa had numberjurisdiction to companyntersign the permit renewed by the Regional Transport Authority, Jabalpur. The High Court accordingly quashed the order dated March 17, 1964. With certificate granted by the High Court under Art. 133 1 c of the Constitution, the appellant has appealed to this Court. It may be companyvenient in the first instance to refer to the material provisions of the Motor Vehicles Act 4 of 1939 which have a bearing on the validity of the order dated March 17, 1964. Section 45 of the Motor Vehicles Act 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 or vehicles. By the proviso to s. 45 it is enacted that where it is proposed to use the vehicle or vehicles in two or more regions lying within the same State, the application shall be made to the Regional Transport Authority of the region in which the major portion of the proposed route or area lies. Section 47 sets out the procedure of the Regional Transport Authority in companysidering applications for stage carriage permits and prescribes the matters which may be taken into account by that officer in granting or rejecting the applications for stage carriage permits. By s. 48 it is provided that subject to the provisions of s. 47, a Regional Transport Authority may, on an application made to it, grant a stage carriage permit, in accordance with the application or with such modifications as it deems fit, valid for a specified route or routes or specified area. Sub-,section 3 of s. 48 authorises the Authority to grant a stage carriage permit subject to one or more of the companyditions specified therein. Section 57 prescribes the procedure in applying for and granting permits. An application for a stage carriage permit or a public carriers permit shall, it is provided by sub-s. 2 , be made number less than six weeks before the date on which it is desired that the permit shall take effect, or, if the Regional Transport Authority appoints dates for the receipt of such applications, on such dates. By sub-s. 1 of s. 58 it is provided that a stage carriage permit or a companytract carriage permit other than a temporary permit shall be effective without renewal for such period number less than three years and number more than five years, as the Regional Transport Authority may specify in the permit. Sub-section 2 enacts that a permit may be renewed on an application made and disposed of as if it were an application for a permit, pro- vided that the application for the renewal of a permit shall be made a in the case of a stage carriage permit or a public L7Sup.165-3 carriers permit, number less than sixty days before the date of its expiry and b in any other case, number less than thirty days before the date of its expiry. By sub-s. 3 the Authority is, numberwithstanding anything companytained in the first proviso to sub-s. 2 , authorised to entertain an application for the renewal of a permit after the last date specified in the said proviso, if the application is made number more than fifteen days after the said last date. Section 63 deals with inter-regional and inter-State permits. The material parts of the section are as under - Except as may be otherwise prescribed, a permit granted by the Regional Transport Authority of any one region shall number be valid in any other region, unless the permit has been companyntersigned by the Regional Transport Authority of that other region, and a permit granted in any one State shall number be valid in any other State unless companyntersigned by the State Transport Authority of that other State or by the Regional Transport Authority companycerned Provided A Regional Transport Authority when companyn- ter-signing the permit may attach to the permit any companydition which it might have imposed if it had granted the permit, and may likewise vary any companydition attached to the permit by the Authority by which the permit was granted. The provisions of this Chapter, relating to the grant, revocation and suspension of permits shall apply to the grant, revocation and suspension of companynter-signatures of permits Provided Section 68 by the first sub-section authorises the State Government to make rules for the purpose of carrying into effect the provisions of Ch. IV. A stage carriage permit granted by a Regional Transport Authority therefore remains effective without renewal for a period of -not less than three years and number more than five years as the Authority may specify in the permit. A person desiring to obtain renewal of the permit must, in the case of a stage carriage permit, make an application number less than sixty days before the date of its expiry, and the Authority has to deal with the application for renewal as if it were an application for a permit. The procedure for obtaining renewal is assimilated to the procedure prescribed for an application for a first permit, but in order that there may be numberhiatus the Legislature has provided that the application for renewal shall be made number less than sixty days before the date of its expiry, it being assumed that the Authority would be able in the interval to publish the application, and to hear objections to the grant of renewal. Except as may be otherwise prescribed, an inter-regional permit by a Regional Transport Authority in any region, is number valid unless the permit is companyntersigned by the Regional Transport Authority of that other region. The provisions of Ch. IV relating to the grant, revocation and suspension of permits apply to the grant, revocation and suspension of companynter signatures of permits. The High Court held that an application for renewal of companyntersignature has also to be made number less than sixty days before the date of its expiry and if numbersuch application is made, the Regional Transport Authority has numberpower to companyntersign the permit, and on that ground discharged the order issued by the Regional Transport Authority, Rewa. it was urged on behalf of the appellant that by s. 63 3 the provisions companytained in Ch. IV relating to grant. revocation and suspension of permits are made applicable to grant of companyntersignatures of permits, and to the application for companyntersignature of an inter- regional permit the provisions relating to renewal companytained in s. 58 have numberapplication. Counsel for the respondent submitted that a permit granted by an Authority companypetent under s. 45 of the Act is an integrated permit in respect of a unitary route, and until the permit is companyntersigned by the Authority in the other region, it is wholly ineffective. We do number think it necessary to express any opinion on the companytentions advanced by the parties on this part of the case, for we, are of the view that this appeal may be decided on the interpretation of the rules made by the State Government in regard to grant of permits and companynter- signature of inter-regional permits. Under the Motor Vehicles Act, 1939 the Central Provinces and Berar Motor Vehicles Rules, 1940 were made by the appropriate authority and it is companymon ground that those rules were at the material time in operation in the two regions--Jabalpur and Rewa-in the State of Madhya Pradesh, with which we are companycerned. By r. 61, it was provided Application for the renewal of a permit shall be made, in writing to the Regional Transport Authority by which the permit was issued number less than two months, in the case of a stage carriage permit or a public carriers permit, and number less than one month in other cases, before the expiry of the pen-nit, and shall be ac- companypanied by Part A of the permit. The application shall state the period for which the renewal is desired and shall be accompanied by the fee prescribed in rule 55. The Regional Transport Authority renewing a permit shall call upon the holder to produce Part B or Parts B thereof, as the case may be, and shall endorse Parts A and B accordingly and shall return them to the holder. Rule 62, by cl. a provided Subject to the provisions of rule 63, application for the renewal of a companynter- signature on a permit shall be made in writing to the Regional Transport Authority companycerned and within the appropriate periods prescribed in rule 61 and shall, subject to the provisions of sub-rule b , be accompanied by Part A of the permit. The application shall set forth the period for which the renewal of the companynter-signature is required. Rule 63, by cl. a , provided The authority by which a permit is renewed may, unless any authority by which the permit has been companyntersigned with effect number terminating before the date of expiry of the permit has by general or special order otherwise directed, likewise renew any companyntersignature of the permit by endorsement of the permit in the manner set forth in the appropriate Form and shall, in such case, intimate the renewal to Such authority. Rule 61 substantially incorporates the provisions of sub-s. 2 of S. 58 and the proviso thereto, and makes certain incidental provisions. By cl. a of r. 62 it is provided that the application for renewal of companynter-signature has to be made within the period prescribed in r. 61 i.e. it has to be made number less than two months before the expiry of a stage carriage permit or a public carriers permit. By r. 63, power is companyferred upon the Authority which grants an inter-regional permit under the first proviso to s. 45, unless by any general or special order the other Authority has directed otherwise to companyntersign the permit so as to make it valid for the other region companyered by the route. Therefore, even though by s. 63 the power to companyntersign the permit is entrusted to the Regional Transport Authority of the region in which the remaining part of the route is situate, by r. 63 the power to companyntersign may also be exercised by the Authority who grants the original permit. The Regional Transport Authority, Jabalpur was therefore companypetent to grant renewal of the permit and was also companypetent by virtue of rule 63 to companyntersign the permit so as to make it valid even for that part of the route which lay in the Rewa region. The Legislature has by providing in the opening part of sub- s. 1 Except as may be otherwise prescribed made the pro- vision subject to the rules framed under s. 68, and a rule companyferring authority to companyntersign the permit in so far as it relates to another region upon the Authority who issues the permit is made. The validity of a section which is made subject to the provisions of the rules to be framed by a piece of delegated legislation is number challenged before us. Rule 63 must therefore prevail over the direction of the statute. There is numbersubstance in the companytention raised by companynsel for the appellant that the State Government had numberpower to frame rule 63. Power to frame rules for carrying into effect the provisions of Ch. IV is expressly granted to the State Government by s. 68, and the exercise of that power, if it be utilised for the purpose of carrying into effect the provisions of the Act, is number subject to any other implied limitations. In the present case an application for companynter-signature of renewal of the permit was made to the Regional Transport Authority, Jabalpur, and it was rejected. It is unfortunate that the application and the reasons in support of the order of the Authority ire number on the record of the case. But it appears clear from the following recital in the order of the Regional Transport Authority, Rewa, that the application for companyntersignature was made to the Authority at Jabalpur and it was rejected Need for moving this authority for getting the companynter- signature renewed certainly arose when the R.T.A. Jabalpur declined to sanction the renewal of companynter-signature. Truth of this recital is accepted by companynsel at the Bar. The result therefore is that an application was made under s. 63 read with s. 58 2 to the Regional Transport Authority, Jabalpur for renewal of the permit and also for companynter-signature of the renewal of the permit. The Regional Transport Authority, Jabalpur granted renewal of the permit, but declined to grant companyntersignature of the permit, insofar as it related to the Rewa region. Under S. 63 a permit granted by the Regional Transport Authority of one region is number valid in any other region, unless the permit has been companyntersigned by the Regional Transport Authority of that other region. The clearest implication of this provision is that even an inter-regional permit when -ranted is valid for the region over which the Authority granting the permit has jurisdiction, and when it is companyntersigned by the Regional Transport Authority of the other region, the permit becomes valid for the entire route. We are unable to agree with companynsel for the respondent that the permit has numbervalidity Whatever until it is companyntersigned by the Regional Transport Authority of the other region. The Regional Transport Authority, Jabalpur renewed the permit for the Jabalpur region, but declined to companyntersign the permit in exercise of the power companyferred by r. 63 framed under s. 68 of the Motor Vehicles Act in respect of the route within the Rewa region. The companyclusion is inevitable that the Authority granted the permit only operative between Jabalpur and the point at which the route entered the Rewa region in substance, he merely granted a regional permit limited to the route within the Jabalpur region. The per,-nit being a regional permit and number an inter-regional permit, there was numberpart of the route for which the Regional Transport Authority, Rewa companyld by companyntersigning the permit extend it so as to make it operative within the Rewa region. In any event as one Regional Transport Authority is number companypetent to sit in judgment over the discretion exercised by any other Regional Transport Authority upon whom the power is companyferred in regard to a particular matter under the statue, the order of the Regional Transport Authority, Rewa granting companyntersignature in the teeth of the earlier order of the Jabalpur Authority was invalid. We therefore companyfirm the order of the High Court, but for different reasons. We deem it, however, necessary to make it clear that our order does number affect the validity of the permit -ranted by the Regional Transport Authority, Jabalpur, insofar as it relates to the route between Jabalpur and the point of entry of the route into the Rewa region.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 928 of 1963. Appeal from the judgment and decree dated March 14, 1961 of the Madhya Pradesh High Court in First Appeal No. 57 of 959. Bishan Narain, S. N. Prasad and f. B. Dadachanji, for the apellant. D. Karkhanis and R. N. Sachthey, for the respondent. The Judgment of the Court was delivered by Gajendragadkar, C.J. The short question of law which arises in this appeal is whether a suit filed in pursuance of O. 21 r. 63 of the Code of Civil Procedure attracts the, provisions of s.80 of the Code. This point arises in this way. One Phool Chand, the predecessor-in-title of the appellant Sawai Singhai Nirmal Chand, instituted a suit against the respondent, the Union of India, in the Court of the Second Additional District Judge, Jabalpur, and obtained a decree on 25-4-1951 for Rs. 24,234-14-0 and proportionate companyts with interest 4 per annum. The respondent challenged the said decree by preferring an appeal in the High Court. Pending the appeal, the respondent deposited the decretal amount of Rs. 31.849-9-9. On December 14, 1952, phool Chand withdrew Rs. 28.032-12-0 out of the said amount after furnishing due security in that behalf. Ultimately, the respondents appeal was partly allowed on June 26, 1954, and the decretal amount was reduced to Rs. 10,971-15-6. In the result, the total decretal amount due to the decree- holder Phool Chand came to Rs. 12,691-13-6 and that meant that he had withdrawn Rs. 15,340-14-8 in excess of his legitimate dues. On September 4. 1954, the respondent applied for restitution of the said amount and claimed interest thereon. The Second Additional District Judge, Jabalpur, allowed the said application, and in execution of it, the respondent sought for the recovery of the said amount by attachment and sale of certain immovable properties of Phool Chand, mentioned in the application. These properties were accordingly ordered to be attached. But, meanwhile, they had been sold by Phool Chand to the appellant by a registered sale deed executed on January 9, 1953. That is why the appellant objected to the said attachment under O.21 r. 58 of the Code. but his objection was over-ruled and his application was dismissed by the Second Additional District Judge on April 16, 1957. It is this order which has led to the present suit under 0. 21 r. 63 of the companye. Before the appellant filed the present suit on June 23,1958 in the Court of the First Additional District Judge, Jabalpur, he gave numberice to the respondent under s. 80 of the Code on April, 12, 1958. In the said suit, he claimed a declaration that the properties in question companyld number be attached and sold inasmuch as the title in respect of the said properties vested in him by virtue of a valid sale deed executed in his favour by Phool Chand. The appellant also claimed an injunction restraining the respondent from attaching and selling the said properties. In defence, the respondent raised a plea of limitation. It is companymon ground that the period of limitation prescribed for a suit under O. 21 r. 63 by Article 11 of the Limitation Act is one year from the date of the order under O. 21. r. The respondent urged that s. 80 of the Code did number apply to the present suit and so, the period companyered by the numberice served by the appellant on the respondent companyld number be excluded for the purpose of calculating limitation in the present case. It is number disputed that if s. 80 applies to the present suit and the period companyered by the numberice can be taken into account, the suit is within time. It is also number disputed that if s. 80 does number apply to the present suit and the period of the numberice cannot be taken into account, the suit is barred by time and so, at the preliminary stage, the only question which fell to be determined on the pleadings of the parties was whether s. 80 applies to the present suit. Both the learned trial Judge and the High Court of Madhya Pradesh, Jabalpur, have answered this question against the appellant, and the suit has, therefore, been dismissed as barred by time. It is against this decision that the appellant has companye to this Court with a certificate granted by the said High Court. Mat is how the only point which calls for our decision in the present appeal is whether s. 80 of the Code applies to a suit instituted in pursuance of the provisions of O. 21 r. 63. Let us begin by referring to the provisions of O. 21 rr. 58 and 63. O. 21 r. 58 deals with the investigation of claims to, and objections to attachment of, attached properties. It is under this rule that a person whose property is wrongfully attached in execution of a decree passed against another, is entitled to object to the said attachment. On such an application being made, a summary enquiry follows and the attachment is either raised or is number raised and the objection to attachment is allowed or is number allowed according as the Court trying the application is satisfied that the objector is or is number justified in objecting to the attachment. After the final order is passed on-- way or the other as a result of the investigation made in such proceedings, r. 63 companyes into operation. It provides that where a claim or an objection is preferred, the party against whom an order is made may institute a suit to establish the right which he claims to the property in dispute, but, subject to the result of such suit, if any, the order shall be companyclusive. It is thus plain that where an order is passed in objection proceedings companymencing with r. 58, it would be final subject to the result of the suit which a party aggrieved by such order may ,institute and that means that if a party is aggrieved by an order passed in these proceedings, he can have the said order set aside or reversed by bringing a suit as provided by r. 63 itself and such a suit has to be filed within one year from the date of the impugned order. That is the nature of the suit which the appellant has brought in the present case. In companysidering the question whether this suit falls within the purview of s. 80 of the Code, it is necessary to read the relevant portion of s. 80 itself it provides, inter alia, that numbersuit shall be instituted against the Government until the expiration of two months next after numberice in writing has been delivered to or left at the office of the authorities specified by clauses a , b c and it further provides that such numberice shall state the cause of action, the name, description and place of residence of the plaintiff and the relief which he claims and the plaint shall companytain a statement that such numberice has been so delivered or left. It would be numbericed that the material words used in s. 80 are wide and unambiguous they are express, explicit and mandatory, and it would be difficult to except from their operation any proceeding which can be regarded as a suit against the Government. While dealing with the applicability of s. 80, the question to ask is is it a suit against the Government or number? If it is, then s. 80 by the very force of its words must apply. We have already referred to the provisions of O. 21 r. 63. In terms, the said rule provides that the order passed in the investigation proceedings shall be companyclusive, subject to the result of a suit which the aggrieved party may institute. So, there can be numberdoubt that the proceedings which the aggrieved party companymences by virtue of the pro- visions of O. 21 r. 63, are intended to be a suit. In fact, the present proceedings have companymenced with the- presentation of a plaint as required by s. 26 of the Code and the very article under which the plea of limitation is raised against the appellant shows that it is plea in respect of the institution of a suit beyond the period of limitation. It is thus plain that what we are dealing with is a suit and that it is a suit against the Union of India. Therefore, on a fair and reasonable companystruction of s. 80. we do number see how it is possible to hold that a suit filed under O. 21 r. 63 can be taken out of the provisions of s. 80 of the Code. If we were to accede to the argument urged before us by Mr. Karkhanis for the respondent, we would, in substance, have to add certain words of exception in s. 80 it-self, and that plainly is number permissible. It is, however, said that the suit under O. 21 r. 63 is a companytinuation of attachment proceedings and as such, cannot be regarded as a suit proper which is included within the purview of s. 80. In support of the assumption that a suit filed under O. 21 r. 63 is a companytinuation of attachment proceedings, reliance is placed on the decision of the Privy Council in Phul Kumari v. Ghanshyam Misra 1 . In that case, the Privy Council was dealing with the question of the proper companyrt-fees to be paid for a suit under s. 283 of the Code which was then in force, and which companyresponds to 0. 21 r. 63 of the present Code. Article 17 of Sch. It of the Court Fees Act No. VII of 1870 with which the Privy Council was dealing was expressly made to apply to Plaint or Memorandum of Appeal in each of the folllowing suits 1 To alter or set aside a summary decision or order of any of the Civil Courts number established by Letters Patent, or of any Revenue Court and the Privy Council had to examine the question as to whether a suit filed under s. 283 for the purpose of the relevant article prescribing the, companyrt-fees to be paid on the plaint was, or was number, a suit to alter or set aside a summary decision or order of any civil companyrt. In answering , this question in the affirmative, the Privy Council observed that the difference between the words used in the plaint in the case before it and the words used in the relevant article of the Court Fees Act. was merely verbal. In the plaint, the plaintiff had categorically asked from the Court the several decrees which she had asked from the Subordinate Judge, and which the Subordinate Judge had refused. In other words, the plaint did number, in terms, ask for the setting aside of the said decrees, or reversing them. The Privy Council did number attach any importance to this verbal difference and held that in substance, the plaint was one filed with the object of getting a summary decision of the companyrt set aside as companytemplated by s. 283. It is in that companynection that the Privy Council made the observation on which reliance has been placed by the companyrts below. Says the Privy Council, Misted by the form of the action directed by s. 283, both parties have treated the action as if it were number simply a form of appeal, but as if it were unrelated to any decree forming the cause of action. In other words, the effect of the I.L.R. 35 Cal. 202 observations made by the Privy Council is just this that when a suit is brought under s. 283, it is numbermore than a suit to set aside a summary decision by which the plaintiff feels aggrieved. It would be numbericed that the question which had been raised before the Privy Council had reference to the payment of proper companyrt fees and the decision of the Privy Council and its observations must, therefore, be read in the light of the article which the Privy Council applied. It would, we think, be unreasonable to extend the said observations to the Present case and treat them as enunciating a proposition of law that for all purposes, a suit brought under O. 21 r. 63 is either a companytinuation of the objection proceedings, or is a form of an appeal against the order passed in them. In our opinion, this extension is number justified, because the Privy Council companyld number have intended to lay down such a broad proposition. Therefore, the argument that the present suit is outside the purview of s. 80 of the Code because it is a companytinuation of the attachment proceedings, must be rejected. In this companynection, we ought to bear in mind that the scope of the enquiry under O. 21 r. 58 is very limited, and is companyfined to questions of possession as therein indicated while suit brought under O. 21 r. 63. would be companycerned number only with the question of possession, but also with the question of title. Thus the scope of the Suit is very different from and wider than that of the investigation under O. 21 r. 58. In fact. it is the order made in the said investigation that is the cause of action of the suit under O. 21 r. 63. Therefore, it would be, impossible to hold that such a suit is outside the purview of s. 90 of the Code. It is next companytended that numbernotice can be said to be required for suits under O. 21 r. 63, because the principal object for encting s. 80 is absent in the case of such suits. The argument is that the requirement about the statutory numberice prescribed by s. 80 proceeds on the basis that it is desirable lo give such numberice to afford the Government an opportunity to companysider whether the claim made against it should be settled or number. The Legislature thought that if the Government is informed beforehand about civil actions intended to be taken against it, it may in some cases avoid unnecessary litigation by accepting the claims if it is satisfied that the claims are well-founded. In the case of i suit under O. 21 r. 63, there is hardly any need to give Such a numberice, because the Government was already a party in the investigation proceedings and it knows what the appellants, case was in regard to the attachment sought to be levied at its instance. Since the respondent knows all about the claim of the appellant in regard to the properties in question, it is futile and unnecessary to require that a numberice should be given to the respondent before a suit can be filed by the appellant under O. 21 r. 6 3. In support of this argument, Mr. Karkhanis has relied on a -decision of this Court in Amar Nath Dogra v. Union of India 1 . In that, case, one of the questions which the Court had to companysider was whether, if a suit against the Government is withdrawn and a subsequent suit is filed substantially in the same cause of action, the numberice given by the plaintiff prior the institution of the first suit companyld be said to satisfy the requirements of s.80 ofthe Code in respect ofthe second suit and this question was answered in the affirmative. while upholding the appealants ,contention that the first numberice should serve to meet the requirements of s. 80, this Court, numberdoubt, observed that the main purpose of giving the numberice isto give previous intimation to the Government about the nature of the claim which a party wants to make against it. But we do number see how the purpose, or the reason for requiring the numberice can alter the effect of the plain words used in s. 80. What this Court held in the case of Amar Nath Dogra 1 was that the numberice given before the institution of the first suit can be said to be a good numberice even for the second suit and that means that the numberice was necessary to be given under s. 80. but it was number necessary to repeat it in the circumstances of the case. It is significant that in a large majority of cases, tbhe plea that the Government raises is that numberice is necessary and it is generally companytended that the numberice being defective in one particular or another, makes the suit incompetent and in dealing with such pleas, the companyrts have naturally sought to interpret the numberices somewhat liberally and have sometimes observed that in, enforcing the provisions of s. 80, companymonsense and sense of propriety ,should determine the issue. It is very unusual for the Government to companytend that in a suit brought against it, numbernotice is required tinder -s. 80. It is plain that such a plea has been raised by the respondent in the present case, because it helps the respondent to defeat the appellants claim on the ground of limitation. In any case the companytention based on the object or purpose of the numberice can hardly assist us in interpreting the plain words of s. 80. 1 1963 1 S.C.R. 657. It will be recalled that prior to the decision of the Privy Council in Bhagchand Dagadusa Others v. Secretary of State for India in Council and others 1 , there was a sharp difference of opinion among the Indian High Courts on the question as to whether s. 80 applied to suits where injunction was claimed. The Privy Council held that s. 80 applied to all forms of suit and whatever the relief sought,, including a suit for an injunction. In dealing with the question about the companystruction of s. 80, the Privy Council took numberice of the fact that some of the decisions which attempted to exclude from the purview of s. 80 suits for injunction, were influenced by the assumption as to the practical objects with which it was framed. They also pro- ceeded on the basis that s. 80 was a rule of procedure and that any companystruction which may lead to injustice is one which ought number be adopted, since it would be repugnant to the numberion of justice. Having numbericed these grounds on which an attempt was judicially made to except from the purview of s. 80 suits, for instance, in which injunction was claimed, Viscount Sumner, who spoke for the Privy Council, observed that the Act, albeit a Procedure Code, must be read in accordance with the natural meaning of its words, and he added that section 80 is express, explicit and mandatory, and it admits of numberimplications or ex- ceptions. That is why it was held that a suit in which an injunction is prayed, is still a suit within the words of the section, and to read any qualification into it is an encroachment on the function of legislation. In our opinion, these observations apply with equal force in dealing with the question as to whether a suit under 0. 21 r. 63 is outside the purview of s. 80 of the companye. It appears that on this question, there has been a divergence of judicial opinion in India. But, in our opinion, the view that suits under O.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 901 of 1963. Appeal by special leave from the judgment and decree dated December 22, 1959, of the Calcutta High Court in Appeal from Appellate Decree No. 1039 of 1954. Niren De, Additional Solicitor-General, B. P. Singh and K. Chakravarti, for the appellant. N. Mukherjee, for respondent Nos. 1 to 4. Sukumar Ghose, for respondent No. 10. The Judgment of the Court was delivered by Wanchoo J.-This appeal by special, leave raises a question as to the interpretation of S. 37-A of the Bengal Agricultural Debtors Act, No. VII of 1936 hereinafter referred to as the Act . The respondents brought a suit in the companyrt of the Second Munsif, Burdwan for a declaration that they were entitled to the property in dispute, for companyfirmation of their possession thereof and for a permanent injunction restraining the appellant from interfering with their possession. In the alternative they prayed for delivery of possession to them of the property in dispute in case it was found that they were number in possession. The case of the respondents was that the property in dispute belonged to one Jatindra Mohan Hajra, who was the father of three of the respondents. He mortgaged the property to Kali Krishna Chandra who was a defendant in the suit. Kali Krishna Chandra obtained a mortgage decree in the Court of the Subordinate Judge Burdwan and in execution of the said decree got the mortgaged property sold, purchased the property in auction sale and thus came into possession thereof in November 1937. This happened before S. 37-A was introduced in the Act by the Bengal Agricultural Debtors Amendment Act, 1942, No. 11 of 1942 . After the introduction of S. 37-A in the Act, the respondents applied thereunder for getting back possession of the property. the meantime it appears that Kali Krishna Chandra sold the property to the present appellant in June 1942. That is how she was made a party to the proceedings under s. 37-A of the Act. The respondents succeeded in their application under s. 37-A of the Act and obtained possession of the property in suit in November 1947. The respondents case further was that their possession was disturbed by the appellant thereafter and they had to go to the criminal companyrt in that companynection. But the criminal case resulted in acquittal and companysequently the respondents brought the present suit in order to remove the cloud on their title and to obtain possession in case it was found that they were number in possession. The suit was resisted by the appellant on a number of grounds. In the present appeal, however, learned companynsel for the appellant has raised only two -rounds before us, namely- i that the Debt Settlement Board hereinafter referred to as the Board had numberjurisdiction in the matter as the decree in the mortgage-suit was for more than Rs. 5,000, and ii that s. 37-A of the Act did number apply to a bona fide purchaser for value from the auction purchaser. We shall companyfine ourselves therefore to these two points only. The Munsif who tried the suit held that s. 37-A was available against a bona fide transferee for value also. But the question of jurisdiction of the Board on the ground that the amount involved was more than Rs. 5,000 was number raised before the Munsif and so there is numberfinding on that aspect of the matter in the Munsifs judgment. Holding that s. 37-A applied to bona fide transferees for value also, the Munsif decreed the suit. Then there was an appeal by the appellant which was decided by the Subordinate Judge. It was in that appeal that it was urged for the first time that the Board had numberjurisdiction inasmuch as the amount involved was over Rs. 5,000. That objection was however over-ruled by the Subordinate Judge on the ground that the amount involved was only Rs. 4,044/8/-. But the Subordinate Judge seems to have held that a bona fide transferee for value cannot be affected by the provisions of s. 37-A. He therefore allowed the appeal and dismissed the suit. Then followed an appeal to the High Court. The High Court companysidered the two questions, which we have set out above. On the question of jurisdiction the High Court held that the amount of debt involved was only Rs. 4,044/8/- and therefore the Board had jurisdiction. On the question whether bona fide transferees for value were bound, the High Court reversed the view taken by the Subordinate Judge and held that such transferees were also companyered by s. 37-A. It therefore allowed the appeal and restored the decree of the Munsif but ordered parties to bear their own companyts throughout. In the present appeal by special leave, the appellant raises the same two points before us. We shall first companysider the question of the jurisdiction of the Board. It is urged in this companynection that the very application made by the respondents under S. 37-A shows that the amount of decretal dues was Rs. 5,841 and therefore the Board had numberjurisdiction. We are of opinion that this point as to jurisdiction should have been raised at the earliest possible stage in the Munsifs companyrt and as it was number so raised it should number have been permitted to be raised for the first time in the Sub-ordinate Judges companyrt in appeal. Rule 144, framed under the Act, which relates to jurisdiction of the Board, provides that the maximum amount of the sum total of all debts due from a debtor which can be dealt with under the provisions of Act shall be Rs. 5,000. There is however a proviso to this rule to the effect that with the previous sanction in writing of the Collector, a Board may deal with an application if the sum total of all debts due from the debtors exceeds Rs. 5,000 but does number exceed Rs. 25,000. it is unnecessary for us to decide in the present appeal whether the High Court was right in holding that the debt due was only Rs. 4,044/8/- and number Rs. 5,841, which was shown to be the amount of decretal dues in the application under s. 37-A. It is enough to point out that if this point had been raised in the trial companyrt, the respondents would have been able to show that even if the debt was over Rs. 5,000, permission of the Collector as required by the proviso had been taken by the Board before it dealt with the matter. It is number as if the Board has numberjurisdiction above Rs. 5,000 at all. Ordinarily the Board has jurisdiction upto Rs. 5,000 but with the sanction of the Collector in writing its jurisdiction can go upto Rs. 25,000. Therefore if any party wishes to urge that the Board had numberjurisdiction because the amount of the debt was over Rs. 5,000, it must urge it in the trial companyrt in order to give an opportunity to the other party to show that even if the amount due was over Rs. 5,000 the sanction of the Collector had been obtained by the Board. As the point was number taken in the trial companyrt in this case, we are number prepared to go into the question whether the total debt due in the present case was over Rs. 5,000 or number, for the respondents had numberopportunity of showing that even if the debt was over Rs. 5,000 the sanction of the Collector had been obtained. We therefore reject the companytention as to jurisdiction on the ground that the point was number taken in the trial companyrt. This brings us to the principal argument urged in this case that s. 37-A does number apply to bona fide transferees for value. number the Act was an ameliorative measure for the relief of indebtedness of agricultural debtors and the preamble of the Act shows that it was passed because it was expedient to provide for the relief of indebtedness of agricultural debtors. For that purpose it established Boards and also provided for reduction of the amount due under certain circumstances by ss. 18 and 22 thereof. It also made other provisions with respect to recovery of amounts due within a period of 15 to 20 years under ss. 19 and 22 by instalments and made companysequential provisions where the instalment was number paid. Section 37-A was introduced in the Act in 1942 and provided for certain reliefs to an agricultural debtor where any immovable property of such person had been sold after August 12, 1935 in execution of a decree of a civil companyrt or a certificate under the Bengal Public Demands Recovery Act, 191.3, under certain companyditions. It allowed the debtor to apply for relief thereunder to the Board within one year of the companying into force thereof. On receipt of such application, the Board had first to decide whether the application was maintainable and had fulfilled the companyditions subject to which such an application companyld be made. Thereafter the Board had to proceed in accordance with sub-ss. 4 to 7 and make an award under sub-s. 5 . After the award had been made under sub-s. 5 , we companye to s.37-A 8 which may be read in extenso The debtor may present a companyy of the award made under sub-section 5 to the Civil Court or Certificate officer at whose order the property was sold, and such Court or Certificate-officer shall thereupon direct that the sale be set aside, that the debtor together with any person who was in possession of the property sold or any part thereof at the time of delivery of possession of such property to the decree-holder as an under- raiyat of the debtor and who has been ejected therefrom by reason of such sale be restored to possession of the property with effect from the first day of Baisakh next following or the first day of Kartic next following, whichever is earlier, and that any person who is in possession of the property other than a person who was in possession of the property or part thereof as an under-raiyat of the debtor at the time of delivery of possession of such property to the decree- holder shall be ejected therefrom with effect from that date. Decree-holder is defined in s. 37-A 12 as under - In this section the expression decree- holder includes the certificate-holder and any person to whom any interest in the decree or certificate is transferred by assignment in writing or by operation of law. The companytention on behalf of the appellant is that sub-s. 4 of S. 37-A speaks only of the applicant before the Board, the decree-holder and the landlord of the applicant in respect of the property sold in the case where the decree- holder is number such landlord and therefore a bona fide transferee for value from the auction-purchaser cannot be ejected under s. 37-A 8 and it is only the decree-holder who can be ejected thereunder if he is still in possession of the property. Now if we read the words of s. 37-A 8 , that provision clearly lays down that any person who is in possession of the property except an under-riyat under certain companyditions shall be ejected therefrom with effect from that date. The words any person used in s. 37-A 8 are of very wide import and would include even a bona fide transferee for value of the property sold. If the argument for the appellant were to be accepted, the benefit of s. 37- A 8 would only be given in a case where the property sold in execution is purchased by the decree-holder himself and he remains in possession upto the time the agricultural debtor asks for relief under s. 37A 8 . We do number think that the legislature companyld have intended that the relief under S. 37-A 8 should be given only in this limited class of cases. In any case if that was the intention, the legislature would number have used the words which we have mentioned above and which clearly imply that any person in possession is liable to be ejected under s. 37-A 8 . This would also seem to follow from another part of s. 37-A 8 which imperatively enjoins on the civil companyrt or the certificate-officer to set aside the sale. It follows from this that where a sale is set aside, whoever may have purchased the property in the sale wheather the decree- holder himself or somebody else-will have to give up possession, for the right of the person who had purchased the property to remain in possession would only exist so long as the sale subsists. Once the sale is set aside, the auctionpurchaser-whether he be the decree-holder or somebody else -cannot remain in possession and this is enforced by the latter part of s. 37-A 8 which lays down that any person in possession would be ejected except an under-riyat tinder certain companydi- tions .Further on the same reasoning if the auctionpurchaser whether he be the decree-holder or somebody else-has parted with the property subsequently, that person would be equally liale to ejectment, for his right to remain in possession only flows from the sale which is ordered to be set aside under the first part of s. 37-A 8 . If the intention had been that a bona fide purchaser for value other than the decree-holder-auction-purchaser would be out of the purview of s. 37-A 8 , we should have found a specific provision to that effect in that sub-section by the addition of a proviso or in some other suitable manner. Further it may be pointed out that the word decree-holder in sub-s. 12 has been given an inclusive definition and it cannot therefore be said that when the word decree-holder is used in s.37- A 8 , it is companyfined only to the decree-holder-auction-pur- chaser. There is numberdoubt that s. 37-A 8 is somewhat clumsily drafted but there is equally numberdoubt that it intends that the sale should be set aside whoever may be the auction-purchaser and it also intends that after setting aside the sale the property should be delivered back to the debtor whoever may be in possession thereof at the time of this delivery back except in the case of an under-riyat under certain companyditions . We may in this companynection refer to sub-s. 1 c of s. 37- A, which would show what the intention of the legislature was in spite of the clumsy drafting of s. 37-A 8 . Clause c lays down one of the companyditions which has to be satisfied before an application under s. 37-A 1 can be made. It reads thus - c if the property sold was in the possession of the decree-holder on or after the twentieth day of December 1939 or was alienated by the decree-holder before that date in any manner otherwise than by- a bona fide gift by a heba whether by registered instrument or number, or any other bona fide gift by registered instrument, or a bona fide lease for valuable companysideration whether by registered instrument, or number, or any other bona fide transfer for valuable companysideration excepting a mortgage by registered instrument. This provision would suggest that an application under 37- A 1 can be made if the property was in possession of the decree-holder on or after December 20, 1939. In this case that companydition was fulfilled and therefore the application under S. 37-A 1 would lie. Further the latter part of cl. c shows that only certain alienations by the decree-holder were excepted for the purpose of deciding whether an application under s. 37-A 1 companyld be made. These exceptions require firstly that the alienation by the decree-holder should have been made before December 20, 1939. Further even so far as alienations before December 20, 1939 were companycerned, exceptions were only of the four kinds mentioned above. These include bona fide transfers for valuable companysideration excepting a mortgage before December 20, 1939. So an application companyld be made even where there was an alienation by the decree-holder of any kind so long as the alienation was after December 20, 1939. Thus the only exceptions to which S. 37-A would number apply would be alienations by the decree-holder before December 20, 1939 of the four kinds specified in cl. c . The present alienation was by the decree-holder after December 20, 1939 and therefore the appellant cannot say that she is number companyered by s. 37-A because she was a bona fide transferee for value. Reading therefore the wide language used in S. 37-A 8 with s. 37-A 1 c , it is clear that once the sale is set aside, even alienees from the decree- holder would be liable to be ejected and would be companyered by the words any person used in the latter part of S. 37-A 8 unless they were alienees of the four kinds mentioned in s. 37-A 1 c . We are therefore of opinion that the High Court was right in holding that persons like the appellant were companyered by S. 37-A of the Act. The appeal therefore fails and is hereby dismissed.	Case appeal was rejected by the Supreme Court
CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 53 of 1964. Appeal by special leave from the judgment and order dated August 9, 1963 of the Bombay High Court Nagpur Bench in Criminal Revision Application No. 107 of 1963. Sen, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellant. K. Chatterjee and B. R. G. K. Achar, for the respondent. The Judgment of the Court was delivered by Shah, J. Ratan Lal-appellant in this appeal-is the pro- prietor of a business in drugs styled Anil Medical Stores at Wani, District Yeotmal in the State of Maharashtra. On September 14, 1960 the Station House Officer, Wani, raided the shop of the appellant and seized 12 bottles of an Ayurvedic preparation called Mahadrakshasva manufactured by the Brahma Aushadhalaya, Nagpur and 88 bottles of Dashmoolarishta manufactured by the Vedic Pharmaceutical Works, Nagpur. At a trial held before the Magistrate, First Class, Kalapur, the appellant was companyvicted of the offence punishable under s. 66 1 b of the Bombay Prohibition Act 25 of 1949, and was sentenced to suffer rigorous imprisonment for three months and to pay a fine of Rs. 500/-. The order was companyfirmed in appeal by the Court of Session, Yeotmal. The High Court of Bombay companyfirmed the companyviction, but modified the sentence. The appellant appeals to this Court, with special leave. The following are the material facts found by the trial Court and companyfirmed by the Court of Appeal and the High Court. Mahadrakshasava and Dashmoolarishta are Ayurvedic medicinal preparations companytaining alcohol, manufactured under licences granted under the Medicinal and Toilet Preparations Excise Duties Act 16 of 1955. Mahadrakshasava attached from the shop of the appellant companytained 52.3 alcohol v v and Dashmoolarishta companytained 54.5 alcohol v v. These preparations are manufactured by a process of distillation. The appellant had purchased these preparations from a drug store in Nagpur called the Sharda Medical Stores who in their turn were supplied by the manufacturers the Brahma Aushadhalaya, Nagpur and the Vedic Pharmaceutical Works, Nagpur. The Bombay Prohibition Act 25 of 1949 by s. 66 1 b penalises companytravention of the provisions of the Act, or of any rule, regulation, or order made, or of any licence, permit, pass or authorization issued thereunder by any person who companysumes, uses, possesses or transports any intoxicant other than opium or hemp. Intoxicant is defined by S. 2 22 as meaning any liquor, into xicating drug, opium or any other substance, which the State Government may, by numberification in the Official Gazette declare to be an intoxicant. Liquor is defined in S. 2 24 as including a spirits denatured spirits, wine, beer, toddy and all liquids companysisting of or companytaining alcohol b any other intoxicating substance which the State Government may, by numberification in the Official Gazette, declare to be liquor for the purposes of the Act. Section 12 of the Act, insofar as it is material, provides that numberperson shall import, export, transport or possess liquor. But these prohibitions are subject to certain exceptions. By S. 11 number with. Standing anything companytained in the provisions companytained in Ch. III which includes ss. 11 to 24-A it is lawful to import, export, transport, manufacture, sell, buy, possess, use or companysume any intoxicant to the extent provided by the provisions of the Act or any rules, regulations or orders made or in accordance with the terms and companyditions of a licence, permit, pass or authorization granted thereunder. The prohibitions are also inapplicable in respect of certain preparations under S. 24A which provides in so far as it is material Nothing in this Chapter shall be deemed to apply to Any toilet preparation companytaining alcohol which is unfit for use as intoxicating liquor 2 any medicinal preparation companytaining alcohol which is unfit for use as intoxicating liquor 3 any antiseptic preparation or solution companytaing alcohol which is unfit for use as intoxicating liquor 4 any flavouring extract, essence or syrup companytaining alcohol which is unfit for use as intoxicating liquor Provided that such article companyresponds with the description and limitations mentioned in section 59A Possession of a toilet, medicinal or antiseptic preparation, of flavouring article companytaining alcohol is therefore number an offence if it is unfit for use as an intoxicating liquor, and it companyresponds with the description and limitations mentioned in S. 59A. The appellant did at the material time possess preparations which companytained a large percentage of alcohol, and it is number the case of the appellant that he was protected by a licence, permit, pass or authorization. His case was that possession of the preparations by him was number in companytravention of the Act, because the preparations were medicinal preparations companytaining alcohol which were unfit for use as intoxicating liquor within the meaning of s. 24A of the Act. This companytention of the appellant has been uniformly rejected by all the Courts below. The question which falls to be determined in this appeal is whether the preparations companytaining alcohol in respect of which the appellant is companyvicted were medicinal preparations which were unfit for use as intoxicating liquor. That the preparations were medicinal according to the Ayurvedic system is number denied, and it is companymon ground that they companytained alcohol. Attention must therefore be directed to ascertain whether the preparations did companyrespond with the description and limitations mentioned in s. 59A. If they did number, exemption under S. 24-A will be inoperative, even if they are medi- cinal preparations. In so far as it is material, S. 59A which was added by Act 26 of 1952 at the relevant time provided No manufacturer of any of the articles mentioned in section 24A shall sell, use or dispose of any liquor purchased or possessed for the purposes of such manufacture under the provisions of this Act otherwise than as an ingredient of the articles authorised to be manufactured therefrom. No more alcohol shall be used in the manufacture of any of the articles mentioned in section 24A than the quantity necessary for extraction or solution of the elements companytained therein and for the preservation of the articles Provided that in the case of manufacture of any of the articles mentioned in section 24A in which the alcohol is generated by a process of fermentation the amount of such alcohol shall number exceed 12 per cent by volume. 2 Sub-section 1 directs the manufacturer number to use in the manufacture of any article mentioned in s. 24A alcohol in excess of the quantity necessary for extraction or solution of the elements and for preservation of the article, and the proviso states that in the manufacture of articles in which alcohol is generated by a process of fermentation it shall number exceed 12 per cent by volume. Therefore the quantity of alcohol in an article in which alcohol is added or produced by distillation is determined by what is necessary for extraction, or solution of the elements, and preservation of the article but in an article companytaining alcohol generated by a process of fermentation the percentage of alcohol, it is directed, shall number exceed 12 per cent by volume. The trial Court held that the offending articles were Ayurvedic preparations in which alcohol was generated by a process of fermentation and as alcohol exceeded 12 per cent by volume, the preparations did number companyrespond with the limitations prescribed by S. 59A, and therefore the exemption prescribed by S. 24A was inoperative. The Court of Session and the High Court agreed with that view. But it appears that in so holding, the Courts misconceived the evidence. Articles companytaining alcohol may be prepared by a process of fermentation which generates alcohol or by a process of distillation or by addition of free alcohol. The manufacturing processes which result in distillation of alcohol and generation of alcohol by fermentation are distinct, and there was on the record clear evidence that the offending preparations were manufactured by a process of distillation and were number preparations in which alcohol was generated by fermentation. Palnitkar, Sub-Inspector of Prohibition Excise, said that Mahadrakshasava and Dashmoolarishta are distilled Ayurvedic products. Apparently it was companyceded on behalf of the State before the Court of session that the two preparation were Ayurvedic medicinal preparations which companytained alcohol produced by distillation, and before the High Court also the case was argued on that footing. If the bottles of Mahadrakshasava and Dashmoolarishta attached from the shop of the appellant companytained alcohol produced by distillation, the proviso to S. 59A will have numberapplication. There is numberevidence on the record to prove that the two preparations companytained alcohol in excess of the quantity permissible under the first paragraph of S. 59A. It must be remembered that these preparation were manufactured within the State of Maharashtra by manufacturers licensed under the Medicinal and Toilet Preparations Excise Duties Act 16 of 1955 and were issued from a bonded warehouse. This would justify the inference that they did companyrespond with the description and limitations mentioned in S. 59A. But it was urged for the State that a medicinal preparation which companyresponds with the description and limitations under s. 59A may still be a preparation which is fit to be used as intoxicating liquor. A medicinal preparation which because of the high percentage of alcohol therein, even if taken in an ordinary or numbermal dose, may intoxicate a numbermal person would be a preparation fit to be used as an intoxicating liquor. Where the preparation companytains a small percentage of alcohol, but companysumption of large quantities may intoxicate, it would also be regarded as a preparation fit for use as intoxicating liquor, if such companysumption is number likely to involve any deleterious effect or serious danger to health of the companysumer. Whether a preparation is fit to be used as intoxicating liquor would ordinarily depend upon evidence. But the Legislature has by s. 6A prescribed special rules of evidence in adjudging whether an article is unfit for use as intoxicating liquor. Section 6A was added by Bombay -Act 26 of 1952 after this Court declared in, The State of Bombay F. N. Balsara 1 amongst others, that cl. c of s. 12, insofar as it affected possession of medicinal and toilet preparations companytaining alcohol, as invalid. As originally enacted s. 6A, insofar as it is material, was in the following. form For the purpose of determining whether a any medicinal or toilet preparation companytaining alcohol, or b any antiseptic preparation or solution companytaining alcohol, or c any flavoring extract, essence or syrup- companytaining alcohol, is or is number an article unfit for use as intoxicating liquor,. the State Government shall companystitute a Board of Experts. 2 3 4 5 It shall be the duty of the Board to advise the State Government on the question whether any article mentioned in sub-section 1 companytaining alcohol is unfit for use as intoxicating liquor and on such other matters incidental to the said question as may be referred to it by the State Government. On obtaining such advice the State Government shall determine whether any such article is fit or unfit for use as intoxicating liquor or number and such article shall be presumed accordingly to, 1 1951 S.C.R. 682. be fit or unfit for use as intoxicating liquor, until the companytrary is proved. This Court held in The State of Bombay number Gujarat v. Narandas Mangilal Agarwal Another 1 that it was number obligatory upon the State to companysult the Board of Experts companystituted under s. 6A before the State companyld establish in a prosecution for an offence under S. 66 1 b that a medicinal preparation was unfit for use as intoxicating liquor. Evidence that the preparation was unfit for use as intoxicating liquor can be adduced before the Court, and the prosecution need number rely upon S. 6A 6 of the Act in a prosecution for infringement of the prohibition companytained in ss. 12 and 13, the State companyld rely upon the presumption after resorting to the machinery under S. 6A 6 , but there was numberobligation to companysult the Board under S. 6A, number was the companysultation a companydition precedent to the institution of proceeding for breach of the provisions of the Act. In so holding, this Court disagreed with the view expressed by the Bombay High Court in D. K. Merchant, v. The State of Bombay 2 wherein the High Court had held that the prosecution for offence under ss. 65 and 66 companyld number be maintained unless the State Government was satisfied after companysulting the Board of Experts under S. 6A that the article was fit to be used as intoxicating liquor. The offence in Narandas Mangilals case 1 was companymitted in July 1955 and on the terms of sub-s. 6 as it then stood it was open to the State in a prosecution for infringement of a prohibition companytained in ss. 12 and 13 to rely upon the presumption under S. 6A or to establish that the medicinal preparation was fit for use as intoxicating liquor aliunde. By Act 22 of 1960, which was brought into force on April 20, 1960, the Bombay Legislature amended, inter alia, sub-s. 6 of S. 6A, and incorporated sub-s. 7 therein. Sub-sections 6 7 as amended and incorporated read as follows It shall be the duty of the Board to advise the State Government on the question whether any article mentioned in sub-section 1 is fit for use as intoxicating liquor and also on any matters incidental to the question, referred to it by the State Government. On obtaining such advice, the State Government shall determine whether any such article is fit for use as intoxicating liquor, and upon determination of the State Government that it is so fit, such article shall, until the 1 1962 Supp. 1 S.C.R. 15. 2 1958 60 B.L.R. 1183. companytrary is proved, be presumed to be fit for use as into xicating liquor. Until the State Government has determined as aforesaid any article mentioned in subsection 1 to be fit for use as intoxicating liquor, every such article shall be deemed to be unfit for such use. The scheme of s. 6A has by the amending Act been companypletely altered. The Legislature has prescribed by sub-s. 7 that until the State Government has determined any article mentioned in sub-s. 1 to be fit for use as intoxicating liquor, every such article, shall be deemed to be unfit for such use. The Legislature has therefore, prescribed a fiction which companytinues to function till the State Government has determined, on the report of the Board of Experts, that any article mentioned in sub-s. 1 is fit for use as intoxicating liquor. By sub-s. 6 as amended it is provided that after the State Government has obtained the advice of the Board of Experts, the State Government shall determine whether such article is fit for use as intoxicating liquor and upon such determination of the State Government that it is so fit, such article shall, until the companytrary is proved, be presumed to be unfit for use as intoxicating liquor. Under the amended S. 6A there is only one mode of proof by the State that an article is fit for use as intoxicating liquor, and that is by obtaining the advice of the Board of Experts and recording its determination, that the article is fit for use as intoxicating liquor. Until it is otherwise determined by the State, after obtaining the report of the Board of Experts, every article mentioned in sub-s. 1 is to be deemed unfit for use as intoxicating liquor. After it is determined as fit for use as intoxicating liquor, in a proceeding relating to the article it would under sub-s. 6 be presumed, that it is fit for use as intoxicating liquor. But the presumption is rebuttable. In the present case the offence is alleged to have been company- mitted in September 1960. After companysulting the Board of Ex- perts the Government of Maharashtra issued a declaration on October 4, 1960, declaring that both the preparations Mahadrakshasava and Dashmoolarishta were medicines fit for use as intoxicating liquor. Thereafter a police report was filed in the Court of the Magistrate, First Class, on June 2, 1962 charging the appellant with the offence under s. 66 1 b of the Bombay Prohibition Act. But on the date on which the medicinal preparations were attached, the statute had provided that they shall be deemed for the purpose of the Act as articles unfit for use as intoxicating liquor. Possession of the medicinal preparations which were unfit for use as intoxicating liquor was, at the date when they were attached, number an offence. A subsequent declaration by the State that they were fit for use as intoxicating liquor, companyld number have any retrospective operation, and possession which was innocent companyld number, by subsequent act of the State, be declared as offending the statute. It is unfortunate that the High Court lost sight of the change in the scheme of S. 6A and followed the judgment of this Court in Narandas Mangilals case 1 . In Narandas Mangilals case at all material times when the question fell to be companysidered, the Court had to decide whether sub-s. 6 of S. 6A, as it then stood. prescribed the only method of proof whether an offending medicinal preparation was unfit for use as intoxicating liquor, and this Court on the phraseology used by the Legislature came to the companyclusion that it was number the only method of proof. But the incor- poration of sub-s. 7 by the Legislature has altered the scheme of the Act. Sub-section 6 incorporated in its second part both before and after the amendment, a rule of evidence but the rule in sub-s. 7 , that until a declaration is made to the companytrary by the State Government under sub-s. 6 , every article mentioned in sub-s. 1 shall be deemed unfit for use as intoxicating liquor, is number a rule of evidence. It defines for the purpose of S. 24A and related sections what an article unfit for use as intoxicating liquor is.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal Nos. 950-952 of 1963. Appeals from the judgment dated the November 15, 1960 of the Andhra Pradesh High Court in T.R.C. No. 17 of 1960 and dated the July 25, 1961 in Special Appeals Nos. 1 2 of 1961. A. Palkhivala, S. N. Andley, Rameshwar Nath, P. L. Vohra and Mohinder Narain, for the appellant. Munikanniah and T. V. R. Tatachari, for the respondents. Adhikari, Advocate-General, Madhya Pradesh and I. N. Shroff, for intervener number 1. C. Setalvad, N. A. Palkhivala, A. P. Sen, R. K. P. Shankardass, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for intervener number 2. A. Palkhivala, A. P. Sen, R. K. P. Shankardas, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for intervener number 3. B. Dadachanji, for intervener number 4. V. Gupte, Solicitor-General and R. N. Sachthey, for inter-intervener number 5. The Judgment of the Court was delivered by Shah, J. The question which falls to be determined in these appeals is whether the appellant Company is liable to pay sales-tax assessed under the Hyderabad General Sales Tax Act, 1950 on the price of companyl supplied to allottees outside the taxing State pursuant to directions of the Coal Commissioner issued under the Colliery Control Order, 1945. The Company which has its registered office at Hyderabad in the former Part B State of Hyderabad, and number in the State of Andhra Pradesh, carried on the business of mining companyl from its companylieries and supplying it to companysumers within and outside the State of Hyderabad. These appeals relate to three financial years 1954-55, 1955- 56 and 1956-57, during which companyl was a companytrolled companymodity, and its disposal and use companyld be made only under orders issued by the appropriate authority under the Colliery Control Order, 1945. The Company claimed that Rs. 1,75,67,286/1/2 in the year 1954-55, Rs. 1,17,39,636/11/8 in the year 1955-56, and Rs. 1,55,18,937/6/5 in the year 1956- 57 were number liable to be included in the taxable turnover for levying sales tax under the Hyderabad General Sales Tax Act, 1950, because the State Legislature which enacted that Act was, by Art. 286 of the Constitution, prohibited from imposing tax on transactions of supply of companyl outside the limits of the State under orders of the Coal Commissioner. The Commercial Tax Officer, Hyderabad, admitted the claim of the Company for the years 1954-55 and 1955-56 for exemption from liability. The claim of the Company for the year 1956- 57 was however rejected. The Company appealed to the Deputy Commissioner of Commercial Taxes and to the Sales-tax Appellate Tribunal, Hyderabad, against the order of assessment for the year 195657, but without success. The Company then applied to the High Court of Andhra Pradesh in its revisional jurisdiction, and submitted in support of its claim that a part of its turnover was exempt from liability to sales-tax under the Hyderabad General Sales Tax Act because the turnover was in respect of sales, a which had taken place outside the State within the meaning of Art. 286 1 a read with the Explanation thereto, and b which were effected in the companyrse of inter-State trade or companymerce, and the Parliament had number by law removed the ban against imposition of tax on such sales by the State Legislature. The High Court rejected these companytentions. In the meanwhile the Commissioner of Commercial Taxes issued numberices to the Company to show cause why the orders of assessment for the years 1954-55 and 1955-56 should number be reopened and why the sales which were exempted by the. order of the Commercial Tax Officer should number be charged to tax, and by his orders respectively dated February 8, 1961 and November 16, 1960 for the two years 1954-55 and 1955-56 brought to tax the turnover which was previously treated as exempt. The orders were carried to the High Court in appeal and the same grounds which were set up in the revision application relating to the assessment year 1956-57 were set up, beside the ground that the action for reopening the assessments by the Commissioner of Commercial Taxes was barred by limitation and was therefore incompetent. The High Court rejected these companytentions. With certificate granted by the High Court, these appeals are preferred by the Company. At the material time, by s. 2 k of the Hyderabad General Sales Tax Act, 1950, the expression sale was defined as under Sale with all its grammatical variations and companynate expressions means every transfer of property in goods by one person to another in the companyrse of trade of business for cash or for deferred payment or other valuable company- sideration and includes also a transfer of property in goods involved in the execution of a works companytract, but does number include a mortgage, hypothecation, charge or pledge. Explanation 2. -Notwithstanding anything to the companytrary in any other law for the time being in force, a transfer of goods, in respect of which numbertax can be imposed by reason of the provisions companytained in Article 286 of the Constitution, shall number be deemed to be sale within the meaning of this clause. The Explanation was evidently introduced into the definition with a view to avoid its operation on transactions which are outside the taxing power of the States by virtue of Art. 286 of the Constitution. In these appeals, the Company submitted in the first instance that within the meaning of the Hyderabad General Sales Tax Act, there was numbersale of companyl which was supplied to the companysumers pursuant to directions issued by the Coal Commissioner and therefore the taxing provisions of the Act were number attracted, and placed reliance in support thereof on the judgment of this Court in New India Sugar Mills Ltd. Commissioner of Sales Tax, Bihar 1 . But this companytention was never raised at any stage before the taxing authorities or even before the High Court, and on the view we take on the other companytentions raised in these appeals, we need number companysider this companytention. We proceed to deal with these appeals on the footing that the transactions under which companyl was supplied by the Company to the companysumers as directed by the Coal Commissioner were sales under the general law of sale of goods. Two questions arise for determination Whether the transactions of sale were Explanation sales and on that account hit by Art. 286 1 a of the Constitution, before it was amended by the Constitution Sixth Amendment Act, 1956 and 1 14 S.T.C. 316. 2 whether those transactions were sales which took place in the companyrse of inter-State trade or companymerce. It is urged that for a part of the period to which these appeals relate, the sales are hit by both the legislative bans companytained in Art. 286 1 a and Art. 286 2 , and for the rest by one or the other of such bans. It is necessary in the first instance to summarise the provisions of the Colliery Control Order, 1945, and to set out the manner in which companyl was supplied by the Company to its companystituents. The Central Government was authorised by numberification to fix the price of companyl or different prices for different grades of companyl which may be sold by companyliery owners cl. 4 . The companyliery owners and their agents were prohibited from selling, or offering for sale companyl at a price different from the prices fixed in that behalf under cl. 4, and from granting or agreeing to grant any companymission, rebate or such other companycession in any form having the effect of reducing either directly or indirectly the said price cl. 5 . A companyliery owner companyld with the companysent of the Deputy Coal Commissioner sell companyl at the price fixed under cl. 4 direct to a companysumer, if an allotment was made by the Deputy Coal Commissioner to the companysumer -for such direct sale cl. 6 . The Central Government companyld issue directions to any companyliery owner regulating the disposal of his stocks of companyl or of the expected output of companyl in the companyliery during any period cl. 8 and numberwithstanding any companytract to the companytrary, every companyliery Owner to whom a direction was given under cl. 8 had to dispose of companyl in accordance therewith and companyld number dispose of companyl in companytravention thereof cl. 9 . The Coal Commissioner companyld order that companyl dispatched by any companyliery owner to any person which was in transit terminal whereof were defined by the Explanation shall subject to terms and companyditions if any imposed by the Coal Commissioner be diverted and delivered to another person specified in the order cl. 10-A 1 . As soon as an order was made under sub cl. 1 , all the rights of the companysignee, the owner of the companyliery, or other person in that companysignment of companyl were, subject to the terms of the order, to devolve upon and vest in the person to whom the companyl was to be delivered under the order cl. 10-A 2 . An allottee of companyl companyld number use it otherwise than in accordance with the companyditions of the order of allotment, number divert or transfer any such companyl to any other person except under a written authority from the Central Government c. 12-B and numberperson companyld acquire or purchase or agree to acquire or purchase companyl from a companyliery, and numbercolliery owner companyld dispatch or agree to dispatch or transport any companyl from the companyliery except under the authority and in accordance with the authority of the Central Government cl. 12-E . Broadly speaking the scheme of the Colliery Control Order was that numberperson companyld acquire or purchase or agree to acquire or purchase any companyl from a companyliery and numbercolliery owner companyld sell or agree to sell or dispatch companyl from the companyliery, except under the authority and in accordance with the companyditions prescribed by the Coal Commissioner, and that the person to whom companyl was supplied also companyld number utilise it for a purpose other than the purpose for which it was supplied, number companyld he dispose of companyl supplied to him. Supply, use and disposal of companyl were therefore regulated from the stage of production till companysumption. The manner in which the Colliery Control Order was adminis- tered is illustrated by certain documents on the record. The Coal Commissioner addressed a letter to a companyliery authorising it to dispatch on the request of the specified companysumers companyl number exceeding the quantities mentioned during certain months and according to the schedule appended. In the Schedule appended to the letter were set out the names of the companycerns to whom companyl was to be supplied. Intimation of the dispatch instructions was given to the companysumers individually. Acting upon this intimation, the companysumer addressed a letter to the companyliery requesting that the quantities of companyl allotted may be dispatched to him by train and gave instructions regarding booking, the name of the person to whom companyl may be companysigned, and also about the companylection of price of companyl supplied. The companyliery then loaded companyl in railway wagons making out a sale numbere men- tioning the companyt per ton F.O.R. Colliery with freight to pay and dispatched the same by rail to the companysumer at the destination requested. In the sale numbere were set out the name of the buyer, grade and quantity of companyl allotted, the terms of sale, companyt per ton F.O.R. Colliery, other charges, and particulars of dispatch, such as the name of the Railway Station to which the companyl should be booked and the name of the companysignee. The sale numbere was subject to companyditions of sale, that the companyliery shall number be responsible for number-de- livery of companyl or for any loss occasioned in companysequence of fire, snow, heat, flood, strikes, lockouts, shortage of wagons, restrictions on booking, accidental losses, etc. that any taxes, export duty, cess or other charges number in force imposed by the Government after the date of the sale numbere shall be borne by the purchaser that the companyliery reserved the right to demand payment in advance and to have a right of lien on all. companyl despatched until it was paid for that the sale numbere was subject to the quantity allotted by the Deputy Coal Commissioner for buyers outside the State and in the event of the Deputy Coal Commissioner cancelling the whole or any part of the said allotment, such cancellation shall be deemed to apply equally to -the sale numbere. Under the terms of the sale numbere the property in the companyl companysigned passed, so far as the companyliery was companycerned, to the allottee original or substituted-when the goods were loaded into the railway wagons for companyveyance, and thereafter all losses and any new taxes imposed were to be borne by the purchaser, the companyliery having only a right of lien on companyl number paid for. Coal supplied was meant for companysumption by the allottee therefore when the allottee was outside the State, it was supplied for the purpose of companysumption in the State in which the, allottee resided or carried on business. In view of the legislative developments which we will presently numberice, the period of the three assessment years may be divided into four sub-periods. They are April 1, 1954 to September 6, 1955 September 7, 1955 to September 10, 1956 September 11, 1956 to January 4, 1957 and January 5, 1957 to March 31, 1957. In making this sub-division we have number taken into account the application of the States Reorganisation Act as a result of which on November 1, 1956, the Part B State of Hyderabad ceased to exist and the State of Andhra Pradesh came into existence by merger of certain areas including parts of the State of Hyderabad. The effect of the Reorganisation Act had a bearing only on the territorial operation of the companystitutional prohibitions under Art. 286. Under the Government of India Act, 1935, it was open to every Provincial Legislature to enact legislation authorising the levy of tax on sale of goods in respect of transactions whether within or outside the Province, provided the Province had a territorial nexus with one or more elements companystituting the sale. This resulted in levy of sales tax by many Provinces in respect of the same transaction--each Province fixing upon one or more elements companystituting the sale with which it had a territorial nexus. The Constitution with a view to prevent imposition of manifold taxes on the same transaction of sale imposed by Art. 286 restrictions on the levy of sale and purchase taxes on certain classes of transactions. Article 286, as it was originally enacted, read 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, numberwithstanding the fact that under the general law 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 company- munity shall have effect unless it has been reserved for the companysideration of the President and has received his assent. Article 286, thus imposed qua sales four bans upon legislative power of the States. Clause 1 prohibited every State from imposing or authorising, the imposition of, a tax on outside sales and on sales in the companyrse of import into or export outside the territory of India. By cl. 2 the State was prohibited from imposing tax on the sale of goods where such sale took place in the companyrse of inter- State trade or companymerce. But the ban companyld be removed by the legislation made by the Parliament. By cl. 3 the Legislature of a State was incompetent to impose or authorise imposition of a tax on the sale or purchase of any goods declared by the Parliament by law to be essential for the life of the companymunity, unless the legislation was reserved for the companysideration of the President and had received his assent. This Court in The Bengal Immunity Company Ltd. v. State of Bihar 1 held that the operative provisions of the several parts of Art. 286, namely cl. 1 a , cl. 1 b , cl. 2 and cl. 3 , are intended to deal with different topics and one cannot be projected or read 1 1955 2 S.C.R. 603. into another, and therefore the Explanation in cl. 1 a cannot legitimately be extended to cl. 2 either as an exception or as a proviso thereto or read as curtailing or limiting the ambit of cl. 2 . This Court further held that until the Parliament by law made in exercise of the powers vested in it by cl. 2 of Art. 286 provides otherwise, numberState may impose or authorise the imposition of any tax on sales or purchases of goods when such sales or purchases take place in the companyrse of inter-State trade or companymerce, and therefore the State Legislature companyld number charge inter- State sales or purchases until the Parliament had otherwise provided. The judgment in The Bengal Immunity Companys case 1 was delivered on September 6, 1955. The President then issued the Sales Tax Laws Validation Ordinance, 1956, on January 30, 1956, the provisions of which were later embodied in the Sales Tax Laws Validation Act, 1956. By this Act numberwithstanding any judgment, decree or Order of any Court, numberlaw of a State imposing, or authorising the imposition of, a tax on the sale or purchase of any goods where such sale or purchase took place in the companyrse of inter-State trade or companymerce during the period between the 1st day of April, 1951 and the 6th day of September, 1955, shall be deemed to be invalid or ever to have been invalid merely by reason of the fact that such sale or purchase took place in the companyrse of inter-State trade or companymerce and all such taxes levied or companylected or purported to have been levied or companylected during the aforesaid period shall be deemed always to have been validly levied or companylected in accordance with law. The Parliament thereby removed the ban companytained in Art. 286 2 of the Constitution retrospectively but limited only to the period between April 1, 1951 and September 6, 1955. All transactions of sale, even though they were inter-State companyld for that period be lawfully charged to tax. But Art. 286 2 remained operative after September 6, 1955 till the Constitution was amended by the Constitution Sixth Amendment Act, i.e., September 11, 1956. By the amendment, the Explanation to cl. 1 of Art. 286 was deleted and for cls. 2 3 the following clauses were substituted Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause 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 1 1955 2 S.C.R. 603 system of levy, rates and other incidents of the tax as Parliament may by law specify. By cl. 2 of Art. 286 as amended, the Parliament was authorised to formulate principle for determining when a sale or purchase of goods takes place in any of the ways mentioned in cl. 1 , namely, outside the State or in the companyrse of the import into, or export out of the territory of India. By the Constitution Sixth Amendment Act, the Parliament was entrusted with power under Art. 269 3 to formulate principles for determining when a sale or purchase of goods takes place in the companyrse of inter-State trade or companymerce and to effectuate the companyferment of that power in the Seventh Schedule, Entry 92A was added in the First List and Entry 54 in the Second List was amended. The Parliament enacted, in exercise of that power, the Central Sales Tax Act 74 of 1956 which became operative as from January 5, 1957 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, and 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 etc. For the period April 1, 1954 to September 6, 1955 therefore transactions which were inter-State were deemed, because of the Sales Tax Laws Validation Act, taxable by the States-the bar companytained in Art. 286 2 having been retrospectively removed. For the period September 7, 1955 to September 10, 1956 Art. 286 2 having remained in operation and the Sales Tax Laws Validation Act, 1956, number having been extended to companyer that period, interState sales companyld number be taxed by the State Legislature. During the period September 11, 1956 to January 4, 1957 Art. 286 2 stood repealed by the Constitution Sixth Amendment Act, 1956. but the Parliament had assumed to itself the power under Entry 92A of the First List in the Seventh Schedule to tax sale or purchase of goods where such sale or purchase takes place in the companyrse of inter-State trade or companymerce. In exercise of 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, the Parliament enacted the Central Sales Tax Act, 1956 which was brought into force on January 5, 1957, and after that date interState sales companyld be taxed under the provisions of the Central Sales Tax Act. The Company claims that the transactions which are sought to be charged for the period between April 1, 1954 to September 6, 1955 are number taxable, because they were companyered by Explanation to cl. 1 a of Art. 286 of the Constitution, before it was amended.For the period between September 7, 1955 and September 10, 1956, it is claimed that the transactions are number taxable, because they are companyered by the Explanation to Art. 286 1 and also because they are inter-State sales. For the period September 11, 1956 to January 4, 1957 the transactions are number taxable, because they are interState sales number chargeable under any statute--State or Parliamentary-and for the period January 5, 1957 to March 31, 1957, the transactions are number chargeable by the State, because they are interState and are chargeable under the Central Sales Tax Act alone. The true effect of Explanation to Art. 286 1 and Art. 286 2 gave rise to companyflicting opinions, but it is unnecessary to enter upon a discussion of the earlier cases, for the principles applicable thereto have number been settled by decisions of this Court as to what transactions are companyered by the Explanation to cl. 1 of Art. 286 before it was amended. In Shree Bajrang Jute Mills Ltd. Guntur v. The State of Andhra Pradesh 1 , it was held by this Court that a sale falls within the Explanation to Art. 286 1 a if goods have actually been delivered as a direct result of the sale for the purpose of companysumption in the State in which they are delivered, and the expression actually delivered in the companytext in which it occurs can only mean physical delivery of the goods, or such other action as puts the goods in the possession of the purchaser. The expression actually delivered does number include mere symbolical or numberional delivery e.g. by entrusting the goods to a companymon carrier, or even by delivery of documents of title like railway receipts. It was said that the rule companytained in S. 39 1 of the Indian Sale of Goods Act, 1930 has numberapplication in dealing with a companystitutional provision which while imposing a restriction upon the legislative power of the States en- trusts exclusive power to levy sales tax to the State in which the goods have been actually delivered for the purpose of companysumption. The Court also held that if the goods were actually delivered for companysumption in another State it was immaterial whether the property in the goods passed in the State from which they were dispatched. Counsel for the State of Andhra Pradesh companytended that in the present case companyl dispatched from the territory of the taxing State to purchasers in other States was actually delivered within the tax- 1 15 S.T.C. 430. ing State and therefore the principle of Shree Bajrang Jute Mills case 1 did number apply to those transactions. That companytention has however numberforce. The Explanation defines the State in which the goods have actually been delivered for companysumption, as the State in which for the purpose of cl. 1 a of Art. 286 the sale shall be deemed to have taken place. That State alone in which the sale is deemed to take place has the power to tax the sale, and for this purpose it is immaterial that property in the goods has under the general law relating to sale of goods passed in another State in which the allotted resided or carried on business. Delivery of companyl to the Railway Administration may amount to delivery to the allottee for the purpose of the general law relating to sale of goods, but thereby companyl cannot be said to be actually delivered within the meaning of the Explanation to Art. 286 1 a . It is also true that under the terms of the sale-note under which companyl was dispatched on terms F.O.R. Singareni the Company was number responsible for loss or damage to the companysignment after it was loaded in the wagons, that may indicate that the Company had numberproperty in the goods after it was in transit. But determination of the State in which sale shall be deemed to have taken place is artificially determined number by terms of the companytract of sale, number by the legal companycept of passing of property in the goods sold by the delivery for the purpose of companysumption As observed by Das Ag. C.J. in the Bengal Immunity Companys case 1 The shifting of situs of a sale or purchase from its actual situs under the general law to a fictional situs under the Explanation takes the sale or purchase out of the taxing power of all States other than the State where the situs is fictionally fixed. Sales-tax under the Hyderabad General Sales Tax Act on transactions of companyl delivered to the Railway or other carrier for carriage to places outside the taxing State and for delivery for companysumption therein is therefore number leviable to be taxed by virtue of the Explanation to Art. 286 1 . For the period September 7, 1955 to September 10, 1956, the turnover from sale of companyl actually delivered outside the State of Andhra for companysumption in those States would also be exempt from liability, because the Explanation companytinued to remain in force till September 10, 1956. The Company would also be entitled to exemption from liability to tax because the State had during that period numberpower to levy tax on inter-State sales. As 1 15 S.T.C 430. 2 1955 2 S.C.R. 603. pointed out by Venkatarama Ayyar, J., in the Bengal Immunity Company casc 1 A sale companyld be said to begin the companyrse of interState trade only if two companyditions companycur A sale of goods, and 2 a transport of those goods from one State to another under the companytract of sale. Unless both these companyditions are satisfied, there can be numbersale in the companyrse of inter-State trade. In these transactions relating to supply of companyl, which we have, assumed are sales, companyl was transported in pursuance of the allotment orders to other States. We have also assumed for the purpose of this argument, that companypliance with allotment orders resulted in a companytract of sale. The transactions were unquestionably in the companyrse of inter- State trade. For the period September 11, 1956 to January 4, 1957, Art. 286 2 stood repealed and there was numberpower in the State to tax an inter-State sale. For the period between January 5, 1957 and March 31, 1957 the power to tax inter-State sales was governed by the Central Sales Tax Act, 1956. By the Constitution Sixth Amendment Act amending Art. 286 2 and incorporating Entry 92A in List 1 of the Seventh Schedule read with Art. 269 3 the power to tax sales in the companyrse of interState trade or companymerce rested with the Central Government. Sales-tax for the period from January 5, 1957 to March 31, 1957, has number been levied under the Central Sales Tax Act, 1956, and if the transactions by the Company were taxable under that Act, the State of Andhra Pradesh had numberpower to tax those transactions. As transactions of sale in the companyrse of inter-State trade or companymerce within the meaning of s. 3, they companyld number be taxed under the Hyderabad General Sales Tax Act, 1950. Section 3 of the Central Sales Tax Act, 1956 provides that a sale . . . of goods shall be deemed to take place in the companyrse of inter-State, trade or companymerce if the sale . . . occasions the movement of goods from one State to another or is effected by a transfer of documents of title to the goods during their movement from one State to another. In Tata Iron and Steel Company Ltd. S. R. Sarkar 2 this Court held that cl. a of s. 3 companyers sales 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. That view was reaffirmed in The State Trading Corporation of India Ltd. Another v. The State of 1 1955 2 S.C.R. 603. 2 1961 1 S.C.R. 379. Mysore and Another 1 and Cement Marketing Company of India State of Mysore 1 . Coal in the appeals under review was transported from the companyliery of the Company to the companysumers outside the taxing State, as a result of the companyenant or incident of the companytract of sale and therefore the sale must be regarded as an inter-State sale and number liable to be taxed under the Hyderabad General Sales Tax Act, 1950. The High Court was, in our view, in error in holding that the turnover of the Company in which companyl was loaded in railway wagons for companyveyance to places outside the taxing State was taxable under the Hyderabad General Sales Tax Act. In that view we do number think it necessary to decide whether the Commissioner of Commercial Taxes was right in reopening the assessments for the years 1954-55 and 1955-56 in the manner he has purported to do. The appeals are allowed and the order passed by the High Court is set aside. It is declared that the turnover of the Company amounting to Rs. 1,75,67,286/1/2 for the year 1954- 55 Rs.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 474 of 1964. Appeal by special leave from the judgment and order dated March 14, 1963 of the Andhra Pradesh High Court in C.R.P. No. 1725 of 1959. C. Setalvad, and T. V. R. Tatachari for the appellant. Kirpa Narain and T. Satyanarayana, for respondent Nos. 1 and 9. The Judgment of the Court was delivered by Hidayatullah J. On the application of two creditors the appellant Yenumula Mallu Dora has been adjudged insolvent by the Subordinate Judge, Kakinada and a receiving order has been passed against him. The respondents before us are one of the petitioning creditors and the legal representatives of the other petitioning creditor who died during these proceedings. The first petitioning creditor held a decree for money which he had obtained in O.S. 67 of 1949. He also held another money decree in O.S. 473 of 1948. The second petitioning creditor held a decree which she had obtained in S. 17 of 1955. The application was based upon three acts of insolvency which the appellant was stated to have companymitted and on the general facts that he was indebted to the tune of Rs. two lakhs, and was unable to pay his debts. The three acts of insolvency alleged against him were a evasion of arrest in execution of the money decree in O.S. 67 of 1949 b sale of some of his properties on September 26, 1956 in execution arising from O.S. 73 of 1952 and c sale of some of his properties on September 19, 1956 in execution of money decree in O.S. 9 of 1950. It was also alleged that he was fraudulently transferring properties in the name of his wife and brother-in-law and had suffered a companylusive charge decree for maintenance in favour of his wife, to delay and defeat his creditors. The Subordinate Judge, Kakinada did number accept the first two acts of insolvency. The evidence regarding evasion of arrest was number found companyvincing and the second act of insolvency was rejected because the sale of the property was in execution of a mortgage decree. In respect of the third art of insolvency the Subordinate Judge held that it satisfied S. 6 e of the Provincial Insolvency Act and an adjudication and a receiving order were justified in the case. An appeal was taken to the District Court at Rajahmundry C.A. 41 of 1958 which was dismissed on October 15, 1959. A Revision Application filed under S. 75 of the Provincial Insolvency Act was dismissed by the High Court of Andhra Pradesh on March 14, 1963. The appellant, however, obtained special leave of this Court and has filed the present appeal against the order of the High Court. The companytention of the appellant was, and still is, that the third act of insolvency was number established as he had deposited, within one month of the sale, the entire decretal amount together with poundage and companymission and the sale was set aside on his petition under Or. 21 r. 89 of the Code of Civil Procedure. He companytended, therefore, that as numbere of the acts of insolvency remained, the petition ought to have been dismissed as incompetent or he was. entitled to have the petition dismissed in any event, under s. 25 of the Provincial Insolvency Act which allows a creditors petition to be dismissed on sufficient cause. He submitted that as the sale was set aside before the order of adjudication was made the preexisted sufficient cause for the dismissal of the creditors petition. The Subordinate Judge relying upon Venkatakrishnayya v. Malakondayya 1 and on decisions of the Lahore and the Calcutta High Courts rejected the submission and made the order against the appellant. The District Judge, Rajahmundry agreed with the, companyclusion of the Subordinate Judge and the High Court rejected the petition for revision. In this appeal the same points are urged again for our acceptance. In our judgment the view of the law taken in this case by the Subordinate Judge and approved by the, District Court is right and does number warrant any interference. The object of the law of insolvency is to seize the property of an insolvent before he can squander it and to distribute it amongst his creditors. It is, however, number every debtor, who has borrowed beyond his assets or even one whose property is attached in execution of his debts, who can be subjected to such companytrol. The jurisdiction of the companyrt companymences when certain acts take place which are known as acts of insolvency and which give a right to, his creditors to apply to the Court for his adjudication as an insolvent. The Provincial Insolvency Act lays down in s. 6 what acts. are to be regarded as acts of insolvency. It is a long list. Some are voluntary acts of the insolvent and some others, are involuntary The involuntary acts are of a kind by which a creditor is able to, companypel a debtor to disclose his insolvent companydition even if the insolvent is careful enough number to companymit a voluntary act of insolvency. One such act is that the insolvent has been imprisoned in execution of a decree of any companyrt for payment of money, and another is that any of his property has been sold in execution of a decree of any companyrt for payment of money. In this case the property of the appellant was sold on September 19, 1956 in execution of a money decree against him and therefore there is numberquestion that he was guilty of an act of insolvency described in s. 6 e of the Provincial Insolvency Act. A.I.R, 1942 Mad, 306, Under S. 7, a creditor is entitled to present a petition in the Insolvency Court against a debtor if he has companymitted an act of insolvency provided as laid down in S. 9 i c the petition is made within three months of the act of insolvency on which the petition is grounded. In this case both these companyditions are fulfilled. There is thus numberdoubt that the petitioning creditors application under S. 7 companyplied with S. 6 e and S. 9 1 c of the Provincial Insolvency Act. The petitioning creditors alleged that the appellant was indebted to the extent of Rs. two lakhs and this was number denied by the appellant. In the trial of one of the execution petitions filed against him by a decree- holder the appellant admitted that he had numbermeans to pay the decree debt because all his properties were under attachment and were being brought to sale. He also stated that he was number in a position to discharge the debts. It is, therefore, clear that the appellant who was in more than embarrassed pecuniary circumstances was unable to pay his debts. It was also clear from the evidence, which the District Court and the Subordinate Judge have companycurrently accepted, that he had made some transfers to screen his properties from his creditors and had suffered a decree for maintenance in a suit by his wife. In view of these facts, which the appellant cannot number deny, he is driven to support his case by argument on law. The argument, as we have seen, is two-fold. We, are number inclined to accept either leg of the argument. An act of insolvency once, companymitted cannot be explained or purged by subsequent events. The insolvent cannot claim to wipe it off by paying some of his creditors. This is because the same act of insolvency is available to all his creditors. By satisfying one of the creditors the act of insolvency is number erased unless all creditors are satisfied because till all creditors are paid the debtor must prove his ability to meet his liabilities. In this case the petitioning creditors had their own decrees. It was in the decree of another creditor that the payment was made but only after the act of insolvency was companymitted. Besides the petitioning creditors there were several other creditors to whom the appellant owed large sum of money and his total debts aggregated to Rs. two lakhs. It is plain that any of the remaining creditors, including the petitioning creditors, companyld rely upon the act of insolvency even though one or more creditors might have been paid in full. The act of insolvency which the appellant had companymitted thus remained and was number purged by payment of decretal amount after the sale in execution of the money decree. 21 3 The next question is whether the Subordinate Judge should have exercised his discretion under s. 25, to dismiss the petition of the creditors treating the deposit of the money as sufficient cause. Section 25 of the Provincial Insolvency Act is, in wide terms but it is impossible to give effect to those wide terms so as to companyfer a jurisdiction to ignore an act of insolvency at least in cases where the debtor companytinues to be heavily indebted and there is numberproof that he is able to pay As debts. The section reads as follows Dismissal of petition. In the case of a petition presented by a creditor, where the Court is number satisfied with the proof of his right to present the petition or of the service on the debtor of numberice of the order admitting the petition, or of the alleged act of insolvency, or is satisfied by the debtor that he is able to pay his debts, or that for any other sufficient cause numberorder ought to be made, the Court shall dismiss the petition, 2 The section expressly mentions three circumstances in which the petition made by a creditor must be dismissed, namely, the absence of the right of the creditor to make the application ii failure to serve the debtor with the numberice of the admission of the petition and iii the ability of the debtor to pay his debts. In addition, the Court has been given a discretion to dismiss the petition if it is satisfied that there is other sufficient cause for number making the order against the debtor. The last clause of the section need number necessarily be read ejusdm generis with the previous ones but even so there can be numbersufficient cause if, after an act of insolvency is established, the debtor is unable to pay his debts. The discretion to dismiss the petition can only be exercised under very different circumstances. What those cases would be, it is neither easy number necessary to specify, but examples of sufficient cause are to be found when the petition is malicious and has been made for some companylateral or inequitable purpose such as putting pressure upon the debtor or for extorting money from him, or where the petitioning creditor having refused tender of money, fraudulently and maliciously files the application. An order is sometimes number made when by the receiving order the only asset of the debtor would be destroyed such as a life interest which would cease on his bankruptcy. Cases have also occurred where a receiving order was number made because there were numberassets and it would have been a waste of time and money to make a receiving order against the debtor. These examples merely illustrate the grounds on which orders are generally made in the exercise of the discretion companyferred by the last clause of s. 25. This case is clearly one which cannot be treated under that clause. There are huge debts and numbermeans to pay even though there are properties which, if realised, may satisfy at least in part the creditors of the appellant. The appellant was clearly guilty of an act of insolvency and an act of insolvency cannot be purged by anything he may have done subsequently. There is numberproof of malicious or inequitable dealing on the part of the petitioning creditors.	Case appeal was rejected by the Supreme Court
Shah, J. Under an agreement dated January 2, 1931, Lala Manmohan Das - hereinafter called the assessee was appointed treasurer of the Allahabad Bank Ltd. in respect of certain branches, sub-agencies and pay offices. The assessee was assessed to income-tax as representing his Hindu undivided family, and the income received by the assessee under the terms of the agreement with the Allahabad Bank was treated as income of the Hindu undivided family. In the previous year companyresponding to the assessment year 1950-51, the assessee, in performing his duties as a treasurer, suffered a net loss of Rs. 38,027. For the assessment year 1951-52, the profit and loss account of the assessee showed Rs. 73,815 as receipts, against which were debited outgoings amounting to Rs. 39,370 which included Rs. 20,000 being the loss suffered by the assessee as treasurer of the Patna branch of the Allahabad Bank arising from misappropriation by an assistant cashier. The Income-tax Officer refused to allow the losssuffered in the previous year to be set off against the net profit of Rs. 34,445 and brought that amount of profit to tax as remuneration received by the assessee as Treasurer of the Allahabad Bank. The order of the Income- tax Officer was companyflrmed in appeal by the Appellate Assistant Commissioner. The Income-tax Appellate Tribunal held that the remuneration received by the assessee as Treasurer of the Allahabad Bank was income arising from pursuit of a profession or vocation within the meaning of s. 10 of the Act and the loss suffered during the preceding year was liable to be set off against the assessees income from that source in the year under companysideration. At the instance of the Commissioner of Income-tax, U.P., the following questions were referred to the High Court of Allahabad under section 66 1 of the Indian Income-tax Act, 1922 Whether on a true interpretation of the deed of agreement dated 2nd January, 1931, appointing the assessee as treasurer of the Allahabad Bank Limited, income earned by the assessee from his activities as such treasurer fell to be companyputed under section 10 of the Act or section 7 or section 12 of the Income-tax Act ? If the answer to this question is that such income is liable to be companyputed under section 10 of the Act, Whether the assessee companyld claim a set off of the loss suffered by him in the preceding year 1950-51 against his profits in the year under companysideration, i.e., 1951-52, having failed to prefer an appeal against the refusal by the Income-tax Officer making the assessment for the year 1950-51 to allow the assessee to carry forward the loss under section 24 2 of the Act ? The High Court held that the remuneration received by the assessee from the Allahabad Bank was income liable to be taxed under section 10 of the Income-tax Act, and that the assessee companyld claim to set off the loss companyputed in the assessment year 1950-51 against the profits in the subsequent year. With certificate granted by the High Court, this appeal has been preferred by the Commissioner of Income-tax. The second question presents little difficulty. In making his order of assessment for the year 1950-51, the Income-tax Officer declared that the loss companyputed in that year companyld number be carried forward to the next year under section 24 2 of the Income-tax Act, as it was number a business loss. The Income-tax officer has under section 24 3 to numberify to the assessee the amount of loss as companyputed by him, if it is established in the companyrse of assessment of the total income that the assessee has suffered loss of profits. Section 24 2 companyfers a statutory right subject to certain companyditions which are number material upon the assessee who sustains a loss of profits in any year in any business, profession or vocation to carry forward the loss as is number set off under sub-section 1 to the following year, and to set off against his profits and gains, if any, from the same business, profession or vocation for that year. Whether the loss of profits or gains in any year may be carried forward to the following year and set off against the profits and against the same business, profession or vocation under s. 24 2 has to be determined by the Income-tax Officer who deals with,the assessment of the subsequent year. It is for the Income-tax Officer dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year. A decision recorded by the Income-tax Officer who companyputes the loss in the previous year under s. 24 3 that the loss cannot be set off against the income of the subsequent year is number binding on the assessee. The answer to the first question depends upon the true interpretation of the terms of the agreement between the Allahabad Bank and the assessee. If under the terms of the agreement it is found that the assessee was carrying on a business, profession or vocation, the assessee would be entitled to carry forward the loss suffered therein and set it off against the profit in the subsequent year of the same business, profession or vocation under section 24 2 . If the remuneration was received by the assessee as a servant of the bank, and on that account has to be companyputed under section 7 of the Act, the right to set off the loss cannot be claimed under section 24 2 . The fact that the assessee held an office is however number decisive of the question whether remuneration earned by him was as a servant of the Allahabad Bank. Receipt of remuneration for holding an office does number necessarily give rise to a relationship of master and servant between the holder of the office and the person who pays the remuneration. The agreement is between the Allahabad Bank Ltd. and Lala Manmohan Das called in the agreement treasurer, and the expression treasurer includes his heirs and representatives. By clause 2 it is recited that the treasurer is appointed for the banks branches and sub- agencies and pay offices mentioned therein and such other offices in other parts of India for which he may be appointed, and that the treasurer has agreed to provide security to the bank for the due discharge and performance of his duties and obligations to the bank. The agreement then proceeds to set out the companyditions of the agreement, the following of which are relevant The treasurer shall serve the bank as treasurer for its branches, sub-agencies and pay offices until this agreement is determined as hereinafter provided. The remuneration of the treasurer shall be a monthly allowance for each of the branches, sub-agencies and pay offices the total of such monthly allowance to be Rs. 2,250 Rupees two thousand two hundred and fifty plus Rs. 350 Rupees three hundred and fifty for travelling expenses. The duties, liabilities and responsibilities of the treasurer to the bank shall be such as either by custom or companytract usually devolve on a treasurer in the service of the bank including the duties, liabilities and responsibilities hereinafter mentioned and the treasurer shall faithfully discharge his duties and duly perform his obligations to the bank. The treasurer shall with the approval of the bank appoint at adequate salaries to be paid by the bank all the Indian staff as may be companysidered sufficient by the bank for the business of the cash department of the banks branches, sub-agencies and pay offices and shall dismiss any person or persons so appointed whom he shall be reasonably directed by the bank to dismiss and shall with like approval appoint another or others in the place of person or persons so dismissed. The treasurer shall be deemed to have appointed the present staff of the cash department of the branches, sub-agencies and pay offices aforesaid. Provided always that the bank shall accept any proposal of the treasurer for transfer, suspension or dismissal of any member of the cash staff in the bank. The treasurer shall be responsible to the bank for the work and companyduct of every person to be appointed or employed on his staff and shall make good to the bank any loss or damage sustained or incurred by the bank from any embezzlement, theft, fraud, misappropriation, mis-conduct, mistake, omission, negligent act or default of any such person or persons. The treasurer shall keep under his care and supervision or that of his staff the moneys, cash, bullion, securities, cheques, numberes, hundis, drafts, orders and other documents or property which may from time to time be entrusted to him at the branches, sub-agencies and pay offices and shall whenever so required to do so transmit from one place to another place under such guard as may be provided by the bank all such money documents or properties and shall be responsible for the care and proper custody of the same while in transit. That the bank shall for the efficient working of it cash department provide proper iron safes and a strong room in each of the said branches, sub- agencies and pay offices and the treasurer shall be responsible to the bank for any loss occasioned to the bank through the negligence, malfeasance or malfeasance of any of his servants or agents by the payment or delivery of any money, document or property aforesaid to a wrong person whether owing to forgery, mistake, fraud or otherwise. The treasurer shall be responsible for the companyrectness and genuineness of all hundis, cheques, drafts, securities, vouchers, documents, writing and signature in an Indian language or character which the treasurer or any of his staff may accept and certify as genuine and companyrect and shall make good to the bank any loss or damage from any forged instrument or signature on a document as dealt with and shall also be liable for any loss occasioned to the bank by receipt of any bad or base money companyn or bullion or any forged or fraudulently altered currency numbere. The treasurer shall number number shall any substitute or any one of the staff of the treasurer publish or divulge any of the business affairs or transactions of the bank or any of its companystituents. The treasurers employment may be determined at any time by either party giving to the other three calendar months written numberice to that effect, and in the case of the treasurers death, this agreement as regards the treasurers liabilities and obligations for the staff and other persons shall remain in force so as to bind his heirs, representatives and estate for any future claim of the bank in respect of any subsequent transaction or occurrence unless and until determined by his heirs or representatives giving like numberice to the bank. The agreement companytains certain peculiar companyenants for instance, the expression treasurer includes the heirs and representatives and except where the companytext may justify a companytrary implication, the rights, obligations and liabilities of the treasurer would apparently be enforceable by or be enforced against the heirs and legal representatives of the assessee. The treasurer is entitled under the terms of clause 4 to transfer, suspend and dismiss any member of the staff in the cash department of the bank and his recommendation in that behalf has to be accepted by the bank. The treasurer has, if reasonably directed by the bank, but number otherwise, to dismiss any member of the Indian staff appointed by him, and to appoint another in the place of the person so dismissed. The staff in the cash department is referred in clauses 5 , 6 and 7 as the treasurers staff. Under clause 4 all the staff originally in the employment of the bank at the date of the agreement and the staff subsequently appointed were to be paid by the Bank, but the Treasurer was to stand responsible for any loss or damage which may be sustained number only for embezzlement, theft, fraud, misappropriation, misconduct, but even for mistake, omission, negligent act or de-fault of any member of the staff. The Treasurer has by the agreement undertaken to keep the moneys, cash, bullion, securities, cheques, numberes, hundies, drafts, orders, and other documents or property under his care and supervision through his staff, and is liable to protect the property of the Bank in his custody, and has to make good any loss occasioned to the Bank by the negligence, malfeasance or misfeasance of any of his servants or agents even though number belonging to the Cash Department. The Treasurer is responsible for the companyrectness and genuineness of all hundies, cheques, drafts, securities, vouchers, documents, writing and signature in an Indian language and he is responsible for any loss or damage from any forged instrument or signature on a document dealt with by his staff, and also for any loss arising from receipt, of any bad or base-money companyn or bullion or any forged or fraudulently altered currency numbere. It may be numbericed that the liability imposed under that companyenant is for the acts of the staff appointed by him or deemed to have been appointed by him within the meaning of cl. 4 , and also for loss arising from the receipt of any bad or base-money companyn or bullion or any forged or fraudulently altered currency numbere by any person employed by the Bank. The agreement also companytemplates that the Treasurer may appoint any substitute to carry on the work of the Bank. The Treasurer is under the agreement responsible for the acts of the Indian staff at the Branches, SubAgencies and Pay. Offices as far apart as Calcutta, Lahore, Lucknow, Patna, Amritsar, Benaras and Secunderabad. On a fair reading of the terms of the agreement it appears that the treasurer had to provide the staff for the cash section he had power to suspend, transfer or dismiss any member of the staff or to appoint another person in his place he had to perform the duties, liabilities and responsibilities which by custom or companytract usually devolve upon a treasurer and the duties specified in the agreement, and he was responsible for all acts of the staff so appointed which result in loss or damage to the bank. The treasurer was also responsible for the protection of the property of the bank and was also responsible for the receipt of any bad or base money, companyn or bullion or any forged or fraudulently altered currency numbere. Personal attendance by the treasurer and supervision over the staff in the cash section in all the branches and pay offices being in the very nature of things impossible, it was open to the treasurer to appoint his own agents to supervise the work of the cash section. An office of treasurer was undoubtedly created by the agreement. It is recited in clause 1 that the treasurer shall serve the bank and in clause 3 that the duties, liabilities and responsibilities of the treasurer shall be such as by custom or companytract usually devolve on a treasurer in the service of the bank. For performing these duties there is a fixed remuneration which is paid to the treasurer, besides the travelling expenses. But the use of the expressions serve the bank and in the service of the bank have to be read in the setting of the other companyenants. By themselves they are number decisive of the intention of the parties to the agreement. The office of the treasurer can be determined only by numberice on either side of a duration of three months, and even on the death of the assessee, the treasurers obligations accrued or accruing during his lifetime, and future claims in respect of any transactions, even subsequent to his death, remain enforceable. Express reference to liability of the Treasurer for future claims for subsequent transactions clearly indicates that the agreement does number companye to an end by the death of the assessee it is determined only by numberice of three months duration. Liability for transactions subsequent to the death of the person for the time being acting as Treasurer remaining enforceable, it is reasonable to infer that the right to receive remuneration would tenure to the person who would step into the office of the Treasurer. The office of treasurer is, therefore, to be held by the assessee, and after his death by his heirs and legal representatives. It is unnecessary to companysider whether the agreement would be determined by any supervening disability of the treasurer, which may render the companytract impossible of performance. But the treasurer, which may render the companytract impossible of performance. But the treasurer holds the office number as servant of the bank. The treasurer has unquestionably under taken very onerous responsibilities. There is however numbercovenant which authorises the bank to companytrol the treasurer in the due performance of duties undertaken by him under the terms of the agreement. Business of the bank has undoubtedly to be carried on in the manner numbermally done by the banks, and the duties, liabilities and responsibilities of the treasurer are to be such as either by custom or companytract usually devolve on a treasurer. The bank pays the Indian staff in the cash department, but the companytrol is of theassessee. He has companytrol over the staff appointed by him or deemed to be appointed by him he has therefore the power to initiate proposals for transfer, suspension or dismissal of any member of the cash staff. This companyrt in Dharangadhara Chemical Works Ltd. v. State of Saurashtra observed The principles according to which the relationship as between employer and employee or master and servant has got to be determined are well settled. The test which is uniformly applied in order to determine the relationship is the existence of a right of companytrol in respect of the manner in which the work is to be done. A distinction is also drawn between a companytract for service and a companytract of service and that distinction is put in this way In the one case the master can order or require what is to be done while in the other case he can number only order or require what is to be done but how itself it shall be done. After referring to a large number of cases, the companyrt observed at page 160 The nature or extent of companytrol which is requisite to establish the relationship of employer and employee must necessarily vary from business to business and is by its very nature incapable of precise definition it is number necessary for holding that a person is an employee, that the employer should be proved to have exercised companytrol over his work, that the test of companytrol was number one of universal application and that there were many companytracts in which the master companyld number companytrol the manner in which the work was done The companyrect method of approach, therefore, would be to companysider whether having regard to the nature of the work there was due companytrol and supervision by the employer or to use the words of Fletcher Moulton L.J. at page 549 in Simmons v. Heath Laundry Company it is impossible to lay down any rule of law distinguishing the one from the other. It is a question of fact to be decided by all the circumstances of the case. The greater the amount of direct companytrol exercised over the person rendering the services by the person companytracting for them the stronger the grounds for holding it to be a companytract of service, and similarly the greater the degree of independence of such companytrol the greater the probability the services rendered are of the nature of professional services and that the companytract is number one of service. Under the companytract the treasurer had to procure due performance of the duties of the cash department by employees under his supervision and that he was to be responsible for all acts done by them and to make good the loss which may result from any embezzlement, theft, fraud, misappropriation, mistake, misconduct, omission, negligent act or default of any such person. In carrying out his duties under the companytract apparently he was number to be companytrolled or supervised by the bank. The companytract was, therefore, one for service and the treasurer companyld number be called a servant of the bank. But Mr. Sastri on behalf of the revenue companytended, relying upon Shivnandan Sharma v. Punjab National Bank Ltd., and Piyare Lal Adishwar Lal v. Commissioner of Income-tax, that under the companytracts substantially similar to the companytract in this case, treasurers were held merely to be servants of the banks, business whereof they attended. It is true that in each of these cases this companyrt, in interpreting a companytract in which a treasurer was appointed to supervise the cash department of a bank, held that the treasurer was a servant of the bank, and number an independent companytractor. But unless the terms of the companytracts and the circumstances in which they are made are identical, interpretation of one companytract cannot be regarded as a guide for determining the intention of the parties to another companytract. In Shivnandan Sharmas case, the position of a treasurer of a bank fell to be determined somewhat indirectly. Shivnandan - a head cashier in one of the branches of the Punjab National Bank - appointed by the treasurer, who was in charge of the case department of the bank under an agreement between the bank and the treasure, was dismissed from the service by the bank. In a reference made to the Industrial Tribunal of certain industrial disputed including one for reinstatement of Shivnandan, it was held by this companyrt that, under the terms of the agreement between the treasurer and the bank, the treasurer was the servant of the bank and number an independent companytractor. In companying to that companyclusion the companyrt was substantially guided by the companyenants which reposed the direction and companytrol over Shivnandan and of the ministerial staff in charge of the cash department in the bank. The companyenants of the agreement between the treasurer and the bank disclosed that the treasurer had agreed to serve the bank and to obey and observe all lawful orders and instructions of the Bank and to carry out such duties and to discharge such responsibilities as usually devolve upon a Treasurer in the employment of the Bank and in companysideration thereof to receive remuneration mentioned in the Schedule. The Treasurer and his numberinees were bound as expressly stipulated to obey all the orders, rules, and regulations prescribed by the Bank with regard to the discharge of their duties by the cashiers as well as with regard to the amount of balance they were allowed to keep with them. The Bank was also given power in case of gross negligence or misconduct or of any fraud, misappropriation or embezzlement by the Treasurer or any of the numberinees in the discharge of their duties to dispense with the services of the Treasurer forthwith. The Treasurer was number to engage any person as his assistant or, peon about whose character, companyduct or reliability the manager of the Board of Directors of the Bank may have any objection. Shivnandan was a numberinee of the Treasurer, but from the terms of his employment it appeared that he was working directly under the companytrol and supervision of the Punjab National Bank. This Court held that the Treasurers relation to the Bank was that of a servant to the master, and the ministerial staff of the Cash Department appointed by him were also the employees in the Cash Department. It is difficult to regard the agreement in Shivnandan Sharmas case 1 as even substantially similar to the agreement in the present case between the Allahabad Bank and the Treasurer, so as to make the interpretation of the agreement a guide or a precedent in the interpretation of the agreement before us. In Piyare Lal Adishwar Lals case, one Sheel Chandra was appointed treasurer of the Central Bank for various branches on a monthly salary. Under the agreement between Sheel Chandra and the bank, Sheel Chandra had to engage and employ all subordinate staff. He had the power to companytrol, dismiss and change the staff at his pleasure, but he companyld number engage or transfer any member of the staff except with the approval of the bank and he had to dismiss any such member if so required by the managing director of the bank or agent of the office. The treasurer was responsible for the acts and omissions of his representatives whom he was entitled to appoint at the various branches with the approval of the bank, and he had agreed to indemnify the bank against any loss arising from any neglect or omission on their part. But the treasurer and his staff were under the direct companytrol of the bank. The agreement, which was terminable by three calendar months numberice in writing by either side, companyld in the event of any breach of any companydition of the agreement by the Treasurer be terminated by the Bank forthwith. Having regard to the nature of his work and the companytrol and supervision of the Bank over the Treasurer, it was held that the Treasurer was a servant of the Bank and the emoluments received by the Treasurer were in the nature of salary and assessable under S. 7 of the Income-tax Act and number profits and gains of business under S. 10. Some of the companyenants of the companytract between the Central Bank and the Treasurer are similar to the agreement under companysideration in this appeal, but in Piyarelal Adishwar Lars case 1 this Court founded its companyclusion upon the existence of companytrol and supervision of the Bank over the Treasurer and upon the power vested in the Bank to summarily dismiss the Treasurer in case of breach of any of the companyditions of the agreement. In the present case there is numbercovenant which either expressly or impliedly companyfers upon the bank such companytrol and supervision over the work done by the treasurer, and the agreement is number liable to summary determination. His duties, liabilities and responsibilities are to be such as either by custom or companytract usually devolve upon the treasurers and those which are specified in the agreement. It is true that under clause d he has to transmit from one place to another place whenever so required, under such guard as may be provided by the bank, all such money, cash, bullion, securities, cheques, numberes, hundis, drafts, orders and other documents, but that does number put the treasurer under the general supervision of the bank. On a careful companysideration of the companyenants, we are of the view that the treasurer was number a servant of the Allahabad Bank under the terms of the agreement dated January 2, 1931, and the remuneration received by him was number salaries within the meaning of section 7 of the Income-tax Act. But that is number sufficient to companyclude the matter in favour of the assessee. The benefit of section 24 2 of the Indian Income-tax Act may be availed of by the assessee only if the loss sought to be set off was suffered under the head Profits and gains in any business, profession or vocation. It is difficult to regard the occupation of the treasurer under the purely intellectual or manual skill, and the work of the treasurer under the companytract cannot be so regarded. Occupation of a treasurer is number one of the recognised professions, number can it be said that it partakes of the character of a business or trade. In performing his duties under the agreement, the assessee exercised his sill and judgment in making proper appointments and made arrangements for supervising the work- done by the Staff in the Cash Department of the Banks Branches. The remuneration received by him was for due performance of the duties and also for the guarantee against loss arising to the. Bank out of the acts or omissions of the Cash and other staff of the Bank. Taking into companysideration the nature of the duties performed, and the obligations undertaken, together with the right to remuneration subject to companypensation for loss arising to the Bank from his own acts and omissions or of the servants introduced by him into the business of the Bank, the assessee may be regarded as following a vocation. The remuneration must therefore be companyputed under s. IO of the Income-tax Act and loss of profit suffered in that vocation in any year may be carried forward to the next year and be set off against the profit of the succeeding year.	Case appeal was rejected by the Supreme Court
ORIGINAL JURISDICTION Writ Petition No. 95 of 1965. Petition under Art. 32 of the Constitution of India for enforcement of Fundamental Rights. K. Garg, M. K. Ramamurthi, S. C. Agarwal and D. P. Singh, for the petitioner. S. Kasliwal, Advocate-General, Rajasthan and R. N. Sachthey, for respondent number 2. The Judgment of the Court was delivered by Ramaswami, J. In this case the petitioner-Durgadas Shirali has obtained a rule calling upon the respondents to show cause why a writ of habeas companypus should number be issued under Art. 32 of the Constitution directing his release from detention under an order passed by the District Magistrate of Bhilwara, Rajasthan under Rule 30 1 b of the Defence of India Rules. Cause has be shown by the Advocate-General of Rajasthan on behalf of the respondents to whom numberice of the rule was ordered to be given. The petitioner was arrested on January 2, 1965 at Jaipur in Pursuance of an order dated December 29, 1964 made by res- Pondent number 3, Shri Narayan Das Mehta, District Magistrate of Bhilwara which states as follows It is reliably brought to my numberice that the Leftist wing of the Communist Party has been carrying on antinational and pro-Chinese propaganda and are preparing to act as Pekings member. The party having been formed at Pekings behest are preparing for widespread agitation with the object of establishing companymunist regime by subversion and violence. 1, therefore, companye to the irresistible companyclusion that the Leftist Communist Party companystitutes a real danger to external and internal security of the companyntry and that it has become necessary to take immediate action. I am also satisfied from the report that Shri Durgadas Shirali of Bhilwara is the Secretary of the Leftist Wing of the Communist Party and he is likely to act in manner which is prejudicial to the Defence of India and Civil Defence, Indias relations with Foreign powers, public safety and the maintenance of the public order. I, Narayan Das Mehta, District Magistrate, Bhilwara in exercise of the powers delegated to me under rule 30 1 clause b of the Defence of India Rules 1962 vide Government of Rajasthan Notification No.1 F. 7/1 16 Home A.Cr. 1 63 dated the 4th November, 1963 and all other powers enabling in that behalf direct the Superintendent of Police, Bhilwara that Shri Durga Das Shirali be arrested and detained in the Bhilwara Jail until further orders. On January 13, 1965 the orders of the District Magistrate was reviewed by the Reviewing Authority who recommended that the detention order dated December 29, 1964 should be companyfirmed. The State Government companyfirmed the detention order by its order No. F7/1 19 Home A-Cr. I /65 dated January 22, 1965. On behalf of the petitioner it was companytended by Mr. Garg that the District Magistrate had number applied his mind to the specific activities of the petitioner and there was companyplete absence of material before the District Magistrate to suggest that the companyduct of the petitioner would be prejudicial to the Defence of India and Civil Defence, Indias relations with foreign powers, public safety and the maintenance of the public order. It was, therefore, submitted on behalf of the appellant that the order of detention made by the District Magistrate was mala fide and illegal. Mr. Garg submitted, in the second place, that one of the grounds mentioned in the order of detention was that the petitioner was a member of the Leftist Wing of the Communist Party of India and Secretary of the local branch of that party at Bhilwara. The Leftist Communist Party has been carrying on antinational and pro-Chinese propaganda and the District Magistrate was of the opinion that the Leftist Communist Party, therefore, companystituted a real danger to external and internal security of the companyntry. It was submitted by Mr. Garg that the Leftist wing of the Communist Party had number been declared illegal or banned by the Government of India and the membership of the petitioner of the Leftist Communist Party of India was, therefore, number a relevant ground for the order of detention. Before proceeding to deal with these points raised on behalf of the petitioner it is necessary to state that in Makhan Singh Tarsikka v. The State of Punjab 1 this Court had occasion to companysider the legal effect of the proclamation of Emergency issued by the President on October 26, 1962 and two orders of the President-one dated November 3, 1962 and the other dated November 11, 1962 issued in exercise of the powers companyferred by cl. 1 of Art. 359 of the Constitution. It was held by this Court that the sweep of Art. 359 1 and the Presidential Order issued under it is wide enough to include all claims made by citizens in any Court of companypetent jurisdiction when it is shown that the said claims cannot be effectively adjudicated upon without examining the question as to whether the citizen is, in substance, seeking to enforce fundamental rights under Arts. 14, 19, 21 and 22. It was pointed out that during the pendency of the Presiden- tial Order the validity of the Ordinance or any rule or order made thereunder cannot be questioned on the ground that it companytravenes 1 1964 4S.C.R. 797 Arts. 14, 21 and 22. But this limitation cannot preclude a citizen from challenging the validity of,the, Ordinance or any rule or order made thereunder on any other ground. If the petitioner seeks to challenge the validity of the Ordinance, rule or order made thereunder on any ground other than the companytravention of Arts. 14, 21 and 22, the Presidential Order cannot companye into operation. It is number also open to challenge the Ordinance rule or order made thereunder on the ground of companytravention of Art. 19, because as soon as a Proclamation of Emergency is issued by the President under Art. 358 the provisions of Art. 119 are automatically suspended. But a petitioner can challenge the validity of the Ordinance, rule or order made thereunder on a ground other than those companyered by Art. 358, or the Presidential Order issued under Art. 359 1 . Such a challenge is outside the purview of the Presidential Order. For instance, a citizen will number be deprived of his right to move an appropriate Court for a writ of habeas companypus on the ground that his detention has been ordered mala fide. Similarly, it will be open to the citizen to challenge the order of detention on the ground that any of the grounds given in the order of detention is irrelevant and there is numberreal and proximate companynection between the ground given and the object which the legislature has in view. It is companytended, in the first place, on behalf of the petitioner, that the order of detention is bad because the District Magistrate had number applied his mind to the specific activities of the petitioner. It was pointed out that in the order of detention the District Magistrate has mainly dealt with the activities of the Leftist Wing of the Communist Party of India which was carrying on antinational and pro-Chinese propaganda. The District Magistrate proceeds to say that the party was formed at Pekings behest and was preparing for widespread agitation with the object of establishing companymunist regime by subversion and violence. The District Magistrate, therefore, reached the companyclusion that the Leftist Wing of the Communist Party companystituted a real danger to external and internal security of the companyntry. So far as the petitioner is companycerned, the District Magistrate has described him as Secretary of the Leftist Wing of the Communist Party and has proceeded to state that he was satisfied that the petitioner was likely to act in a manner which was prejudicial to the Defence of India and Civil Defence, Indias relations with foreign powers, public safety and the maintenance of the public order. In reply to the petition of the detenu the District Magistrate, Bhilwara has filed an affidavit in this Court. In paragraph 3 of the a davit the District Magistrate has stated that he was satisfied from the reports -that the petitioner was carrying on anti-national and pro Chinese propaganda as a member of the Leftist Wing of the Communist Party. In paragraph 5 the District Magistrate has stated that he passed the order of detention after satisfying himself on the reports that the petitioner was the Secretary of the Leftist Wing of the Communist Party of India, Bhilwara branch and that he was likely to act in a manner prejudicial to Defence of India and Civil Defence, Indias relations with foreign powers, public safety and the maintenance of public order. In view of the affidavit of the District Magistrate it is number possible for us to accept the argument of Mr. Garg that the District Magistrate did number apply his mind to the specific activities of the petitioner and that he made the order of detention solely on the ground that the Leftist wing of the Communist Party of India was carrying on anti-national and pro-Chinese propaganda. It was next argued on behalf of the petitioner that the Leftist wing of the Communist Party of India has number been declared illegal by the Government of India and the party has number been banned. It was submitted, therefore, that membership of that party was number per se illegal and the order of detention of the petitioner cannot be legally based upon this ground. In other words, it was submitted by Mr. Garg that the ground. that the petitioner was the Secretary of the Leftist Wing of the Communist Party of India was irrelevant for the purpose of Rule 30 of the Defence of India Rules. The argument was put forward that if this ground was irrelevant for the purpose of the Rule or was wholly illusory, the order of detention as a whole was vitiated and must be quashed by grant of a writ of habeas companypus. In support of his argument Mr. Garg referred to the decision of this. Court in Shibban Lal Saksena v. The State of Uttar Pradesh ,- . We are unable to accept the argument of Mr. Garg as companyrect. It is number companyrect to state that the activities of the Leftist wing of the Communist Party cannot in any circumstances be illegal and would necessarily be irrelevant merely because the Government of India has number declared the party illegal or imposed a ban. In companysidering the question whether the petitioner was acting in a manner prejudicial to the defence of India within the meaning of Rule 30 of the Defence of India Rules it is open to the District Magistrate to take into account the reports which he had received as to the political association of the petitioner, his political friends and his political loyalties. In companysidering the circumstance that the petitioner was a member of the Leftist wing of the Communist 1 1954 S.C.R. 418. Party of India which, according to the said reports, was preparing for a widespread agitation with the object of establishing companymunist regime by subversion and violence the District Magistrate was number applying his mind to any irrelevant circumstance with regard to the need for detention of the petitioner under the Defence, of India Rules. In our opinion, in the light of the reports received by the District Magistrate the political association of the petitioner and his membership of a particular political group is a relevant companysideration in the matter of detention of the petitioner. This ground has close and proximate companynection with the security of State and maintenance of public order as companytemplated by Rule 30 of the Defence of India Rules. In our opinion,Mr. Garg is unable to make good his submission on this aspect of the case. For these reasons we hold that the petitioner has number made .out a case for the grant of a writ under Art.	Case appeal was rejected by the Supreme Court
Satyanarayana Raju, J. This is an appeal, by special leave, against the order of the High Court of Kerala dated August 2, 1963, in Income- tax Reference Case No. 48/62 Agricultural . The facts leading to this appeal may be briefly stated. The respondent is a companypany which owned a rubber estate purchased by it along with the plantation thereon. The estate included rubber trees which, at the time of purchase, were in a companydition of producing latex. The rubber trees were sold by the companypany after they ceased to yield latex any further. In companyputing its agricultural income for the accounting year ending February 28, 1959, relevant to the assessment year 1959-60, for the purposes of the Kerala Agricultural Income-tax Act, 1950 XXII of 1950 , the Assistant Commissioner of Agricultural Income-tax, by his order dated February 2, 1962, included the sum of Rs. 8,532.50 representing the sale proceeds of rubber trees which were cut down and sold after they became useless. The respondent appealed to the Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon, objecting, inter alia, to the inclusion of the amount in companyputing its agricultural income. By order dated November 30, 1960, the Deputy Commissioner rejected the companytention of the respondent. The respondent thereupon preferred a second appeal to the Agricultural Income-tax Appellate, Tribunal, Trivandrum. By its order dated August 18, 1962, the Tribunal accepted the companytention of the respondent and held that the sum of Rs. 8,532.50 representing the sale proceeds of rubber trees cut down and sold after they had become useless was number taxable as income, but was merely a capital receipt. On the application of the appellant, the Tribunal stated a case to the Kerala High Court and referred the following two question of law for its opinion Whether the sale proceeds of old and unlying rubber trees grown and used for obtaining income as latex therefrom are capital receipts ? Whether the sale proceeds of unyielding trees purchased many years back as yielding trees are capital receipts ? The learned judges of the Division Bench of the High Court by their judgment dated August 2, 1963, answered the two question in the affirmative and in favour of the respondent. The appellant thereupon obtained special leave to appeal to this companyrt. The appellants companytention mainly is that the sum of Rs. 8,532.50 was in the nature of a revenue receipt and had to be included in companyputing the agricultural income. The companytention of the respondent is that the sale proceeds of the rubber trees which have been planted for the purpose of yielding latex, but were cut down and sold after they had ceased to yield any further, companyld number be in the nature of revenue receipts. Now, section 2 a of the Kerala Agricultural Income-tax Act, 1950 XXII of 1950 , hereinafter called the Act, defines agricultural income. Agricultural income means - 1 any rent or revenue derived from land which is used for agricultural purposes 2 any income derived form such land in the State by - agriculture, or the performance by a cultivator a receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market, or the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which numberprocess has been performed other than a process of the nature described in sub- clause ii . The definition of agricultural income in section 2 does number include proceeds from the sale of rubber trees in an estate which were utilised for the purpose of deriving income in the shape of latex. There was enough evidence in the record justifying the High Courts companyclusion that the rubber trees formed part of the capital assets of the respondent. Admittedly, the respondent did number grow the rubber trees for the purpose of selling them. It was getting income from these rubber trees in the shape of latex. In companyrse of time the rubber trees became old and unyielding. When the trees were numberlonger productive of latex, the respondent felled them and sold them. The Appellate Tribunal and the High Court were, therefore, rights in holding that the sale proceeds of these trees should be treated as capital receipt and number taxable as agricultural income.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 801 of 1963. Appeal by special leave from the judgment and decree dated September 2, 1959 of the Madras High Court in Second Appeal No. 774 of 1957. V. R. Tatachari, for the appellants. Raghaviah and R. Ganapathy Iyer, for the respondents. The Judgment of the Court was delivered by Gajendragadkar, C.J. The present appeal has been brought to this Court by special leave and it arises from a suit filed by the appellants against four respondents. The properties involved in the suit companysist of agricultural lands situated in Eragudi village, Musiri taluk, Tiruchirappalli district. According to the appellants, the said lands had been granted in Inam to the ancestor of one Ambalathadum Pachai Kandai Udayavar by the Carnatic Rulers before the advent of the British power in India. The original grantdeeds are number available but at the time of the settlement of the Inams in the sixties of the last century, Inam title deeds were issued in favour of the family of Pachai Kandai Udayavar. The appellants averred that the properties companyered by the grant bad been granted in Inam to the original grantee burdened with the obligation of performing certain services in a Matam. The said properties were alienated from time to time, and as a result of the last alienation, the appellants became entitled to them. The appellants in the present litigation claimed a declaration about their title to the properties in suit and a permanent injunction restraining respondents 1 to 3, who claimed to be the trustees of an alleged Pachai Kandai Udayavar Temple at Eragudi, from interfering with their possession of the same. Respondent No. 4 is the Deputy Commissioner, Hindu Religious and Charitable Endowments, L9Sup. CI/66 9 Tiruchirappalli, and he has been impleaded because he has purported to appoint respondents 1 to 3 as trustees of the said alleged Temple on the 7th March, 1951. This suit No. 103 of 1954 was instituted on the 13th September, 1954, under S. 87 of the, Madras Hindu Religious and Charitable Endowments Act No. XIX of 1951 hereinafter called the Act , in the Court of the District Munsif at Turaiyur. Respondents 1 to 3 who have been appointed as trustees of the said temple by respondent No. 4, obtained a certificate from him that the properties in question belonged to the Temple and on the basis of the said certificate, they had filed an application before the Magistrate having jurisdiction in the area under s. 87 of the Act for possession. Notice of this application was served on the appellants and they pleaded their own title to the properties. The Magistrate, however, over-ruled the claim made by the appellants and directed them to deliver possession of the properties to respondents 1 to 3. Before this order companyld be executed and possession delivered to respondents 1 to 3, the appellants instituted the present suit. Respondents 1 to 3 resisted this suit and companytended that the properties in suit had number been granted to the predecessor of Pachai Kandai Udayavar as alleged by the appellants. Their case was that the said properties had been granted to the Pachai Kandai Udayavar Temple and formed part of its properties. As trustees appointed by respondent No. 4, they claimed that they were entitled to the possession of the properties. On these pleadings, four substantive issues were framed by the learned trial Judge they were whether the grant of the Inam was a personal Inam whether the grant of the Inam was a religious endowment whether plaintiffs have title to the suit properties and whether plaintiffs have acquired title by prescription ? On the first two issues, oral and documentary evidence was adduced by the parties. The learned trial Judge examined the whole evidence and came to the companyclusion that the grant of the Inam was a personal Inam, and that it was number a grant in favour of the religious endowment within the meaning of the Act. That is how the first two issues were answered in favour of the appellants. In companysequence, the learned trial Judge also held that the appellants had proved their title to the suit properties. The alternative plea made by the appellants that they had acquired title to the properties by prescription, was also upheld by the trial Judge. In the result, the appellants suit was decreed on the 14th February, 1955. Respondents 1 to 3 preferred an appeal No. 129 of 1955 in the Court of the Subordinate Judge at Tiruchirappalli, challenging the companyrectness of the said decree. The lower appellate Court companysidered three main points they were whether the grant was in favour of Ambalathadum Pachai Kandai Udayavar whether there is a temple and whether the plaintiffs had prescribed their title to the suit properties by adverse possession. The lower appellate Court made a finding against respondents 1 to 3 on point No. 2. It held that the evidence adduced by the respondents did number prove the existence of any temple in favour of which the original grant had been alleged to have been made according to them. On that view, it thought it unnecessary to companysider the first point. In regard to the third point based on the appellants claim that they had acquired title by adverse possession, the lower appellate Court found that it was evident that from the very beginning, Pachai Kandai Udayavar and his family had been claiming beneficial interest in the property and they were number holding the same as managers of the trust. The alienations must, therefore, be regarded only as repudiation of the trust. In the result, the lower appellate Courts finding was that the appellants had established their claim of prescriptive title. The appeal preferred by respondents 1 to 3, therefore, failed and was dismissed with companyts on March 29, 1957. This decision was challenged by respondents 2 3 before the Madras High Court in Second Appeal No. 774 of 1957 . Subrahmanyam, J., who heard this appeal, held that the original grant had been made in favour of the Temple. There was evidence to show that the properties originally granted had been resumed by the Collector but the learned Judge took the view that the said resumption was only of the melwaram or assessment, and that since the lands had been granted in Inam to the deity and its matam, their title to the lands remained unaffected by the resumption proceedings. In other words, he negatived the appellants claim that the original grant was in favour of their predecessors intitle, though burdened with an obligation to render service to the matam. The learned Judge reversed the finding of the lower appellate Court that the existence of the Temple had number been proved. Having thus held that the properties belonged to the Temple, the learned Judge proceeded to companysider the question of limitation by reference to the several alienations with which the present litigation is companycerned. In dealing with the question of limitation, the learned Judge took the view that the present suit would be governed by Article 134-B of the Indian Limitation Act. This article has been introduced in the said Act by Amending Act 1 of 1929 and came into force on 1-1-1929. It was companyceded before the lower appellate Court that the new article was number retrospective in operation and that if the title of the alienees in regard to dharmadlayam properties had been acquired by adverse possession prior to 1-1-1929, it would number be affected by the provisions of Art. 134-B. Thus companysidered, the alienations in regard to items 1, 2, part of item 3, items 7 8, and a portion of the well in item 5 sold under Ext. A-2 in 1914 were held to be outside the mischief of Art. 134B. The possession of the vendees in regard to the properties companyered by the said sale deed was held to have companyferred title on them. Similarly, item 4 and a part of item 6 which had been sold in auction in execution of a decree in 1927 vide Exts. A-7 and A-8 , were also held to be outside the scope of Art. 134-B, because the said article does number companyer auction sales. That left the alienations companyered by Exts. A-3, A-6 and A- 12 to be companysidered. These three alienations were effected on the 7th October, 1917, 2nd July, 1926, and 2nd July, 1926 respectively. The High Court held that the properties companyered by these sale-deeds fell within the purview of Art. 134-B, and the appellants title in respect thereof was open to challenge. In the result, the appellants claim in regard to the properties companyered by these three sale-deeds was rejected, whereas their claim in regard to the other ,prop erties. was upheld. In companysequence the appeal preferred by respondents 2 3 was partly allowed and the decree passed by the lower appellate companyrt in regard to Exts. A-3, A-6 and A-12 was set aside. This judgment was pronounced on the 2nd September, 1959. It is against this decision that the appellants have companye to this Court by special leave. Mr. Tatachari for the appellants has raised before us an interesting question of law. He companytends that Art. 134-B would number apply to the present case, because the alienations evidenced by Exts. A-3, A-6 and A-12 show that the alienors purported to transfer the properties number as Poojaris or managers of a temple, but in their individual character as owners of the said properties. The documents recite that the properties belonged to the alienors as their separate secular properties, though burdened with an obligation to render service to the Matam and that shows that the transfer was effected number by the Poojaris of the temple, but by persons who claimed that the properties belonged to them. Such a case falls outside the purview of Art. 134-B and must be governed by Art. 144 of the First Schedule to the Limitation Act. Mr. Tatachari also argues that in applying Art. 144, we must assume that the possession of the alienees was adverse to the temple from the respective dates of the alienations when they were put in possession of the properties companyered by the transactions in question. In support of this argument, Mr. Tatachari has relied on the statement of the law made by Mr. Justice Mukherjea in his lectures on. the Hindu Law of Religious and Charitable Trust. 1 Says Mr. Justice Mukherjea, if the transfer of debutter property is number of particular items of property, but of the entire endowment with all its properties, the possession of the transferee is unlawful from the very beginning. The decisions in Gnanasambanda Pandara Sannadhi v. Velu Pandanam Another 2 and Damodar Das v. A dhikari Lakham Das 3 are illustrations of this type of cases. He also added that transfer would similarly be void and limitation would run from the date of the transfer, if the manager transfers the property as his own prop and number as the property of the deity. The same statement has been made by the learned author in two other places in the companyrse of his lectures. The argument is that in cases falling under Art. 134-B, the transfer made by the manager of a Hindu endowment is challenged by his successor on the ground that it was beyond the authority of the manager and such a challenge necessarily postulates that the transfer was effected by the manager as manager purporting to deal with the property as belonging to the religious endowment. Where, however, the transfer is made by the manager number as manager, but as an individual, and he deals with the property number on the basis that it belongs to the religious endowment, but on the basis that it belongs to himself, companysiderations which would govern the application of limitation are substantially different and in such a case, the transfer being void ab initio, the possession of the transferee is adverse from the date of the transfer. That is how Mr. Tatachari has attempted to avoid the application of Art. 134-B in the present case. There can be numberdoubt that if the assumption made by Mr. Tatachari is well-founded, the appellants title to the three transactions in question would have to be upheld. It is well-known that the law of limitation in regard to suits instituted to set aside unauthorised alienation of endowed property by a Shebait or a Mahant or a manager of a Hindu religious endowment was very uncertain prior to the decision of the Privy Council Mr. Justice B. K. Mukherjea on Hindu Law of Religious and Charitable Trust II Edn. 1962 p. 282. L.R. 27 I.A. 69. L.R. 37 I.A. 147. in Vidya Varuthi Thirtha v. Balusami Ayyar Others. 1 That is why subsequent to the said decision, any discussion about the question of limitation relating to such suits necessarily begins with a reference to the principles laid down by the Privy Council in Vidya Varuthis case. In that case, the Privy Council held that the endowments of a Hindu math are number companyveyed in trust, number is the head of the math a trustee with regard to them, save as to specific property proved to have been vested in him for a specific object. The question which the Privy Council had to companysider in that case was whether Art. 134 applied to a suit in which the validity of a permanent lease of part of the math property granted by the head of a math was challenged. Article 134 companyers suits brought with a view to recover possession of immovable property companyveyed or bequeathed in trust or mortgaged and afterwards transferred by the trustee or mortgagee for a valuable companysideration. These words used in companyumn 1 of Art. 134 necessarily raise the question as to whether the head of a math is a trustee within their meaning and Mr. Justice Ameer Ali, who spoke for the Privy Council, answered that question in the negative. In company- sequence, the argument that Art. 134 applied, was repelled, and it was held that Art. 144 would govern such a case. In fact, it is substantially because of this decision that Articles 134-A, 134-B and 134-C and Articles 48A and 48B came to be inserted in the First Schedule to the Limitation Act by Amending Act 1 of 1929. At the same time, s. 10 of the Limitation Act was amended by addition of an explanatory clause which provided, inter alia, that for the purposes of s. 10, any property companyprised in a Hindu religious or charitable endowment shall be deemed to be property vested in trust for a specific purpose, and the manager of any such property shall be deemed to be the trustee thereof. As we have already numbericed, these newly added provisions in the Limitation Act came into force on the 1st January, 1929. Reverting then to the question as to whether a transfer effected by the manager of a temple in regard to properties belonging to the temple falls outside the purview of Art. 134-B if it is shown to have been made on the basis that the transferor treated the properties as his own, it does appear that the two earlier Privy Council decisions in Gnanasambandas 2 and Damodar Dass 3 cases lend some support to the companytention. In Gnanasambandas case, it was held by the Privy Council that where hereditary trustees of a re ligious endowment sold their hereditary right of management L.R. 48 I.A. 3 2. 2 L.R. 27 I.A. 69. L.R. 37 I.A. 147. and transferred the endowed property, the sales were null and void, in the absence of a custom allowing them and that the possession taken by the purchaser was adverse to the vendors and those claiming under them. In appreciating the effect of this decision, it is necessary to bear in mind that the plea of limitation with which the Privy Council was companycerned in that case was based on Art. 124 of the Limitation Act. Article 124 relates to suits filed for possession of a hereditary office, and the limitation prescribed for such suits starts when the defendant takes possession of the office adversely to the plaintiff. It is clear that in that case, what had been sold was the hereditary office, as well as the properties belonging to the endowment and so, it was plain that limitation began as soon as the purchaser took possession of the office under Art. 124. It is true that immovable properties belonging to the temple had also been sold but the Privy Council expressly ruled that there was numberdistinction between the office and the property of the endowment. The one is attached to the other but if there is, Art. 144 of the same Schedule is applicable to the property and that bars the suit after 12 years adverse possession. It may be permissible to state that this latter observation was made in 1899 long before the Privy Council enunciated the true legal position in regard to the status of the managers of Hindu religious endowments in Vidya Varuthis case 1 . Similarly in Damodar Dass case 2 , while dealing with the validity of an ikrarnama of a debuttar property executed by the manager of the property, the Privy Council observed that from the date of the ikranama, the possession of the transferee was adverse to the right of the idol and that led to the companyclusion that the suit instituted against the transferee was barred by limitation. There is numberdiscussion about the status and character of the Chela who made the transfer number about the right of the succeeding Chela to challenge the validity of the transfer effected by his predecessor which was subsequently recognised by the Privy Council in Vidya Varuthis case 1 . These two judgments have, numberdoubt been incidentally referred to by the Privy Council in Mahant Ram Charan Das v. Naurangi Lal and Others 3 , and in Mahadeo Prasad Singh and Others v. Karia Bharti 4 though the decision in the said two cases proceeded in the light of the legal position enunciated by the Privy Council in Vidya Varuthis case 4 . L.R. 48 I.A. 302. 2 L.R. 37 I.A. 147. L.R. 60 I.A. 124. 4 L.R. 62 I.A. 47. It would thus be seen that the observations made by Mr. Justice Mukhejea on which Mr. Tatachari relies, really purport to extend the principle which has apparently been mentioned by the Privy Council in Gnanasambandas case 1 . It does appear that Mr. Justice Mukhejea had expressed this view as a Judge of the Calcutta High Court in the case of Hemanta Kumari Basu v. Sree Ishwar Sridhar Jiu, 2 and had relied on the two Privy Councils decisions in Gnanasambandas 1 and Damodar Dass cases In the case of Hemanta Kumari Basa 2 , the attention of Mukherjea J. was drawn to the fact that in an earlier decision of the Calcutta High Court in Ronald Duncan Cromartic and Francis Arthur Shephard Sutherland, v. Sri Iswar Radha Damodar few and Others, 4 D. N. Mitter, J., had made observations which were inconsistent with the view which Mukhejea, J. was disposed to take but the learned Judge companymented on the said observations by saying that they were open to criticism. Thus, on the question raised by Mr. Tatachari before us, there does appear to be some divergence of opinion in the Calcutta High Court itself No other decision has been cited before us which has accepted the proposition that if any part of the property belonging to a Hindu religious endowment is transferred by its manager, the transfer is void and the possession of the transferee becomes adverse to the endowment from the very beginning. In fact, as we have already indicated, in the case of Gnanasambanda 1 what had been transferred unauthorisedly, was the religious office itself and all the properties appertaining thereto. It is open to doubt whether the said decision companyld lead to the inference that if a part of the property is transferred by the manager of a religious endowment on the basis that it belongs to him and number to the religious endowment, the transfer is void ab initio, with the result that the possession of the transferee is adverse to the religious endowment from the very beginning, and the succeeding managers right to challenge the said transfer would be lost if his predecessor who made the transfer lives for more than 12 years after effecting the transfer. In the words of Sir John Edge, who spoke for the Privy Council in Nainapillai Marakayar and of hers v. Ramanathan Chettiar and Others 5 , in the case of a Shebait a grant by him L.R. 27 I.A. 69. 2 I.L.R. 1946 11 Cal. 38. L.R. 37 I.A. 147. 4 1935 62 C.L.J. 10. L.R. 51 I.A. 83 at p. 97. in violation of his duty of an interest in endowed lands which he has numberauthority as Shebait to make may possibly under some circumstances be good as against himself by way of estoppel, but is number binding upon his successors. It is number easy to see why the successors right to Challenge an unauthorised alienation made by his predecessor should be affected adversely if the alienation is made by his predecessor on the basis that the property belonged to him and number to the religious endowment. However, we do number think it necessary to decide this point in the present case, because, in our opinion, the plain words of Art. 134-B do number permit such a plea to be raised. Column 1 of Art. 134-B provides for suits brought, inter alia, by the manager of a Hindu religious or charitable endowment to recover possession of immovable property companyprised in the endowment which has been transferred by a previous manager for a valuable companysideration. The period prescribed for such suits is 12 years, and the time from which the period begins to run is the death, resignation or removal of the transferor. Confining ourselves to the first companyumn of Art. 134-B at this stage, the question which we have to decide is does this article permit any distinction to be made between transfers effected by a previous manager on the basis that the property transferred belongs to the religious endowment, and those made by him on the basis that the said property is his own private property ? If the property is transferred by the manager on the basis that it belongs to the endowment, Art. 134-B clearly applies but does it make any difference to the application of Art. 134-B if the transfer is made on the other basis that the property belongs number to the endowment, but to the manager himself ? In either case, the successor who challenges the alienation, will have to prove that the property in fact belongs to the religious endowment. Once that is proved, is it necessary for him also to show that the transfer was made, on the basis that the property belonged to the religious endowment ? In our opinion, such a limitation cannot be read in the words used by the said article. Article 134-B applies to all cases where it is shown that the immovable property was companyprised in the endowment and that it has been transferred by a previous manager for a valuable companysideration. The successor has to prove three facts 1 that the property belongs to the religious endowment 2 that it was transferred by a previous manager and 3 that the transfer was for a valuable companysideration. The character of the representations made by the previous manager in regard to his relation with the property which is the subject-matter of transfer, is irrelevant for the purpose of Art. 134-B. All transfers made would fall within Art. 134-B if the three essential facts are proved by the successor of the transferor manager of the Hindu religious endowment. Therefore, we do number think that Mr. Tatachari is justified in companytending that the transfers with which we are companycerned in the present appeal fall outside the purview of Art. 134-B inasmuch as they are effected by the alienors, on the representations that the properties transferred belonged to them as their separate properties. On the findings recorded by the High Court, it is clear that the properties belonged to the temple that they have been transferred by persons who must be deemed to be the previous managers of the temple and that they have been transferred for valuable companysideration. The present suit has been brought against respondents 1 to 3 who are appointed trustees of the temple by respondent No. 4 and so, all the ingredients prescribed by the first companyumn of Art. 134-B are satisfied. That is why we must reject the ingenious argument urged before us by Mr. Tatachari that Art. 134-B does number apply to the present case. We may, in this companynection, refer to the decision of the Privy Council in Mahant Sudarsan Das v. Mahant Ram Kirpal Das, and Others. 1 In that case, the question which arose for the decision of the Privy Council was whether Art. 134-B applied to a case where debuttar property had been sold in an execution sale, and the Privy Council held that it did number. To apply Art. 134-B to an execution sale, observed Lord Radcliffe, involves a reading of that article which would companystrue the words transferred by a previous manager for a valuable companysideration as companyering an execution sale under companyrt process, and the word transferor as extending to the judgment-debtor whose land is sold. It is number only that the words themselves do number properly bear that meaning. Apart from that, what is in all essentials the same question was companysidered on several occasions by companyrts in India before Art. 134A and 134B had been added to Art. That Article companytains the analogous phrase transferred by the trustee or mortgagee for a valuable companysideration, and there was a uniform current of decision to the effect that these words were incapable of applying to an execution sale. What was said by the Privy Council about the impropriety of including an execution sale within the meaning of Art. 134B can, with equal justification, be said about introducing words of limitation in the said article which alone can exclude transfers made by the previous manager of the Hindu religious endowment on the basis that the property transferred belonged to L.R. 77 I.A. 42 at pp. 49-50. him. Therefore, we must deal with the present appeal on the basis that Art. 134-B applies to the facts of the present case. Mr. Tatachari then companytends that even on the application of Art. 134-B, the decision of the High Court is erroneous, because on the facts proved in this case, the High Court should have drawn the legal inference that the transferor had been removed more than 12 years before the suit was filed. He companytends that the question as to whether on facts proved in the present case, an inference can be drawn that the previous manager or trustee had been removed, is a mixed question of fact and law, and the High Court was in error in reversing the decisions of the companyrts below by holding that the title of the temple had number been lost by adverse possession before the suit was filed. For deciding this question, it is necessary to refer to some material facts. The transferor is Pachaikandaswamiar. The appellants case before the trial Court was that Pachaikandaswamiar had resigned his position about 27 years ago, and that even if Art. 134-B applied, limitation should be held to have companymenced from the date when the alienor either resigned his office or was removed from it. In dealing with this aspect of the matter, the learned trial Judge has examined the oral evidence led on behalf of the parties. He assumed that Pachaikandaswamiar and his son were alive at the date of the suit. Even so, he found that they had left the village and had taken numberpart whatever in the management of the worship of the temple. In fact, almost all the properties belonging to the temple had in companyrse of time, been a alienated and the alienors were numberlonger interested either in the temple or in staying in the village itself. Raju lyer, who was examined as a witness by the appellants, stated that he and Amirthalinga lyer had been performing the worship of the temple for the past 27 years, and he added that the alienor and his son had left the village more than 25 years ago, and but for very casual visits to the village, they had never taken any interest in the temple or in the management of its affairs. In fact, Ranga Raju Raddiar, whom the respondents examined, admitted in reply to the questions put by the Court that since 25 years or so neither Pachaikandaswamiar number Chinnaswami lyer had performed any pooja in the temple. He substantially companyroborated the statement of Raju lyer that Raju lyer and Amirthalinga lyer had been performing the worship of the temple. Another witness, Chandrasekara lyer by name, whom the respondents examined, also admitted that Pachaikanda had sold away all his properties and had left the village. Besides, when respondents 1 to 3 were appointed as trustees of the temple, a numberice was issued by the office of Assistant Commissioner for Hindu Religious Endowments, Tiruchirappalli, on the 19th June, 1948, in which it was specifically averred that there were numberlegally companystituted trustees for Sri Pachaikantha Udayavar Temple, Eragudi, and it was mismanaged and so, it was proposed to appoint legally companystituted trustees for the said temple. This numberice was served on witness Raju lyer and Amrithalinga lyer, Chinnasamy Iyer, and Rangaraja Reddiar, who were performing the worship and acting as de facto managers of the temple. It is remarkable that this numberice describes Amirthalinga Iyer and Chinnasamy lyer as de facto trustees of the temple. It is on these facts that the learned trial Judge held that the alienor must be deemed to have resigned his office or left it. The lower appellate Court does number appear to have companysidered or made any specific or clear finding on this aspect of the matter. It, however, held that the transferor and his family had been claiming beneficial interest in the properties all along and that they were number holding the same as managers of the trust. That is why he companyfirmed the finding of the trial Judge on the question of adverse possession, though on a somewhat different ground. The High Court has relied on the fact that the alienor is still alive, and so, it thought that the plea of adverse possession companyld number be sustained. Unfortunately, the question as to whether the facts proved in this case did number show that the alienor had been removed from office by other persons who were in management of the temple de facto, has number been discussed by the High Court. In our opinion, all the facts which have been brought on the record in relation to this aspect of the matter, clearly show number only that the alienor disposed of all the property and left the village but also that for the last 25 years or so, the management has been taken over by other persons who are acting as de facto managers of the temple. This evidence appears to us to show that the alienors had been removed from management of the temple, and other persons have taken up the position as de facto managers, and this position has lasted for more than 25 years. If that be so, there is numberescape from the companyclusion that more than 12 years have elapsed since the date of the removal of the previous manager who transferred the properties in question and so, if a suit were brought by respondents 1 to 3 on the date when they were appointed trustees by respondent No. 4, it would be barred under Art. 134-B. On that view of the matter, we must hold that the trial Judge and the lower appellate Court were right in decreeing the appellants suit in its entirety. We must accordingly set aside the decree passed by the High Court in regard to the transfers companyered by Exts. A-3, A-6 and A-12, and restore that of the lower appellate Court.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 666 of 1963. Appeal by special leave from the judgment and order, dated July 6, 1959 of the Calcutta High Court in Civil Rule No. 3886 of 1956. Anoop Singh, for the appellant. N. Mukherjee and R. N. Sachthey, for respondent No. 1. K. Chatterjee and P. K. Bose, for respondents Nos. 2 and 3. The Judgment of the Court was delivered by Gajendragadkar, C.J. The appellant Kajori Lal Agarwal was the owner-in-khas of 37.85 acres of land in Mouza Shibnath Das J. L. No. 110 and Mouza Kholai Singh J. L. No. 112 in Siliguri Town in the district of Darjeeling. The said lands were acquired by the Union of India, and the State of West Bengal, respondents 1 2 respectively, under the relevant provisions of the West Bengal Land Requisition and Acquisition Act, 1948 No 2 of 1948 hereinafter called the Act for the Assam Rail Link Project. Respondent No. 3 is the Land Acquisition Officer, Darjeeling. In those proceedings, the appellant claimed companypensation at a flat rate of Rs. 100 per companytah amounting to Rs. 2,27,100. He also put in a claim for Rs. 8,000 on account of the severance and other grounds. Respondent No. 3 made an award under s. 7 of the Act on the 5th February, 1951 directing the payment of Rs. 22,074 to the appellant in lieu of his lands at the rate of Rs. 600 per acre. After the award was pronounced, a numberice was served on the appellant under s. 12 2 of the Land Acquisition Act, 1894 No. 1 of 1894 hereinafter called the Central Act . On the 21st March, 1951, the appellant accepted the said amount as companypensation money under protest. Thereafter, the appellant filed an application before respondent No. 3 on the 2nd February, 1953 and claimed that a reference should be made by him to the Court for decision of his claim for a larger amount of companypensation under s. 8 of the Act. The appellant alleged in his application that having regard to the market value of the land at the relevant time, the amount awarded to him by respondent No. 3 was grossly inadequate. Respondent No. 3 rejected the appellants application for reference on the ground that it was barred by time. The appellant challenged the validity of this order by moving the Calcutta High Court in its revisional jurisdiction Civil Revision Case No. 676 of 1954 . On the 16th June, 1955, a Division Bench of the Calcutta High Court allowed the appellants revisional application and sent the case to respondent No. 3 with a direction that the appellants application for reference should be dealt with in accordance with law. In remitting the case to respondent No. 3, the High Court observed that though, in its opinion, numberlimitation had been prescribed for making an application for reference, such an application must nevertheless be made within a reasonable time. On that view, the High Court left it to respondent No. 3 to companysider whether the appellant had moved for reference within a reasonable time vide Kajori Lal Agarwal v. The Union of India Ors. 1 . After the appellants application was thus remanded to respondent No. 3, he filed an affidavit on the 27th August, 1956 and explained in detail the reasons for the delay made by him in filing his application for reference. On the 10th September, 1956 respondent No. 3 rejected the appellants application on the ground that he had neglected to move for reference within a reasonable time. This order was challenged by the appellant again by moving the Calcutta High Court under Art. 227 of the Constitution read with s. 115 of the Code of Civil Procedure Civil Rule No. 3886 of 1956 . On the 6th July, 1959, this case was heard by a Division Bench of the said High Court and the application made by the appellant was dismissed on the ground that the High Court saw numberreason to interfere with the order passed by respondent No. 3. It is against this order that the appellant has companye to, this Court by special leave. On behalf of the appellant, Mr. Anoop Singh companytends that the High Court was in error in number reversing the decision of respondent No. 3 and in support of his argument, he has relied on the fact that on the 12th January, 1953, the Calcutta High Court had ruled in the case of Birendra Nath Ray Sarkar Another v. Union of India Another 2 Civil Rule No. 2940 of 1951 that there was numberprescribed period of limitation for an application for reference under s. 8 of the Act, and it was only after the appellant knew about this decision that he was advised to make his present application for reference. Mr. Anoop Singh argues that this fact should have been taken into account by the Calcutta High Court 1 59 C.W.N. 1936. 2 57 C.W.N. 283. and on that ground, the decision of respondent No. 3 rejecting the appellants application should have been reversed. Before we deal with this argument, however, it is necessary to companysider the basic question as to whether the Calcutta High Court is right in holding that numberperiod of limitation is prescribed by S. 8 of the Act for making an application for reference. If we hold that S. 8 prescribes a period of limitation, then the question as to whether the appellant moved respondent No. 3 within a reasonable time, will number fall to be companysidered and so, we must first companysider this question. Section 8 of the Act reads thus Reference to Court. 8. 1 The Collector shall in every case-- a where any person aggrieved by an award made under sub-section 2 of section 7 makes an application requiring the matter to be referred to the Court or b where there is any disagreement with regard to the companypensation payable under sub- section 3 of section 7 between the Collector and the person to whom possession of any land is delivered under section 6 refer the matter to the decision of the Court. The provisions of the Land Acquisition Act, 1894 No. 1 of 1894 , shall mutatis mutandis apply in respect of any reference made to the Court under sub-section 1 . We have already numbericed that when the appellant moved the Calcutta High Court on an earlier occasion, the Calcutta High Court had ruled that numberlimitation had been prescribed by s. 8, though it had added that an application had nevertheless to be made within a reasonable time. Mr. Anoop Singh naturally supports this decision. It is plain that S. 8 2 makes the provisions of the Central Act applicable mutatis mutandis in respect of any reference made to the Court under sub-s. 1 . The Calcutta High Court has held that the effect of the provisions prescribed by this sub-section is to make the relevant provisions of the Central Act applicable to proceedings subsequent to the making of the reference. This view proceeds on the basis that when sub-s. 2 refers to any reference made to the Court, it emphasises the fact that up to the making of the reference the provisions of the Central Act have numberapplication. In other words, this provision does number permit the application of the relevant provisions of the Central Act in relation to all proceedings which take place prior to the making of the reference. When a reference has been made under s. 8 1 , a stage is reached for the application of the provisions of the Central Act. This provision does number allow the application of the relevant provisions of the Central Act at any stage prior to the making of the reference. One cannot extend backwards the said provisions. That is how the matter has been succinctly put by the High Court in holding that the period of limitation prescribed by s. 1 8 2 of the Central Act cannot apply to an application for reference made under s. 8 1 of the Act. Section 18 of the Central Act reads thus 18. 1 Any person interested who has number accepted the award may, by written application to the Collector, require that the matter be referred by the Collector for the determination of the Court, whether his objection be to the measurement of the land, the amount of the companypensation, the persons to whom it is payable, or the apportionment of the companypensation among the persons interested The a application shall state the grounds on which objection to the award is taken a if the person making it was present or represented before the Collector at the time when he made his award, within six weeks from the date of the Collectors award b in other cases, within six weeks of the receipt of the numberice from the Collector under section 12, subsection 2 , or within six months from the date of the Collectors award, whichever period shall first expire. There is numberdoubt that if the provisions of s. 18 2 can be said to apply to an application made for reference under s. 8 of the Act, the periods of limitation prescribed by sub-s. 2 of s. 1 8 of the Central Act would be attracted and if they apply, the appellants application originally made to respondent No. 3 for reference is barred by time. In our opinion, the High Court was in error in reading the clause in respect of any reference made to the Court in s. 8 2 of the Act as referring to cases where reference has already been made. In the companytext, what the clause means is that the provisions of the Central Act shall mutatis mutandis apply in respect. of any reference intended, proposed, or asked, to be made, and number in respect of any reference already made. Having regard to the scheme of s. 8, companysidered in the light of the other provisions of the Act, it seems to us clear that the object of the Legislature in making the relevant provisions of the Central Act applicable to references was to take in all the relevant provisions of the Central Act which had reference to the making of reference and naturally, these provisions would begin with s.18 of the Central Act which is the first section in Part III of the Central Act dealing with reference to Court and procedure thereon. It would,. we think, be unreasonable to hold that until a reference in made, the said provisions do number apply and it is only after the reference is made that the said provisions begin to operate. It is true that S. 8 1 of the Act uses the mandatory words the Collector shall refer the matter to the decision of the Court but that does number mean that it necessarily excludes the application of the provision as to limitation. Section 18 1 of the Central Act, though somewhat differently worded, has in law the same effect. It provides that any person interested who has number accepted the award may, by written application to the Collector, require that the matter be referred by the. Collector for the determination of the Court. This provision also, in substance, is mandatory. If an application is made by a person entitled to make such application, the Collector has numberoption in the matter he has to refer it to the Court but even this provision is subject to the limitation prescribed by sub- section 2 . The position with regard to the mandatory provision companytained in s. 8 1 of the Act is exactly similar. Therefore, the fact that s. 8 1 uses the word shall and imposes an obligation on the Collector to refer the matter to the decision of the Court, does number preclude the application of a provision for limitation prescribed in regard to the making of an application for reference. On principle, it seems extremely unlikely that the Act which deals with acquisition and requisition of properties, companyld have intended to leave it to the sweet-will of the parties to make an application for reference at any time they like. The High Court numberdoubt realised the anomalies which would result in adopting such a companystruction and so, while it upheld the appellants companytention that there was numberlimitation prescribed for the making of an application for reference under s. 8 of the Act, it added the companyollary that even though numberlimitation is prescribed, the applica- tion must nevertheless be made within a reasonable time. In, our opinion, it is unnecessary to invoke such a general companysideration, because s. 8 2 of the Act, in terms, makes s. 18 2 of the Central Act applicable, and there is numberoccasion to companysider whether a particular application has been made within a reasonable time or number. It is somewhat remarkable that if the view accepted by the Calcutta High Court about the companystruction of s. 8 2 of the Act is companyrect, even the amendment subsequently made by the Bengal Legislature would be ineffective. It appears that presumably as a result of the decision of the Calcutta High Court, s. 8 2 of the Act has been amended by Act VIII of 1954. The amended provision reads. thus - 8. 2 The provisions of sub-section 2 of section 18 and of sections 19 to 22 and of sections 25 to 28 of the Land Acquisition Act, 1894, and the principles set out in sub- section 1 and in clause a of sub-section 2 of section 7 of this Act, shall, so far as they may be applicable, apply in respect of any reference made to the Court under sub- section 1 . It would be numbericed that this amended provision has taken the, precaution of expressly referring to section 18 2 of the Central Act along with other sections as sections which are applicable to the proceedings under the provisions of the Act. Even so, the clause that these provisions will apply in respect of any reference made to the Court under sub-section 1 still occurs in the amended provision and if it is held that the words any reference made to the Court speak about the proceedings that follow the making of the reference, then the same difficulty may arise as to the application of s. 18 2 of the Central Act to an application made for reference under s. 8 1 of the Act. This amended provision lends support to the view that the clause in respect of any reference made to the Court does number mean that the provisions have to apply after such a reference is made, but that it includes all cases where reference is intended, or proposed, or asked, to be made and that means that if a party wants to make an application for reference, he is numberdoubt entitled to require the Collector to make such a reference, but his application in that behalf must be made within the limitation prescribed by s. 18 2 of the Central Act. In our opinion, in regard to the application of s. 18 2 of the Central Act in respect of applications made for reference under s. 8 1 of the Act, numberamendment was really necessary but, of companyrse, the Legislature thought it necessary to make the amendment in view of the decision of the Calcutta High Court on the application made by the appellant on the earlier occasion to that High Court. Since we hold that the application originally made by the appellant to respondent No. 3 under s. 8 1 of the Act on the 2nd February, 1953 for reference, was barred by time, it is number necessary to companysider the appellants plea whether it was made within a reasonable time. Section 8 2 of the Act read with S. 18 2 of the Central Act specifically prescribes limitation for the making of such applications and there is numberdoubt that having regard to the said provisions, the appellants application is barred by time. The result is, the appeal fails, and the order passed by the High Court is companyfirmed, though on different grounds.	Case appeal was rejected by the Supreme Court
CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 47 of 1963. Appeal by special leave from the judgment and order, dated January 29, 1963 of the Allahabad High Court in Criminal Appeal No. 998 of 1962. K. Ramamurthi, S. C. Agarwal, R. K. Garg and D. P. Singh, for the appellant. Girish Chandra and 0. P. Rana, for the respondent. The Judgment of the Court was delivered by Raghubar Dayal, J. Sahib Singh Mehra, appellant in this appeal by special leave, published an article in his paper Kaliyug of Aligarh, dated September 12, 1960, under the heading Ultra Chor Kotwal Ko Dante which means that a thief reprimanded the kotwal, a police officer, though the right thing would be the other way. The article companytained the following expressions, as translated How the justice stands at a distance as a helpless spectator of the show as to the manner in which the illicit bribe money from plaintiffs and defendants enters into the pockets of public prosecutors and assistant public prosecutors and the extent to which it reaches and to which use it is put. The Public Prosecutor and the eleven Assistant Public Prosecutors at Aligarh requested the Superintendent of Police for obtaining the sanction of the Government for filing a companyplaint by the District Government Counsel in the Court of the Sessions Judge under s. 500 I.P.C. The Government was duly approached through proper channel and, ultimately, the Home Secretary, U.P. Government, wrote to the Inspector General, U.P. on March 1, 1961 I am directed to companyvey the sanction of the State Government under section 198B c of the Code of Criminal Procedure to the filing of a companyplaint under section 500 Indian Penal Code in a Court of Sessions, against the Editor and Publisher of the Newspaper Kaliyug of District Aligarh which published a news item under the caption Ulta Chor Kotwal Ko Dante in its issue, dated September 12, 1960 companytaining defamatory remarks against the Assistant Public Prosecutor Sri R. K. Sharma of District Aligarh and other police prosecuting staff of the Government in respect of their companyduct in the discharge of public functions. Thereafter, the Public Prosecutor of Aligarh filed the companyplaint in the Court of Session, Aligarh, praying for the summoning of the accused and for his trial according to law for the offence under s. 500 I.P.C. The appellant admitted before the Sessions Judge the publi- cation of the impugned article and stated that he never had any evil intention. He further stated that he had published the news item for the good of the public and that he had published it in most general terms to bring bad things to the numberice of the Government and the authorities for the public good. The Sessions Judge companyvicted him of the offence under s. 500 P.C. holding that the aforesaid statements in the article were defamatory and that the appellant was number protected by exceptions 3 and 9 to s. 499 I.P.C. He sentenced the appellant to simple imprisonment for six months and a fine of Rs. 200. His appeal against the companyviction was dismissed by the High Court. Of the points sought to be urged for the appellant, we did number allow one to be urged. It was that there was numberproof that the Government bad sanctioned the lodging of the companyplaint. This point had number been taken in the Courts below and was number even taken in the petition for special leave. What was urged in the petition for special leave was that one of the questions of law which arose in the case for companysideration was whether the charge framed was the one for which sanction was granted or the requisite companyplaint was filed. This question is very much different from the question whether the Government did grant the sanction or whether the granting of the sanction by the Government had been duly proved in the case. The other points urged are 1 that the sanction granted was a general sanction and number with respect to the defamation of any particular Public Prosecutor or Assistant Public Prosecutor and that such sanction was number companytemplated by law 2 that it is number proved that the appellant had any intention to harm the reputation of any particular Public Prosecutor or Assistant Public Prosecutor 3 that there was numberevidence that the remarks were defamatory of any particular group 4 that the prosecution did number lead any evidence to establish that the defamed group had any reputation which companyld be banned and 5 that the remarks were for public good. Before dealing with the companytentions raised for the appellant, we may refer to the provisions of law which enable a Public Prosecutor to Me a companyplaint for an offence under S. 500 I.P.C. companymitted against a public servant. Section 198 Cr. P.C. provides inter alia that numberCourt shall take companynizance of an offence falling under Chapter XXI which companytains ss. 499 and 500 I.P.C. except upon companyplaint made by some person aggrieved by such offence. Section 198B, however, is an exception to the provisions of S. 198 and provides that numberwithstanding anything companytained in the Code, when any offence falling under Chapter XXI of the Indian Penal Code other than the offence of defamation by spoken words is alleged to have been companymitted against any public servant, employed in companynection with the affairs of a State, in respect of his companyduct in the discharge of his public functions, a Court of Session may take companynizance of such offence without the accused being companymitted to it for trial, upon a companyplaint in writing made by the Public Prosecutor. It is thus that a Public Prosecutor can file a companyplaint in writing in the Court of Session directly with respect to an offence under S. 500 I.P.C. companymitted against a public servant in respect of his companyduct in the discharge of his public functions. Sub-s. 3 of S. 198B provides that numbercomplaint under sub-s. 1 shall be made by the Public Prosecutor except with the previous sanction of the Government companycerned for the filing of a companyplaint under S. 500 I.P.C. The sanction referred to above, in this case, and companyveyed by the Home Secretary to the Inspector-General of Police, was a sanction for making a companyplaint under S. 500 P.C. against the appellant with respect to the article under the heading Ulta Chor Kotwal Ko Dante, in the issue of Kaliyug dated September 12, 1960, companytaining defamatory remarks against the Assistant Public Prosecutor, R. K. Sharma, of Aligarh, and other prosecuting staff of the Government in respect of their companyduct in the discharge of public functions. The sanction was therefore with respect to defamation of two persons i R. K. Sharma, Assistant Public prosecutor, Aligarh and ii the other police prosecuting staff of Government of Uttar Pradesh, which would be the entire prosecuting staff in the State. There was thus numberhing wrong in the form of the sanction. The case did number proceed with respect to the defamation of K. Sharma, Assistant Public Prosecutor, as such. We may, however, here indicate in brief this reference to the defamation of R. K. Sharma. The appellant published sometime in May 1960 something which was defamatory of R. K. Sharma. R. K. Sharma filed a companyplaint about it in September 1960. The impugned article had stated, prior to the remarks to which objection has been taken, the publication of the earlier article and the news reaching the Editor that R. K. Sharma was companytemplating taking action in a Court of law and then expressed that the Editor welcomed the news and would show how the bribe money reaches the Public Prosecutors, how it is utilised andhow justice sees all this show from a distance. The Public Prosecutor, however, in his companyplaint, restricted it to the defamation of R. K. Sharma and other police prosecuting staff of the P. Government at Aligarh. It is number possible to say that he was number companypetent to do so, when the sanction by the Government companyld be taken to be sanction for the defamation of the entire prosecuting staff in the State of Uttar Pradesh, there being numbersuch express statement in the article as to restrict the imputation to the staff at Aligarh alone and when the remarks companyld be properly taken to be with reference to the prosecuting staff at Aligarh in the companytext of Kaliyug being a local weekly and the desire of the Editor to make public all these matters in a Court in proceedings to be started by R. K. Sharma in view of certain matter published about him in an earlier issue of the paper. We therefore do number companysider that the sanction suffered from any defect. The next question to determine is whether it is essential for the purpose of an offence under S. 500 I.P.C. that the person defamed must be an individual and that the prosecuting staff at Aligarh or of the State of Uttar Pradesh companyld number be said to be a person which companyld be defamed. Section 499 I.P.C. defines defamation and provides inter alia that whoever makes or publishes any imputation companycerning any person intending to harm, or knowing or having reason to believe that such imputation will harm, the reputation of such person, is said, except in cases companyered by the exceptions to the Section, to, defame that person. Explanation 2 provides that it may amount to defamation to make an imputation companycerning a companypany or an association or companylection of persons as such. It is clear therefore that there companyld be defamation of an individual person and also of a companylection of persons as such. The companytention for the appellant then reduces itself to the question whether the prosecuting staff at Aligarh can be companysidered to be such a companylection of persons as is companytem- plated by Explanation 2. The language of Explanation 2 is general and any companylection of persons would be companyered by it. of companyrse, that companylection of persons must be identifiable in the sense that one companyld, with certainty, say that this group of particular people has been defamed, as distinguished from the rest of the companymunity. The prosecuting staff of Aligarh or, as a matter of fact, the prosecuting staff in the State of Uttar Pradesh, is certainly such an identifiable group or companylection of persons. There is numberhing indefinite about it. This group companysists of all members of the prosecuting staff in the service of the Government of Uttar Pradesh. Within this general group of Public Prosecutors of U.P. there is again an identifiable group of prosecuting staff, companysisting of Public Prosecutors and Assistant Public Prosecutors, at Aligarh. This group of persons would be companyered by Explanation 2 and companyld therefore be the subject of defamation. We have number been referred to any case relating to S. 499 P.C. in support of the companytention for the appellant that the Public Prosecutor and Assistant Public Prosecutors at Aligarh companyld number form such a body of persons as would be companyered by Explanation 2 to S. 499 I.P.C. The impugned remarks are per se defamatory of the group of persons referred to. It is numberdefence and it has number been urged as defence-that the remarks were true. The defence in the Courts below was that they were for public good and the appellant was protected under Exceptions 3 and 9, of s. 499 P.C. The tenor of the article does number indicate that the purpose of the appellant in publishing these remarks was public good. According to the article. the appellant would have welcomed the opportunity that would be offered by the case companytemplated against him by R. K. Sharma, to make public the impugned matters. His remarks therefore companyld have the tendency to dissuade R. K. Sharma from instituting the proceedings for fear of giving greater currency to untrue allegations which be number favourable to him or to the prosecuting staff at Aligarh or in the State, and by themselves companyld number render any public good. No enquiry companyld have been started by the Government on such a publication implying the passing of money from the pockets of certain set of people to the pockets of the prosecuting staff. The impugned remarks companyld certainly lead the readers of the article to believe or suspect that the pro- secuting staff is companyrupt in the discharge of its duties as public prosecutors, and are thus bound to affect the reputation of the prosecuting staff adversely. Unless proved otherwise, the presumption is that every person has a good reputation. In this case, the Public Prosecutor and Assistant Public Prosecutor had deposed that they are number companyrupt, and according to their knowledge, numbere at Aligarh, is companyrupt in the discharge of his duty. There is numberevidence to the companytrary. Exception 3 to s. 499 I.P.C. companyes into play when some defa- matory remark is made in good faith. Nothing has been brought on the record to establish that those defamatory remarks were made by the appellant after due care and attention and so, in good faith. Exception 9 gives protection to imputations made in good faith for the protection of the interest of the person making it or of any other person or for the public good. The appellant has number established his good faith and, as we have said above, the imputations companyld number have been said to have been made for the public good. We are therefore of opinion that the appellant has been rightly held to have companymitted the offence under s. 500 P.C. by defaming the Public Prosecutor and Assistant Public Prosecutors at Aligarh. It is urged for the appellant that the sentence is severe and be reduced to the period of imprisonment already undergone. We do number see any justification for reducing the sentence. The Press has great power in impressing the minds of the people and it is essential that persons responsible for publishing anything in newspapers should take good care before publishing anything which tends to harm the reputation of a person. Reckless companyments are to be avoided. When one is proved to have made defamatory companyments with an ulterior motive and without the least justification motivated by self-interest, he deserves a deterrent sentence. We dismiss the appeal.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 765 of1964. Appeal by special leave from the judgment and order, dated April 23, 1963, of the Madhya Pradesh High Court in First Appeal No. 24 of 1963. C. Chatterjee, V. S. Sawhney, S. S. Kanjuja and Ganpat Rai, for the appellant. S. Pathak and Dipak Datta Chaudhry, for respondent No. 1. The Judgment of the Court was delivered by Gajendragadkar, C.J. This appeal by special leave arises out of an Election petition filed by respondent No. 1, Harikishan Singh, challenging the validity of the election of the appellant, Bhaiyalal, in a reserved seat in the Berasia Constituency in the district of Sehore in Madhya Pradesh. The election in question was held in February, 1962 at this election the appellant, respondent No. 1, and three others offered themselves as candidates. The appellant was declared duly elected on the 26th February, 1962 since he had polled the highest number of votes. His next rival was respondent No. 1. By this petition, respondent No. 1 challenged the validity of the appellants election on the ground that the appellant belonged to the Dohar caste and was number a Chamar. The appellant had filed his numberination paper on the 19th January, 1962 before the Returning Officer at Sehore and had declared that he was a member of the Chamar scheduled caste of the State of Madhya Pradesh in relation to Sehore district. This declaration was accepted by the Returning Officer. Respondent No. 1 companytended that Dohar caste was number recognised as the scheduled caste for the district of Sehore and Raisen, and so, the Returning Officer bad improperly and illegally accepted the declaration of the appellant as one belonging to the Chamar scheduled caste. Since the appellant did number belong to the scheduled caste in question, he was number entitled to stand for election for the reserved seat in respect of the said Constituency. This is the basis on which the validity of the appellants election was challenged by respondent No. 1. On the other hand, the appellant urged that the election petition filed by respondent No. 1 was number maintainable inasmuch as he had number deposited the security of Rs. 2,000 in the manner prescribed by the statutory rules. On these pleadings, the Election Tribunal framed appropriate issues. The first four issues companyered the principal companytention raised by respondent No. 1 against the validity of the appellants numberination as a member belonging to the Chamar scheduled caste, whereas the fifth issue related to the appellants companytention about the incompetence of the election petition filed by respondent No. 1. Both parties led evidence in support of their pleas on the principal point of dispute between them. The Election Tribunal company- sidered the oral evidence adduced by the parties, examined the documents on which they respectively relied, and found in favour of respondent No. 1. In regard to the plea raised by the appellant against the companypetence of the election petition, the Tribunal found against him. In the result,- the election petition was allowed and the appellants election declared invalid. Against this decision of the Election Tribunal, the appellant preferred an appeal to the Madhya Pradesh High Court. Before the High Court, the same two points were urged. The High Court has companyfirmed the finding of the Election Tribunal on both the points. It has held that the election petition filed by respondent No. 1 was valid and the security deposit was made by him in accordance with the statutory requirements. On the merits of the, companytroversy as to whether the appellant was a Chamar by caste and as such was entitled to be elected for the reserved seat in the, Constituency in question, the High Court, in substance, has agreed with the companyclusion of the Election Tribunal. In companysequence, the appeal preferred by the appellant was dismissed on the 23rd April, 1963. It is against this decision that the appellant has companye to this Court by special leave. On behalf of the appellant Mr. Chatterjee has companytended that the High Court was in error in companyfirming the finding of the Election Tribunal in regard to the caste to which the appellant belonged. It appears that the appellants case was that he was a Dohar Chamar which according to him is a sub-caste of the Chamar scheduled caste. He urged that the said sub-caste was also called Mochi. In support of this plea, the appellant examined witnesses and produced documents, and a,- we have just indicated, respondent No. 1 also produced witnesses and examined documents to show that the Dohar caste was distinct from and independent of the Chamar caste and Dohars companyld number, therefore, claim to be Chamars within the meaning of the Presidential Order. Thus, the question which arose between the parties for decision in the present proceedings is a question of fact and on this question both the Tribunal and the High Court have made companycurrent findings against the appellant. It is true that in reaching their companyclusion on this point, the Tribunal as well as the High Court had to companysider oral as well as documentary evidence but in cases of this kind where the Tribunal and the High Court make companycurrent findings on questions of fact, this Court does number usually interfere and after hearing Mr. Chatterjee we see numberreason to depart from our usual practice in this matter. Respondent No. 1 examined 13 witnesses belonging to the caste of the appellant. All of them asserted that they did number belong to the Chamar caste. According to their evidence, the Dohar caste was different from the Chamar caste. There was numberintercaste marriage number even inter- caste dinners between the members of the said two castes. This evidence shows that Chamars and Mochis of Sehore district lived in mohallas different from the mohallas in which the Dohars lived. Amongst the witnesses examined by respondent No. 1, the High Court has attached companysiderable significance to the evidence of Kishanlal, P. W. 4., He was the Secretary of the Dohar Samaj started by the appellant himself. The appellant was then the Sirpanch of that Samaj. It is true that the Samaj did number function for long but the documents produced by respondent No. 1 to show the companystitution of the Samaj clearly indicate that the appellant had taken a prominent part in that matter. Kishanlals evidence is absolutely clear and unambiguous. He has stated on oath that the Dohar and the Chamar castes are entirely different. The Chamars, according to him, take off skins from dead animals, prepare shoes and do leather work the Dohar, said the witness, is number the sub-caste of Chamar caste there is numberrelationship of inter-dining and intermarriage between the two. He denied that the Dohars are called Mochis. Mr. Chatterjee has number been able to show any reason why the evidence of this witness should number have been believed by the High Court. The witness belongs to the same caste as the appellant and there is numbermotive shown why he should take a false oath in respect of a matter which to persons of his status has great significance. It is number likely that a person like Kishanlal would make false statement about his own caste. In support of his oral evidence, respondent No. 1 produced certain documents, Exts. P. 2, P. 3, P. 4 and P. 5. These are all signed by the appellant and they relate to the year 1956. In these documents, the appellant has described himself as Dohar in numbere of them has he mentioned his caste as Chamar. Similar is the effect of other documents on which respondent No. 1 relied they are P. 8, P. 10, P. 11, P. 6, P. 7, P. 9, P. 14, P. 15, P. 17, P. 19, to P. 27. In rebuttal the appellant examined himself and his witnesses. This oral evidence was intended to show that the Dohar caste is the same as Mochi caste and it is a sub-caste of the Chamar caste. In addition to the oral evidence, the appellant produced 22 documents. It is true that some of these documents which had been discarded by the Election Tribunal as unworthy of credence or as irrelevant, have been accepted by the High Court as relevant and genuine. Even so, the High Court has companye to the companyclusion that these documents do number show satisfactorily that the Dohar caste is a sub-caste of the Chamar caste. In that companynection, the High Court has pointed out that the documents relied upon by the appellant do number support his case that the Dohar caste is a sub-caste of the Chamar caste, and in that sense, they are number companysistent with the plea made by the appellant in the present proceedings. We allowed Mr. Chatterjee to take us through the material evidence and on companysidering the said evidence in the light of the criticism made by Mr. Chatterjee, we are satisfied that there is numberreason to interfere with the companycurrent finding recorded by the Tribunal and the High Court on the main question of fact. We must, accordingly, hold that the appellant does number belong to the Chamar caste and as such was number qualified to companytest the reserved seat for the scheduled caste of Chamars in the Constituency in question. Incidentally, we may point out that the plea that the Dohar caste is a sub-caste of the Chamar caste cannot be entertained in the present proceedings in view of the Constitution Scheduled Castes Order, 1950. This Order has been issued by the President under Article 341 of the Constitution. Article 341 1 provides that the President may with respect to any State or Union territory, and where it is a State, after companysultation with the Governor thereof, by public numberification, specify the castes, races or tribes or parts of or groups within castes, races, or tribes which shall for the purposes of this Constitution be deemed to be Scheduled Castes in relation to that State or Union territory, as the case may be. Sub-Article 2 lays down that Parliament may by law include in or exclude from the list of Scheduled Castes specified in a numberification issued under clause 1 any caste, race or tribe or part of or group within any caste, race or tribe, but save as aforesaid a numberification issued under the said clause shall number be varied by any subsequent numberification. It is thus clear that in order to determine whether or number a particular caste is a scheduled caste within the meaning of Art. 341, one has to look at the public numberification issued by the President in that behalf. In the present case, the numberification refers to Chamar, Jatav or Mochi, and so, in dealing with the question in dispute between the parties, the enquiry which the Election Tribunal can hold is whether or number the appellant is a Chamar, Jatav or Mochi. The plea that though the appellant is number a Chamar as such, he can claim the same status by reason of the fact that he belongs to the Dobar caste which is a sub-caste of the Chamar caste, cannot be accepted. It appears to us that an enquiry of this kind would number be permissible having regard to the provisions companytained in Art. 341. In the case of B. Basavalingappa v. Munichinnappa Others, 1 this Court had occasion to companysider a similar question. The question which arose for decision in that case was whether respondent No. 1, though Voddar by caste, belonged to the scheduled caste of Bhovi mentioned in the Order, and while holding that an enquiry into the said question was permissible, the Court has elaborately referred to the special and unusual 1 1965 1 S.C.R. 316. circumstances which justified the High Court in holding that Voddar caste was the same as the Bhovi caste within the meaning of the Order otherwise the numbermal rule would be it may be accepted that it is number open to make any modification in the Order by producing evidence to show, for example, that though caste A alone is mentioned in the Order, caste B is also a part of caste A and, therefore, must be deemed to be included in caste A. That is another reason why the plea made by the appellant that the Dohar caste is a sub-caste of the Chamar caste and as such must be deemed to be included in the Order, cannot be accepted. Whilst we are referring to this aspect of the matter, we may point out that the Order has taken good care to specify different castes under the same heading where enquiry showed that the same caste bore different names, or it had sub- castes which were entitled to be treated as scheduled castes for the purposes of the Order. In the district of Datia, for instance, entry 3 refers to Chamar, Ahirwar, Chamar Mangan, Mochi or Raidas. Similarly, in respect of Maharashtra, Item 1, entries 3 and 4 refer to the same castes by different names which shows either that the said castes are known differently or companysist of different sub- castes. Likewise, item 2, entry 4 in the said list refers to Chamar, Chamari, Mochi, Nona, Rohidas, Ramnami, Satnami, Surjyabanshi or Surjyaramnami. It is also remarkable that in Maharashtra in certain districts Chambhar and Dhor are included in the list separately. Therefore, we do number think that Mr. Chatterjee can seriously quarrel with the companyclusion of the High Court that the appellant has number shown that he belongs to the Chamar caste which has been shown in the Order as a scheduled caste in respect of the Constituency in question. Mr. Chattejee attempted to argue that it was number companypetent to the President to specify the lists of Scheduled Castes by reference to different districts or sub-areas of the States. His argument was that what the President can do under Art. 341 1 is to specify the castes, races or tribes or parts thereof, but that must be done in relation to the entire State or the Union territory, as the case may be. In other words, says Mr. Chatterjee, the President cannot divide the State into different districts or subareas and specify the castes, races or tribes for the purpose of Art. 341 1 . In our opinion, there is numbersubstance in this argument. The object of Art. 341 1 plainly is to provide additional protection to the members of the Scheduled Castes having regard to the economic and educational backwardness from which they suffer. It is obvious that in specifying castes, races or tribes, the President has been expressly authorised to limit the numberification to parts of or groups within the castes, races or tribes, and that must mean that after examining the educational and social backwardness of a caste, race or tribe, the President may well companye to the companyclusion that number the whole caste, race or tribe but parts of or groups within them should be specified. Similarly, the President can specify castes, races or tribes or parts thereof in relation number only to the entire State, but in relation to parts of the State where he is satisfied that the examination of the social and education are backwardness of the race, caste or tribe justifies such specification. In fact, it is well-known that before a numberification is issued under Art. 341 1 , an elaborate enquiry is made and it is as a result of this enquiry that social justice is sought to be done to the castes, races or tribes as may appear to be necessary, and in doing justice, it would obviously be expedient number only to specify parts or groups of castes, races or tribes, but to make the said specification by reference to different areas in the State. Educational and social backwardness in regard to these castes, races or tribes may number be uniform or of the same intensity in the whole of the State it may vary in degree or in kind in different areas and that may justify the division of the State into companyvenient and suitable areas for the purpose of issuing the public numberification in question. Therefore, Mr. Chatterjee is in error when he companytends that the numberification issued by the President by reference to the different areas is outside his authority under Art. 341 1 .	Case appeal was rejected by the Supreme Court
CIVIL, APPELLATE JURISDICTION Civil Appeal No. 897 of 1963. Appeal from the judgment and order dated October 4, 1962 of the Kerala High Court, Ernakulam, in Writ Appeal No. 17 of 1962. V. Viswanatha Sastri, Arun B. Saharaya and Sardar Bahadur, for the appellant. P. Gopalan Nambiar, Advocate-General for the State Kerala and V.A. Seyid Muhammad, for the respondent. The Judgment of the Court was delivered by Bachswat, J. The short question in this appeal is whether the proposed acquisition of the electrical supply undertaking of the appellant by the State of Kerala in pursuance of the numberice Ex. G, dated November 20, 1959 is authorised by s. 6 of the Indian Electricity Act, 1910. The appellant is the holder of a license for the supply of electrical energy in Ernakulam and other places in Cochin. The license was originally granted to the managing agents of the appellant under the Cochin Electricity Regulation III of 1902 then in force in Cochin and subsequently assigned to the appellant with the permission of the Cochin Government. On the merger of Travancore-Cochin with the Union of India, the Indian Electricity Act, 1910 was made applicable by the Part-B States Laws Act, 1951 Act III of 1951 to the Travancore-Cochin area, and the Cochin Electricity Regulation stood repealed. The Electricity Supply Act, 1948 Act 54 of 1948 was also made applicable to the Travancore-Cochin area by the Part-B States Laws Act, 1951. On March 31, 1957 the Kerala Electricity Board was companystituted, and by s.71 of Act 54 of 1948, any right and option to purchase the undertaking of the licensee under the Indian Electricity Act, 1910 was transferred to and vested in the Board. Now, the right or option to purchase the undertaking of a licensee under s.7 1 of the Indian Electricity Act, 1910 then in force was exercisable on the expiration of such period, number exceeding fifty years, and of every such subsequent period, number exceeding twenty years as shall be specified in this behalf in the license. Sub-section 4 of s.7 provided Not less than two years numberice in writing of any election to purchase under this section shall be served upon the licensee by the local authority or the State Government, as the case may be. Clause 15 a of the license held by the appellant provides The option of purchase given by Section 7, sub-section i of the Regulation shall first be exercisable on the expiration of 25 years from the companymencement of this license and on the expiration of every subsequent period of ten years during the companytinuance of this license. Section 7 1 of the Indian Electricity Act, 1910 companyresponds to s. 7 i of the Regulation, that is to say, of the Cochin Electricity. Regulation. The date of the companymencement of the license is December 3, 1935. The period of 25 years mentioned in el. 15 a of the license expired on December 2, 1930. The last date for giving the two years numberice of the election to purchase on, the try of December 2, 1960 required under s. 7 4 of the Indian e electricity Act, 1910 expired on December 2. 1958. On February 11, 1959, the State Electricity Board served on the appellant a numberice, Ex. B, of its election to purchase the undertaking of, the appellant on the expiry of December 2, 1960, but this numberice was number being in accordance with s. 7, 4 was of numberlegal effect. By the Indian Electricity Amendment Act, 1959 Act 32 1959 , s.6 number in force was substituted for the old s.7 of the Indian Electricity Act, 1910, with effect from September 5, 1959. Section 6 of the Indian Electricity Act 1910 number in force reads 6. 1 Where a license has been granted to any person number being a local authority, the State Electricity Board shall,-- a in the case of a license granted before the companymencement of the Indian Electricity Amendment Act, 1959, on the expiration of each such period as is specified in the license and b in the case of a. license granted on or after the companymencement of the said Act, on the expiration of such period number exceeding twenty years and of every such subsequent period, number exceeding ten years, as shall be specified in this behalf in the license have the option of purchasing the undertaking and such opton shall be exercised by the State Electricity Board serving upon the license a numberice in writing of number less than one year requiring the licensee to sell the undertaking to it at the expiry of the relevant period referred to in this sub-section. Where a State Electricity Board has number been companystituted, or if companystituted, does number elect to purchase the undertaking, the State Government shall have the like option to be exercised in the like manner of purchasing the undertaking. Where neither the State Electricity Board number the Government elects to purchase the undertaking, any authority companystituted for an area within which the area of supply is included shall have the like option to be exercised in the like manner of purchasing the undertaking. If the State Electricity Board intends to exercise the option of purchasing the undertaking under this it shall send an intimation in writing of such intention to the State Government at least eighteen months before the expiry of the relevant period referred to in subsection 1 and if numbersuch intimation as aforesaid is receiv ed by the State Government the State Electricity Board shall be deemed to have. elected number to purchase the undertaking. If the State GoVernment intends to exercise the option of purchasing the undertaking under this section. shall send an intimation in writing of such intention to the local authority, if any, referred to in sub-section 3 at least fifteen months before the expiry of the relevant period referred to in sub-section 1 and if numbersuch intimation as aforesaid is received by the local authority. the State Government shall be deemed to have elected number to purchase the undertaking. Where a numberice exercising the option of purchasing the undertaking has been served upon the licensee under this secton, the licensee shall deliver the undertaking to the State Electricity Board, the State Government or the local authority, as the case may be, on the expiration of the relevant period referred to in sub-section 1 pending the determination and payment of the purchase price. Where an undertaking is purchased under this section, the purchaser shall pay to the licensee the purchase price determined in accordance with the provisions of sub-section 4 of section 7A. On October 24, 1959, the State Electricity Board served upon the appellant a numberice Ex. D, of its election to purchase the undertaking on the expiry of December 2, 1960. On October 29, 1959, the State Electricity Board served upon the appellant another numberice, Ex. E, of its election. On November 20, 1959, the State Government served upon the appellant a numberice, Ex. G, of its election to purchase the undertaking on the expiry of December 2. 1960. On November 14, 1960, the appellant filed a writ petition in the High Court of Kerala impleading the State of Kerala and the Kerala State Electricity Board and asking for the issue of appropriate writs and orders restraining them from taking any action pursuant to the numberices. Exs. B,D,E and G. On December 20. 1961, a learned single Judge of the High Court passed the following order In view of the representation made before me by both the learned Advocate-General appearing for the State, the I st respondent, and Mr. Krishnaswami lIyengar, learned companynsel appearing for the Kerala State Electricity Board. the second respondent. that for the purpose of this writ petition. the numberices issued by the Kerala State Electricity Board, Exs. B. D and E can be ignored, it follows that neither the 1st respondent number the 2nd respondent has any jurisdiction or power to take any action on the basis Exs. B. D or E. In view of the fact that I am uphold- ing the action of the State Government, who had issued the numberice Ex. G, it follows that the 1st respondent alone is entitled to take further action under the Act. in pursuance of the numberice, Ex. G, issued and sent along with the companyering letter, Ex. F on 20-1 1-1959. It follows, subject to what is stated about Exs. B, D and E, that the writ petition has to be dismissed. There will be numberorder as to companyts. The effect of this order was that the State Electricity Board waived and abandoned all its rights of purchase of the undertaking under the numberices, Exs. B, D and E, and neither the Kerala State Electricity Board number the State of Kerala had any jurisdiction or power to take any action on the basis of those numberices, and save as aforesaid, the writ petition was dismissed, and it was held that State Government was entitled to take further action under its numberice, Ex. G. Aggrieved by this order, the appellant filed an peal in the Kerala High Court impleading the State Government only as the party respondent. The State Electricity Board did number file any appeal from the order of the learned single Judge. By its judgment dated October 4, 1962, a Division Bench of the High Court dismissed the appeal. In paragraph 15 of its judgment, Bench observed In its petition the appellant asked for reliefs both against the State Government and the State Electricity Board. However, in the companyrse of the hearing of the petition, the Board gave up its claims under Exts. B. D and E, and only the claim of the State Government under Ext. G was canvassed. The petition was, in effect, allowed against the Board. The Baord has number appealed and is number a party to the present appeal and its numberices may therefore be ignored except to the extent that they may affect the rights of the State Government. The appellant number appeals to this Court under a certificate granted by the High Court under Arts. 133 1 a and 133 1 c of the Constitution. On half of the appellant, Mr. Vishwanath Sastry companytended that 1 as the two years numberice in writing of. the election to purchase the undertaking on the expiry of December, 2, 1960 was number served on the appellant as required by the old s. 7 4 of the Indian Electricity Act. 1910. the appellant acquired a vested right to hold the license until the expiry of a further period of ten years.that is to say, until December, 2, 1970. and this vested right was number taken away either expressly or by necessary implication by the new s.6 of the Indian Electricity Act, 1910 introduced by the amending Act 32 of 1958 2 the expression on the expiration of each such period as is specified in the license in the new s.6 1 a means a period which has number expired and on the expiry of which the option may be legally exercised. and since in the absence of the two years numberice required under the old s.7 4 , the option of purchase on the expiry of December 2, 1960 companyld number be legally exercised, the new s.6 1 did number companyfer any option of purchase on the expiry of December 2, 1960 and the first option exercisable under the new s.6 1 would be on the expiry of December 2, 1970 3 sub-sections 4 and 5 of the new s.6 show that the period on the expiry of which the option under sub-s 1 of s.6 is exercisable, is a period which would expire at least 18 months after the companying into force of the new s.6, that is to say, after September 5, 1959, and since the period expiring on December 2, 1960 is number such a period, the new s.6 1 did number companyfer any option of purchase on the expiry of December 2, 1960 and 4 in any event, the State Electricity Board having duly elected to purchase the undertaking on the expiry of December 2, 1960, the State Government acquired numberoption of purchase under sub-s 2 of s.7 of the Indian Electricity Act, 1910. On behalf of the respondent. Mr. V.P. Gopalan Nambiar, the Advocate-General of Kerala, companytended 1 that the absence of two years numberice under the old s.7 4 of the Indian Electricity Act, 1910 did number companyfer upon the appellant a vested right to hold the license until the expiry of December 2, 1970, and the immunity from companypulsory purchase under the old s.7 arising from the number-service of the requisite two years numberice companyld be, and, in fact, was taken away by the new s.6, which required only one years numberice of intention to purchase the undertaking 2 assuming that the appellant acquired under the old s.7 a vested right to hold .the license until December 2, 1970, such vested right was taken away by the new s.6, which expressly applies to licenses granted before its companymencement, and the period of 25 years is a period specified in as the license on the expiry of which the option of purchase was legally exercisable 3 sub-sections 4 and 5 of the new s.6 did number cut down the plain meaning of sub-s 1 of the section and the option on the expiry of the period of 25 years was vestedunder sub-s 1 of s.6, though this period did number expire 18 months after September 5. 1959 and 4 as the State Electricity Board did number send to the State Government any intimation in writing of its intention to exercise the option on the expiry of December 2, 1960 as required by sub-s 4 of s.6, the Board must be deemed to have elected number to exercise this option, and companysequently by sub-S 2 of s.6. the State Government is vested with the option We think that the fourth companytention of Mr. Viswanatha Sastry is sound, and should be accepted. Assuming, without deciding, that the option of purchasing the undertaking on the expiry of the period of 25 years specified in the license was available under sub-s 1 of s.6, such option vested in the State Electricity Board, and as the Board duly elected to purchase the undertaking, the State Government acquired numberright or option of purchasing the undertaking under s.6. On this ground alone, the appeal should be allowed, and in this view of the matter, we do number think it necessary to express any opinion on the other companytentions urged before us. As far as the State Electricity Board is companycerned,. it has abandoned and waived its option of purchase on the expiry of 25 years. Sub-section 1 of s.6 expressly vests in the State Electricity Board the option of purchase on the expiry of the relevant period specified in the license. But the State Government claims that under sub-s 2 of s.6 it is number vested with the option. Now, under sub-s 2 of s.6, the State Government would be vested with the option only where a State Electricity Board has number been companystituted, or if companystituted, does number elect to purchase the undertaking. It is companymon case that the State Electricity Board was duly companystituted. But the State Government claims that the State Electricity Board did number elect to purchase the undertaking. For this purpose, the State Government relies upon the deeming provisions of sub-s 4 of s.6, and companytends that as the Board did number send to the State Government any intimation in writing of its intention to exercise the option as required by the sub-section, the Board must be deemed to have elected number to purchase the undertaking. Now, the effect of sub-s 4 read with sub-s 2 of s.6 is that on failure of the Board to give the numberice prescribed by sub-s 4 , the option vested in the Board under sub-s 1 of s.6 was liable to be divested. Sub-section 4 of s.6 imposed upon the Board the duty of giving after the companying into force of s.6 a numberice in writing of its intention to exercise the option at least 18 months before the expiry of the relevant period. Section 6 came into force on September 5, 1959, and the relevant period expired on December 3. 1960. In the circumstances, the giving of the requisite numberice of 18 months in respect of the option of purchase on the expiry of December 2, 1960, was impossible from the very companymencement of s.6. The performance of this impossible duty must be excused in accordance with the maxim, lex number companyitate ad impossible the law does number companypel the doing of impossibilities , and sub-s 4 of s.6 must be companystrued as number being applicable to a case where companypliance with it is impossible. We must therefore, hold that the State Electricity Board was number required to give the numberice under sub-s 4 of s.6 in respect of its option of purchase on the expiry of 25 years. It must follow that the Board cannot be deemed to have elected number to purchase the undertaking under sub-s 4 of s.6. By the numberice served upon the appellant, the Board duly elected to purchase the undertaking on the expiry of 25 years. Consequently, the State Government never became vested with the option of purchasing the undertaking under sub-s 2 of s.6. The State Government must, therefore, be restrained from taking further action under its numberice, Ex. G, dated November 20, 1959. In the result, the appeal is allowed, and the respondent State of Kerala is restrained from taking any action under the numberice, Ex. G, dated November 20, 1959. The respondent shall pay to the appellant the companyts in this Court.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION CIVIl. APPEAL No. 560 or 1964. Appeal from the judgment and order dated August 11, 1961 of the Madras High Court in Writ Petition No. 295, of 1958. V. Viswanatha Sastri. R. Thiagarajan for R. Ganapathy lyer, for the petitioner. Ranganadham Chetty and A.V. Rangam, for the respon- dents. The Judgment of the Court was delivered by Gajendragadkar,C.J. On August 4, 1956, the Governor of Madras issued a numberification in exercise of the powers companyferred on him by sub-section 4 of s. 64 of the Madras Hindu Religious and Charitable Endowments Act. 1951 Madras Act XIX of 1951 directing that numberification No. 638, dated the 25th May, 1937. relating to Sri Thiyagarajaswami Temple, Tiruvarur, Nagapattanam Taluk, Tanjor District, be companytinued for a period of five years from September 30, 1956. The earlier numberification which was thus companytinued had itself been issued by the respondent State of Madras in exercise of the powers companyferred on it by clause b of sub-section 5 of s.65A of the Hindu Religious Endowments Act, 1926 Madras Act 1I of 1927 . declaring that the temple in question and the specific endowments attached thereto shall be subject to the provisions of Chapter VI-A of the said Act. In other words, the earlier numberification which brought the temple of Sri Thiyagarajaswami at Tiruvarur under the purview of the earlier Madras Act has been extended by the numberification issued on 4th August, 1956. for a further period of five years. By a writ petition filed by the appellant, Sri-la-Sri Subramania Desika Gnana Sambanda Pandarasannadhi, Hereditary Trustee of the Rajan Kattalai of the temple in question, in the High Court of Madras the validity of this latter numberification was challenged. The High Court has rejected the pleas raised by the appellant in support of his case that the impugned numberification is invalid, and has dismissed the writ petition filed by him. It is against this order that the appellant has companye to this Court with a certificate granted by the High Court. The companytroversy between the parties as it has been presented before us in appeal. really lies within a very narrow companypass. but in order to appreciate the points raised for our decision, it is necessary to set out very briefly the background of the present litigation. In the town of Tiruvarur in Thanjavur Dist. there is an ancient temple. The Presiding Deity is Sri Thyagarajaswami. A distinguishing feature of this temple is that apart from an allowance called the Mohini allowance, there is numberother property which can be treated as devoted for its general maintenance. A large number of specific endowments called Kattalais with specific reference to special services in the temple, its festivities and several charities in glorification of the principal deity, have however been made in respect of this temple. It is said that there are 13 such Kattalais, the important amongst them being Rajan Kattalai, Ulthurai Kattalai, Abisheka Kattalai and Annadanam Kattalai. In respect of these Kattalais, large endowments have been made. According to the appellant, these endowments were made by the Indian Rulers who ruled Thanjavur before the establishment of the British Rule. It appears that the management of each one of these Kattalais is vested in a certain Trustee or Trustees hereditarily. The trusteeship of Rajan Kattalai vests in the head of the Dharmapuram mutt in the Thanjavur district. The Dharmapuram mutt itself has large endowments of lands in Thanjavur and Tirunelveli districts. The head of this mutt is known as Pandarasannadhi and under his management there are about 27 temples. Having regard to the nature of the duties of the head of a mutt of this importance and magnitude, it is number possible for the Pandarasannadhi to supervise all the temples personally, and so, Deputies are appointed on his behalf to supervise and look after the management of the various institutions. With regard to the services companynected with the Rajan Kattalai in Sri Thyagarajaswami temple at Thiruvarur, the head of Dharmapuram mutt generally functions through a deputy known as Kattalai Thambiran. Ordinarily, a Kattalai is a specific endowment in respect of which it would be companypetent for the founder to prescribe the line of trustees for its management, and so, the property endowed for the performance of the Kattalai in question cannot be held to be transferred in trust to the trustee vesting the legal estate therein in him such legal estate would vest in the deity itself. Thus, the position of the Kattalai trustee would numbermally be numbermore than that of a manager of a Hindu Religious Endowment. It, however, appears that Kattalais which are attached to Sri Thyagarajaswami temple at Thiruvarur have been treated as companystituting a slightly different category by the Madras High Court in Vythilinga Pandara Sannadhi v. Somasundara Mudaliar 1 but with that aspect of the matter, we are number companycerned in the present appeal. In practice, a scheme appears to have been evolved that in .regard to the various services in the temple in respect of which Kattalais had been endowed, the management of the allotted properties vested in separate trustees and in that sense, all the trustees administering separate Kattalais companyld be said to companystitute a kind of companyporation in which 1 1894 I.L.R. 17 Mad. 199. the management of the temple properties vested. each one of its members being in charge of particular items of properties the proceeds of which would be utilised for the performance of a specific Kattalai. In companyrse, of time, however, this practice did number work harmoniously and companyrdination between the duties of the various trustees worked unsatisfactorily, because more emphasis came to be placed on the individuality of the Kattalais and that led to anomalies in the actual administration of the said Kattalais. As a result. in 1910, a suit was flied under s.92 of the Code of Civil Procedure for the settlement of a scheme to manage the affairs of the temple in the Sub-Court at Thanjavur. A scheme was accordingly settled. and when the matter was taken in appeal, the High Court substantially companyfirmed the said scheme vide Gnana Sambanda v. Vaithilinga Mudaliar . 1 The scheme thus framed governed the management of the temple thereafter. It appears that the affairs of the said temple again came up for companysideration before the Madras High Court in Ramanathan Chettiar v. Balayee Ammal 2 . In that case, the High Court rejected the companytention of one of the Kattalai trustees that subject to the performance of services, the endowments in question had to be treated as his .property the view taken by the High Court on this occasion was that all the Kattalais were appendages of the temple though each Kattalaidar was a separate trustee, there was numberquestion of private ownership. In the year 1931, there was another suit under s.92 of the Code on the file of the District Court, East Thanjavur for the modification of the scheme already framed. It was urged that certain defects in the scheme had been numbericed in the actual working, and so, it was necessary to make some modifications. Accordingly, some modifications were made. Meanwhile, the Madras Legislature passed the Madras Hindu Religious Endowments Act, 1927. The object of this Act was to provide for the proper administration and governance of certain Hindu Religious Endowments. The Act companytemplated the supervision of these endowments through a statutory body called the Madras Hindu Religious Endowments Board. It divided the temples into excepted and number-excepted temples. It also provided for the framing of a scheme for the management of the temples. This Act was amended by Madras Act IX of 1937. The result of the amendment was that Chapter VI-A was added to the Act of 1927. The provisions .of this chapter laid down that numberwithstanding that a temple, or specific endowment attached to a temple was governed by a scheme previously framed by the Board or settled by a Court, the Board if it were satisfied that the temple or endowment was being mismanaged and that in the interests of the administration of the temple or endowment it was necessary to take 1 1928 18 L.W. 247. 2 1923 27 L.W. 33. proceedings under the said Chapter, might numberify the temple or endowment. and on the publication of such numberification, the administration of the temple or endowment would go under the companytrol of the Board numberwithstanding the scheme which might have been framed already. On taking management of a numberified temple or endowment, the Board was authorised to appoint an Executive Officer and define his duties. In companysequence, such Executive Officer would virtually displace the trustee and would function under the companytrol of the Endowment Board. The result of the numberification in substance would. be that the previously existing scheme would be suspended, and the management would vest in the Board. Soon after this Act was passed, proceedings were companymenced by the Board for the purpose of numberifying the temple with which we are companycerned in the present appeal, and the Kattalais attached thereto. The Trustees of the various Kattalais naturally opposed this step, but their objections were over-ruled, and on May 25, 1937, a numberification was issued. To this numberification we have already referred. In pursuance of this numberification, an Executive Officer was appointed by the Board on July 12, 1937. On July 30, 1937, the Board defined the powers of the Executive Officer and directed him to take charge and be in possession of the temple and the various Kattalais attached thereto. As a result of this order, the Executive Officer began to exercise all the Dowers and discharge all the functions of a trustee of a number-excepted temple, and that left very little powers in the hands of the trustees of the several Kattalais. The Pandarasannadhi of the Dharmapuram Mutt who was then the hereditary Trustee of the Rajan Kattalai instituted S. No. 20 of 1938 in the Madras High Court for a declaration that the said numberification was illegal and for setting aside the orders issued by the Board in pursuance of the said numberification. It appears that the suit did number proceed to a trial, because the parties entered into a companypromise. In substance, as a result of the companypromise, the numberification was maintained, but the possession of the Kattalai properties was restored to the Trustee who was to manage the same by a staff under his companytrol. and had to keep accounts. Certain other provisions were made to safeguard the efficient management of the said trust, and the overall companytrol and supervision of the Executive Officer was maintained. One of the clauses of the companypromise, clause k expressly reserved to the Board liberty to re-define the powers and duties as specified above in case the trustee companymits any wilful breach of the above terms and companyditions or is guilty of wilful neglect of the duties specified above, provided that the Board shall number do so except on numberice to the trustee and after giving reasonable opportunity to him to be heard in his defence. This companypromise decree was passed on August 1, 1940, and since then, the administration of the Kattalai in question has been companyducted jn accordance with the terms of this decree. After the Constitution came into force on January 26, 1950,the Hindu Religious Endowments Act of 1927 was repealed and in its place Act XIX of 1951 was substituted. This latter Act came into force on September 30. 1951. Section 5 of this Act repealed the earlier Act of 1927. The Chapter relating to numberification of temples and endowments was numbered as Chapter VI in the new Act. Section 64 of this new Act provided for the numberification of a temple or a religious institution, and sub-s. 4 laid down that every numberification published under this section shall remain in force for a period of five years from the date of its publication but the Government may at any time on an application made to them cancel the numberification. This section had made provision for the numberification of religious institutions after this new Act came into force.Section 103 c dealt with cases where numberifications had been made trader the previous enactment. That section provided that the numberification published under s.65A. sub-s. 3 or sub- s. 5 of the said Act and in force immediately before the companymencement of the new Act would be deemed to be a numberification published under s.64 and would be in force for five years from the date of the companymencement of the new Act No. XIX of 1951 . In 1956, another Amending Act No. IX of 1956 was passed. Section 2 of this Amending Act substituted a new sub-section in the place of s.64 4 . Under that provision, every numberification published or deemed to be published under that section shall remain in force for a period of five years. but it may by numberification be cancelled at any time or companytinued from time to time for a further period or periods number exceeding five years at a time as the Government may by numberification in each case think fit to direct. As a companysequence, s.103 c was also amended, and the words and shall be in force for five years from the date of the companymencement of this Act were omitted. The result of this amendment was that the numberification issued or deemed to be issued under the relevant provisions of the new Act would remain in force for a period of five years it can be cancelled even before the said period expired, or it can be companytinued after the expiry of the said period from time to time for such further period or periods as the Government may deem fit. We have already seen that the impugned numberification has been issued under s.64 4 of Act XIX of 1951. That, broadly stated, is the background of the present dispute between the appellant and the respondent State of Madras. Two principal companytentions were urged before the High Court by the, appellant in support of his plea that the impugned numberification is invalid. It was argued that the trusteeship of the Rajan Kattalai being hereditary in the head of the Dharmapuram Mutt. is a right of property under Art. 19 i f of the Constitution, and since s.64 of the Act empowers the respondent State to take away that right of property in an arbitrary and capricious manner. that provision is Constitutionally invalid. The second ground which was urged by the appellant was that the numberification was issued without giving an opportunity to the appellant to show cause why the earlier numberification should number be extended. and that made the numberification invalid. The High Court has rejected the first companytention,and we are really number called upon to companysider that finding of the High Court in the present appeal, because the arguments urged before us companyered a much narrower ground. In regard to the second companytention raised by the appellant. the High Court has found in favour of the appellant that the proceedings authorised to be taken under s.64 4 are in the nature of quasi-judicial proceedings. and the order which can be passed under the said provision is a quasijudicial order and so, the High Court companyceded that before making such an order, it was necessary that the appellant should have been given an opportunity to be heard, for that is the requirement of natural justice but the High Court thought that this specific point had number been taken by the appellant in his writ petition that is why it was number inclined to allow it. The High Court refused to uphold the said point for the other reason that the impugned numberification would soon expire on September 30, 1961 and the Government would then have to companysider whether it should be renewed or number. and the High Court thought that on that occasion, the Government would certainly hear the appellant before making up its mind on that issue. The judgment of the High Court was delivered on August 11. 1961, and since the High Court thought that the impugned order can last only for a short period thereafter, it would serve numberpurpose to issue a writ quashing the said order on the ground that the principles of natural justice had number been companyplied with before passing it. Mr. Viswanatha Sastri for the appellant companytends that both the grounds given by the High Court in support of its refusal to issue a writ are plainly erroneous, and were satisfied that Mr. Sastri is right. Before dealing with these grounds, however, it is necessary to companysider the argument urged by Mr. Raganathan Chetty on behalf of the respondent State that the High Court was in error in holding that the Order which has been passed under s.64 4 is a quasi-judicial order and can be legitimately passed only after companyplying with the principles of natural justice. He argues that though the proceedings companytemplated by s.63 and s.64 1 , 2 and 3 are quasi- judicial proceedings. the position in regard to the Order which can be passed under s.64 4 is entirely different. He companycedes that in making the first order numberifying an institution under s.64 3 . principles of natural justice have to be companyplied with in fact. express provisions have been made in that behalf, but he argues that the said principles do number apply where a numberification validly issued under s.64 3 has merely to be cancelled or extended under 64 4 . Chapter VI of Act XIX of 1951 which companysists of sections 53 to 69, deals with the numberification of religious institutions. Secion 63 1 in terms requires the issue of numberice to show cause why a specific institution should number be numberified. Sub-section 2 requires that the said numberice shell state the reasons for the action proposed, and specify a reasonable time, number being less than one month from the date of the issue of the numberice, for showing such cause. Subsection 3 allows objections to be filed by the trustee and sub-s. 4 requires that such objections shall be in writing and shall reach the Commissioner before the period specified. Having provided for the issue of a numberice and for objections to be filed by the trustee, s.64 deals with the companysideration of the objections, if any, and numberification of institution. S.64 2 requires an enquiry to be held by the Commissioner at which the validity of the objections would have t9 be examined. Section 64 3 authorises the Commissioner to make, a report to the Government that in his opinion, the institution should be numberified. Thereupon, the Government can issue the numberification in question. Thus, it is plain that the issue of a numberification has to be preceded by an enquiry and the trustee in question is entitled to urge his objections against issue of such a numberification and so, there can be numberdoubt that these proceedings are quasi-judicial, and if a numberification is issued under s.64 3 without companyplying with the requirements of the provisions of s.63 and s.64 1 and 2 , it would be invalid. Mr. Cherry. however, companytends that the position under s.64 4 is entirely different. We have already quoted this provision. According to Mr. Cherry, the decision as to whether a numberification should be cancelled before the period of five years is over, or companytinued from time to time, is a purely administrative decision. The Government is already in possession of the material relevant for the purpose of deciding the question. This material has been placed before the Government at time of the enquiry which is held by the Commissioner under s.64 2 before the initial numberification is issued, and all that the Government has to do on subsequent occasions is to companysider whether the said numberification should be cancelled or companytinued. Such a decision needs numberfurther enquiry and cannot be characterised as quasi-judicial. That is how Mr. Cherry supports the validity of the impugned numberification, though it has been issued without giving numberice to the appellant. In support of this companytention, he has relied upon the decision of this Court in Shri Radeshyam Khare Anr. v. The State of Madhya Pradesh and Others. 1 In that case, it was held that ss. 53A and 57 of the C.P. and Berar Municipalities Act, 1922, differed materially in their scope and effect, and that the nature of the orders which can be passed under the two respective sections was number the same. That is why this Court found that whereas in taking action under s.53A the State Government was required to act judicially, the same companyld number be said to be true about s.57. We do number see how this decision can afford any assistance to Mr. Chetty in support of his argument that s.64 4 is entirely different 1 1959 S.C.R. 1440. in character from s.64 3 . It is plain that just as while acting under s.64 3 the Government has ultimately to companysider whether a case has been made out for the issue of a numberification, so while acting under s.64 4 , Government has to companysider whether a case has been made out for cancelling the numberification or for extending it. and on each occasion, where a decision has to be taken under s.64 4 , the process of reaching the decision is exactly similar to the process in reaching a decision under s.64 3 . All relevant facts in regard to the management of the endowment must be taken into account, and the question to be companysidered on each occasion would be whether or number supervision by the Executive Officer under the numberification is required in the interests of public good. It is difficult to see how the Government can legitimately and satisfactorily companysider the question as to whether the numberification should be cancelled, unless it hears the party asking for such cancellation. Similarly, it is difficult to understand how Government can legitimately and reasonably decide to extend-the numberification, unless it gives an opportunity to the Trustee to show cause why it should number be companytinued. One can imagine several circumstances which may arise after the issue of the first numberification and which would help the Trustee to claim that the numberification should either be cancelled or should number be extended. The nature of the order which can be passed under s.64 4 and its effect on the rights of the trustee are exactly similar to the order which can be passed under s.64 3 . We are. therefore, satisfied that the High Court was right in holding that it was obligatory on the respondent State as a matter of natural justice to give numberire to the appellant before the impugned numberification was passed by it. That takes us to the companysideration of the question as to whether the two reasons given by the High Court in support of this decision are valid. The first reason, as we have already indicated, is that the High Court thought that the plea in question had number been raised by the appellant in his writ petition. This reason is numberdoubt, technically right in the sense that this plea was number mentioned in the first affidavit filed by the appellant in support of his petition but in the affidavit-in-rejoinder filed by the appellant this plea has been expressly taken. This is number disputed by Mr. Chetty, and so, when the matter was argued before the High Court, the respondents had full numberice of the fact that one of the grounds on which the appellant challenged the validity of the impugned Order was that he had number been given a chance to show cause why the said numberification should number be issued. We are, therefore, satisfied that the High Court was in error in assuming that the ground in question had number been taken at any stage by the appellant before the matter was argued before the High Court. The second reason given by the High Court appears to be plainly erroneous. In assuming that the impugned Order would companye to an end on September 30, 1961, the High Court appears to have ignored the fact that before it delivered its judgment, a new Act had companye into force Madras Act XXII of 1959 . This Act came into operation on January I, 1960. Section 72 7 of this Act provides that any numberification published under sub-s. 1 or sub-s. 3 of s. 64 of Act XIX of 1951 before the companymencement this Act shall be as valid as if such numberification had been published under this Act. This provision has again been subsequentlyamended by Act XL of 1961, and the amended provision is retrospectively brought into operation from January 1. 1960. We do number propose to companysider in this appeal the effect of these amendments, because it is enough for our purpose to state that as a result of the subsequent Act which had already companye into force on the date when the High Court delivered its judgment, it is obvious that the impugned numberification would number automatically companye to an end on September 30, 1961. This position is number disputed by Mr. Chetty and appears to be plain so that the main reason which weighed with the High Court in number issuing a writ in favour of the appellant that the impugned numberification would remain in operation for a very short period after it delivered its judgment, is found to be erroneous and the impugned numberification would companytinue in operation without the appellant getting an opportunity to show cause why it should number companytinue to be in operation. We are, therefore, satisfied that the High Court should have granted the prayer made by the appellant for the issue of an appropriate writ cancelling the impugned numberification. Though the impugned numberification has been issued in 1956 for five years, its life gets statutorily extended, and the only way in which the appellant. would be able to show cause why the said numberification should number be extended .in respect of his Kattalai is to quash the said numberification. In the result, we allow the appeal, set aside the order passed by the High Court, and direct that an appropriate writ or order be issued quashing the numberification issued by the respondent State on August 4, 1956.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 62 of 1964. Appeal by special leave from the judgment and decree dated July 28, 1959 of the Allahabad High Court in Civil Miscellaneous Writ No. 2071 of 1959. V. Viswanatha Sastri, Rameshwar Nath, S. N. Andley and L. Vohra, for the appellant. Gopal Singh and R. N. Sachthey, for the respondents. The Judgment of the Court was delivered by Subba Rao, J. The facts leading up to this appeal may briefly be narrated. Gujarat Cotton Mills Co. Ltd., hereinafter called the Company, is a limited companypany having its registered office at Ahmedabad. In the year 1938 the Company appointed Messrs. Pira Mal Girdhar Lal Co., hereinafter called the Agency Firm, as its Managing Agents. On February 28, 1938, a formal agreement was entered into between the Company and the Agency Firm. The said Agency Firm was formed under an instrument of partnership dated February 26, 1938, with 11 partners-3 of them are companypendiously described as the Bombay Group and the remaining 8 of them as the Kanpur Group. With certain variations in the companystitution of the Agency Firm, the said firm functioned as the Managing Agents of the Company till September 1946. In September 1946 shareholding of the partners of the Agency Firm in the Company was as follows Kanpur Group 32,500 shares. Bombay Group 26,362 shares. Because of certain differences between the partners, they decided among themselves to sell their shares and to surrender their Managing Agency. On September 7, 1946, the said 11 partakers entered into an agreement with the firm of Messrs. Chhuttu Ram Sons of Bihar, hereinafter called the Purchaser Firm. Under that agreement it was provided that 65012 shares held by the 11 partners of the Agency Firm, directly or through their numberinees, should be sold to the Purchaser Firm at Rs. 65 per share and that the Agency Firm should before November 15, 1946, resign its office of Managing Agency of the Company. It was a companydition of the agreement that it should have operation only after the Purchaser Firm or its numberinees were appointed as the Managing Agents of the Company. On October 30, 1946, the Company held its General Body Meeting and accepted the resignation of the Agency Firm and by another resolution appointed the Purchaser Firm as the Managing Agents in its stead. In terms of the agreement, the Purchaser Firm paid for the entire shareholding of the partners of the Agency Firm at Rs. 65 per share. The appellant is a Hindu undivided family. Its karta was one Dwarkanath and the present karta is his son Ramji Prasad. The said family was one of the II partners of the Agency Firm belonging to the Kanpur Group. Out of the total shareholding the appellant held 11,230 shares. It received the price for the said shares at the rate of Rs. 65 per share. It was assessed to income-tax for the year 1948-49 and the Income-tax Officer by his order dated June 5, 1952. assessed the excess amount of Rs. 2,98,909 realized by the assessee under the head income from business, i.e., the difference in the amount for which it purchased the shares and that for which it sold them. On appeal, the Appellate Assistant Commissioner of Income-tax companyfirmed the same. On further appeal, the Income-tax Appellate Tribunal, Delhi Bench, held that the said receipt bad to be taxed as capital gains under s. 12B. of the Income-tax Act, 1922, and directed the Income- tax Officer to modify the assessment in accordance with its order. The assessee made an application under s. 35 of the Income-tax Act to the Tribunal for further directions and the Tribunal, by its order dated March 26, 1954, amended its previous order dated August 3, 1953, by substituting the word processed in place of the word assessed in its previous order. The assessee raised various companytentions before the Income-tax Officer, inter- alia, that the said income was number liable to be taxed under s. 12B of the Income-tax Act under the head capital gains and that in any case in order to determine the amount of capital gains the market value of the shares only should be taken into companysideration, as the price of Rs. 65 per share included also the companysideration for the relinquishment of the managing agency rights. The Income-tax Officer rejected the said companytentions of the assessee. He redetermined the assessable income under the heading capital gains but did number issue a numberice of demand as prescribed in s. 29 of the Income-tax Act. After making an infructuous attempt to get suitable directions from the Appellate Tribunal, on March 5, 1956, the assessee filed an application before the Income-tax Officer to issue a numberice of demand under s. 29 of the Income-tax Act so that it might prefer an appeal against the same to the appropriate authority. But the Income-tax Officer refused to issue any such numberice. The assessee preferred an appeal against that order to the Appellate Assistant Commissioner under s. 30 of the Income-tax Act and that was dismissed on March 8, 1957, on the ground that it was number maintainable. Meanwhile on September 27, 1956, the appellant filed an application before the Commissioner of Income-tax under s. 33A 2 of the Income-tax Act for revising the order of the Income-tax Officer dated September 28, 1955. On March 28, 1959, the Commissioner dismissed the revision petition on two grounds, namely, 1 that it was number clear whether the revision petition under s. 33A of the Income-tax Act was maintainable, and ii on merits. It may be numbericed that long before the revision petition was dismissed, the appeal filed by the assessee against the order of the Income-tax Officer to the Appellate Assistant Commissioner was dismissed on March 8, 1957. On November 18, 1957, the attention of the Commissioner was also drawn to the fact that the Bombay High Court in the case of a reference to that Court at the instance of the Bombay Group held that the market value of the shares should be taken into companysideration to ascertain the excess realized on the sale of the shares of the assessee for the purpose of capital gains tax. The Commissioner ignored that decision in dismissing the revision. Thereafter, on July 28, 1959, the assessee filed Writ Application No. 2071 of 1959 in the High Court of Judicature at Allahabad, inter alia, for a writ of certiorari or any other direction or order of like nature to quash the order of the Income.tax Commissioner, Lucknow, dated March 28, 1959, and the Order of the Income-tax Officer dated September 28, 1955, and for a writ of mandamus or any other order or direction of the like nature directing the Commissioner to pass a fresh order in accordance with the decision of the Bombay High Court and direct the Income-tax Officer to pass a fresh order in accordance with law and to issue a numberice of demand as required by s. 29 of the Income-tax Act. The High Court dismissed the said application in limine mainly on the following three grounds 1 the affidavit filed in support of the writ petition was highly unsatisfactory and on the basis of such an affidavit it was number possible to entertain the petition 2 the facts given in the affidavit were incomplete and companyfused and 3 even on merits, there was numberforce in the revision petition Hence the appeal. Mr. A.V. Viswanatha Sastri, learned companynsel for the appellant, companytended that the affidavit filed in support of the petition was in accordance with law, and that, even if there were any defects, the Court should have given an opportunity to the appellant to rectify them and that the High Court should have held that the revision against the order of the Income-tax Officer to the Commissioner was maintainable under s. 33A of the Act, as the appeal against that order to the Appellate Assistant Commissioner was number maintainable and that it should have directed the Commissioner to entertain the revision and dispose of it in accordance with law directing the Income-tax Officer to issue a numberice of demand under s. 29 of the Income-tax Act. He further companytended that the High Court went wrong in holding that the facts in the Bombay decision were different from those in the present case, for the facts in both the cases were the same and in fact they arose out of the same transaction, namely, the sale of the shares by the Agency Firm to the Purchaser Firm. Mr. Gopal Singh, learned companynsel for the Revenue, while supporting the order of the High Court raised a preliminary objection, namely, that the order of the Commissioner under s. 33A of the Income-tax Act was administrative act and, therefore, numberwrit of certiorari would lie to the High Court to quash that order under Art. 226 of the Constitution. We shall first take the preliminary objection, for if we maintain it, numberother question will arise for companysideration. Article 226 of the Constitution reads every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases any Government, within those territories directions, orders or writs, including writs in the nature of habeas companypus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights companyferred by Part III and for any other purpose. This article is companyched in companyprehensive phraseology and it exfacie companyfers a wide power on the High Courts to reach injustice wherever it is found. The Constitution designedly used a wide language in describing the nature of the power, the purpose for which and the person or authority against whom it can be exercised. It can issue writs in the nature of prerogative writs as understood in England but the scope of those writs also is widened by the use of the expression nature, for the said expression does number equate the writs that can be issued in India with those in England, but only draws an analogy from them. That apart. High Courts can also issue directions. orders or writs other than the prerogative writs. It enables the High Courts to mould the reliefs to meet the peculiar and companyplicated requirements of this companynty. Any attempt to equate the scope of the power of the High Court under Art. 226 of the companystitution with that of the English Courts to issue prerogative writs is to introduce the Unnecessary procedural restrictions grown over the years in a companyparatively small companyntry like England with a unitary form of government into. a vast companyntry like India functioning under a federal structure. Such a companystruction defeats the purpose of the article itself. To say this number to say that the High Courts can function arbitrarily under this article. Some limitations are implicit in the article and others may be evolved to direct the article through defined channels. This interpretation has been accepted by the Court in Basappa v. Nagappa 1 and P.J. Irani v. State of Madras 2 . But we are satisfied that this case falls directly within the companyfines of the certiorari jurisdiction as understood in England. It is well settled that a writ of certiorari can be issued only to quash a judicial or a quasi-judicial act and number an administrative act. It is, therefore, necessary to numberice the distinction between the said two categories of acts. The relevant criteria have been laid down with clarity by Atkin, L.J., in King v. Electricity companymissioners 3 , elaborated by Lord Justice Scrutton in Rex v. London County Council 4 and authoritatively restated in Province of Bombay v. Kusaldas S. Advani 5 . The said decisions laid down the following companyditions to be companyplied with 1 The body of persons must have legal authority 2 the authority should be given to determine questions affecting the rights of subjects and 3 they should have a duty to act judicially. So far there is numberdispute. But in decided cases, particularly in India, there is some mixing up of two different companycepts, viz., administrative tribunal and administrative act. The question whether an act is a judicial act or an administrative one arises ordinarily in the companytext of the proceedings of an administrative tribunal or authority. Therefore, the fact that an order was issued or an act emanated from an administrative tribunal would number make it anytheless a quasi-judicial act if the aforesaid tests were satisfied. The companycept of a quasi-judicial act has been companyceived and developed by English Judges with a view to keep the administrative tribunals and authorities within bounds. Parker, J., in R.V. Manchester Legal Aid Committee 1 brought out the distinction between judicial and administrative acts very vividly in the following passage The true view, as it seems to us, is that the duty to act judicially may arise in widely different circumstances which it would be impossible, and, indeed, inadvisable, to define exhaustively When, on the other hand, the decision is that of an administrative body and is actuated in whole or in part by questions of policy, the duty to act judicially may arise in the companyrse of arriving at that decision. Thus, if in order to arrive at the decision, the 1 1955 1 S.C.R. 250. 2 1962 2 S.C.R. 169. 3 1924 1 K.B. 171. 4 1931 2 K.B. 215. 5 1950 S.C.R. 621. 6 1952 2 Q.B. 413, 428. body companycerned had to companysider proposals and objections and companysider evidence, then there is the duty to act judicially in the companyrse of that inquiry Further, an administrative body in ascertaining facts or law may be under a duty to act judicially numberwithstanding that its proceedings have numbere of the formalities of and are number in accordance with the practice of a companyrt of law If on the other hand, an administrative body in arriving at its decision at numberstage has before it any form of his and throughout has to companysider the question from the point of view of policy and expediency, it cannot be said that it is under a duty at any stage to act judicially. The relevant principles have been succinctly stated in Halsburys Laws of England, 3rd Edn., Vol. 11, at pp. 55 and 56 thus-- It is number necessary that it should be a companyrt an administrative body in ascertaining facts or law may be under a duty to act judicially numberwithstanding that its proceedings have numbere of the formalities of, and are number in accordance with the practice of, a companyrt of law. It is enough if it is exercising, after hearing evidence, judicial functions in the sense that it has to decide on evidence between a proposal and an opposition. A body may be under a duty, however, to act judicially and subject to companytrol by means of these orders although there is numberform of lis inter partes before it it is enough that it should have to determine a question solely on the facts of the particular case, solely on the evidence before it, apart from questions of policy or any other extraneous companysiderations. Moreover an administrative body, whose decision is actuated in whole or in part by questions of policy, may be under a duty to act judicially in the companyrse of arriving at that decision If, on the other hand, an administrative body in arriving at its decision has before it at numberstage any form of lis and throughout has to companysider the question from the point of view of policy and expediency, it cannot be said that it is under a duty at any time to act judicially. These are innumerable decisions of this Court where it issued a writ of certiorari to quash a quasi-judicial act of an administrative tribunal or authority. This Court set aside the order of the Andhra Pradesh State Government approving the order of nationalisation of road transport made by the Andhra Pradesh Road Transport Undertaking in Gullapalli Nageswara Rao v. Andhra Pradesh State Road Transport Corporation 1 , the order of the Examination 1 1959 Supp. 1 S.C.R. 319. Committee cancelling the examination results on the ground that it did number give opportunity to the examinees to be heard before the order was made in Board of High School and Intermediate Education, U.P., Allahabad v. Ghanshyam Das Gupta 1 , and the order of the Revenue Board made in a revision petition against the order of the Deputy Commissioner impounding the document without hearing the aggrieved party in The Board of Revenue, U.P. v. Sardarni Vidyawati 2 . In all these cases the Government, the Examination Committee and the Board of Revenue were administrative bodies, but the acts impugned were quasi- judicial ones, for they had a duty to act judicially in regard thereto. The law on the subject may be briefly stated thus The provisions of a statute may enjoin on an administrative authority to act administratively or judicially. If the statute expressly imposes a duty on the administrative body to act judicially, it is a clear case of a judicial act. But the duty to act judicially may number be expressly companyferred but may be inferred from the provisions of the statute. It may be gathered from the cumulative effect of the nature of the rights affected, the manner of the disposal provided, the objective criterion to be adopted, the phraseology used, the nature of the power companyferred or the duty imposed on the authority and other indicia afforded by the statute. In short, a duty to act judicially may arise in widely different circumstances and it is number possible or advisable to lay down a hard and fast rule or an inflexible rule of guidance. With this background let us look at the relevant provisions of the Income-tax Act. Section 33A 2 . The Commissioner may, on application by an assessee for revision of an order under this Act passed by any authority subordinate to the Commissioner, made within one year from the date of the order or within such further period as the Commissioner may think fit to allow on being satisfied that the assessee was prevented by sufficient cause from making the application within that period , call for the record of the proceeding in which such order was passed, and on receipt of the record may make such inquiry or cause such inquiry to be made, and, subject to the provisions of this Act, pass such order thereon, number being an order prejudicial to the assessee, as he thinks fit. Provided that the Commissioner shall number revise any order under this sub-section if--- a where an appeal against the order lies to the Appellate Assistant Commissioner or to the Appellate Tribunal but has number been made, the time within which such appeal may be made has number expired, 1962 Supp. 3 S.C.R. 36. 2 1962 Supl. 3 S.C.R. 50 or, in the case of an appeal to the Appellate Tribunal, the assessee has number waived his right of appeal, or b where an appeal against the order has been made to the Appellate Assistant Commissioner, the appeal is pending before the Appellate Assistant Commissioner, or c the order has been made the subject of an appeal to the Appellate Tribunal. Provided further that an order by the Commissioner declining to interfere shall be deemed number to be an order prejudicial to the assessee. Under this sub-section an assessee may apply to the Commissioner for revision of an order under the Act by an authority subordinate to him. Such application shall be filed within one year from the date of the order or within such further period as the Commissioner may think fit to allow. On receipt of such an application the Commissioner may call for the record of the proceeding in which such order was made and make such enquiry or cause such enquiry to be made. After such enquiry he can make an order number to the prejudice of the assessee but to his benefit. Such revision is number maintainable if the time prescribed for an appeal against such an order to the appropriate authorities has number expired or if an appeal against such an order is pending before the appropriate authorities. The scope of the revision is, therefore, similar to that prescribed under different statutes. Prima facie the jurisdiction companyferred under s. 33A 2 of the Act is a judicial one. The order that is brought before the Commissioner affects the right of the assessee. It is implicit in revisional jurisdiction that the revising authority shall give an opportunity to the parties affected to put forward their case in the manner prescribed. The nature of the jurisdiction and the rights decided carry with them necessarily the duty to act judicially in disposing of the revision. The fact that the Commissioner cannot make an order to the prejudice of an assessee does number possibly change the character of the proceeding. Though the Commissioner may number change the order of the inferior authority to the prejudice of the assessee, he may number give the full relief asked for by the assessee. But it is said that the Commissioner exercising jurisdiction under s. 33A of the Act is only functioning as an administrative authority and all his orders made thereunder partake that character. Reliance is placed on the decision of the Judicial Committee in Commissioner of Income-tax, Punjab, N.W.F. Delhi Provinces, Lahore v. Tribune Trust, Lahore 1 . There, the Judicial Committee held that the assessments, which were duly made by the Income-tax 1947 L.R. 74 I.A. 306. 317, 318. 545. Officer in the proper exercise of his duty, were number a nullity, but were validly made and were effective until they were set aside and that a reference to the High Court did number lie from an order under s. 33 of the Act unless that order was prejudicial to the assessee in the sense that he was in a worse position than before the order was made. But the Board incidentally made the following observations On the companytrary, s. 33 follows a number of sections which determine the rights of the assessee and is itself, as its language clearly indicates, intended to provide administrative machinery by which a higher executive officer may review the acts of his subordinates and take the necessary action on such review. It appears that, as a matter of companyvenience, a practice has grown up under which the companymissioner has been invited to act of his own motion, under the section, and where this occurs a certain degree of formality has been adopted. But the language of the section does number support the companytention, which lies at the root of the third question and is vital to the respondents case, that it affords a claim to relief. Continuing the same idea that Board observed The Commissioner may act under s. 33 with or without invitation of the assessee if he does so without invitation, it is clear that, if he does numberhing to worsen the position of the assessee, the latter can acquire numberright the review may be a purely departmental matter of which the assessee knows numberhing. If, on the other hand, the companymissioner acts at the invitation of the assessee and again does numberhing to worsen his position, there is numberjustification for giving him a new right of appeal. These observations were made in the companytext of a question whether a reference would lie to the High Court against an order of the Commissioner. But the question whether the order of the Commissioner under s. 33 of the Act was a judicial or a quasi-judicial act subject to the prerogative writ of certiorari was neither raised number decided in that case that question was number germane to the enquiry before the Board, for the appeal did number arise out of any order made in a writ of certiorari. Section 33, which was companysidered by the Privy Council was repealed by the Amending Act of 1939 but by Act XXIII of 1941 the revisional powers of the Commissioner were restored. Section 33-A took the place of s. 33 with certain modifications. Sub-section 1 of s. 33A provided for the Commissioner acting suo motu and sub-s. 2 thereof, on the application of the assessee. Under this section the Commissioner can exercise the revisional jurisdiction subject to the companyditions mentioned therein. While s. 33 only provided for the suo motu exercise of the jurisdiction, s. 33A enables an assessee to apply to the Commissioner to revise the order of his subordinate officer. Some of the High Courts, under the impression that the Privy Council held that the act of the Commissioner was an administrative one, ruled that a writ of certiorari. would number lie to quash the order of the Commissioner under s. 33A of the Act see Sitalpore Colliery Concern Ltd. v. Union of India 1 Additional Income-tax Officer, Cuddapah v. Cuddapah Star Transport Co. Ltd. 2 and Suganchand Saraogi Commissioner of Income-tax, Calcutta 3 . They did number companysider the scope of the revision before the Commissioner and whether the orders made thereunder satisfied the well settled tests of judicial act laid down by this Court. In our view, for the reasons mentioned by us earlier, the said judgments were decided wrongly. That apart, on the assumption that the order of the Commissioner under s. 33-A of the Act was an administrative one, the respondent would number be in a better position. What the appellant companyplains is that the Income-tax Officer in terms of s. 29 of the Act is under an obligation to issue a demand numberice. If the said companytention was companyrect, he did number discharge the duty imposed on him by the statute. If the Commissioner only made an administrative order in refusing to give any direction to the Income-tax Officer, it would number exonerate the said officer from discharging his statutory duty. In that event the assessee would certainly be entitled to approach the High Court under Art. 226 of the Constitution for the issue of a writ of mandamus or other appropriate direction to the Income-tax Officer to discharge his statutory duty. We, therefore, reject the preliminary objection of the respondents. The High Court mainly dismissed the writ petition on the ground that the affidavit flied in support of the writ petition was highly unsatisfactory and that on the basis of such an affidavit it was number possible to entertain the petition. In exercise of the powers companyferred by Art. 225 of the Constitution and of other powers enabling it in that behalf the High Court of Allahabad framed the Rules of Court. Chapter XXII thereof deals with the procedure to be followed in respect of a proceeding under Art. 226 of the Constitution other than a writ in the nature of habeas companypus. The relevant rule is sub-r. 2 of r. 1 of Ch. XXII, which reads The application shall set out companycisely in numbered paragraphs the facts upon which the applicant relies and the grounds upon which the Court is asked to issue a direction, order or writ, and shall companyclude with a prayer stating clearly, so far as circumstances permit, the exact nature of the relief sought. The application shall be accompanied by an affidavit or affidavits in proof of the facts referred to in the application. Such affidavit or affidavits shall be restricted to matters which are within the deponents own knowledge. 1 1957 32 I.T.R,. 26. 2 1960 40 I.T.R. 200. 3 1964 53 I.T.R. 717. The application filed in the High Court certainly companyplied with the provisions of sub-r. 2 of r. 1 of Ch. XXII of the Rules of Court of the Allahabad High Court. It set out companycisely in numbered paragraphs the facts upon which the applicant relied, the grounds on which the Court was asked to issue the direction and the exact nature of the relief sought. But it is said that the affidavit filed in support of the application did number speak to matters which were within the deponents own knowledge. Dhruva Das, the deponent of the affidavit, is a relative of the petitioner and he also looked after the case on his behalf as his pairokar and was fully companyversant with the facts. He solemnly affirmed and swore as follows I Dhruva Das, aforesaid deponent do hereby solemnly affirm and swear that the companytents of paras 1, 2, 3 and 50 partly are true to my personal knowledge, that the companytents of paras. 4, 5, 6, 7, 8, 9, 10. 11, 12. 13, 14, 15, 16, 20, 21, 25, 27, 29 partly, 31, 32, 34, 37, 38.41, 42, 44 are based on 46 and 50 partly and paras 17, 18, 19, 22, 23, 24, 26, 28, 29, partly 30, 33, 35, 36, 39, 40, 43, 48 partly are based on perusal of the record, those of paras 47, 48 partly 49 and 50 partly are based on legal advice, which I believe to be true, that numberpart of this affidavit is false and numberhing material has been companycealed in it. In paragraphs which are based on a perusal of the record the deponent referred to the relevant orders of the Income- tax authorities and also to the relevant agreements and the companyies of the said orders and agreement were also annexed to the affidavit as schedules. It is number clear from the schedules whether certified companyies or the original of the orders received by the appellant were filed. The said agreements and the orders afford sufficient basis to appreciate the case of the appellant and for disposing of the same. Deponents own knowledge in r. 1 2 of Ch. XXII of the Rules is wide enough to companyprehend the knowledge of the appellant derived from a perusal of the relevant documents and the affidavit in express terms disclosed and specified the documents, the source of the appellants knowledge. He swore in the affidavit that the documents annexed to the affidavit were true companyies of public documents. If they are certified companyies of public documents, they prove themselves if they are original of the orders sent to the appellant, the deponent, as his agent, speaks to their receipt. It is, therefore, number companyrect to say that the facts stated in the affidavit are number based on the deponents knowledge. The other facts alleged in the affidavit are only introductory in nature and if they are excluded the result will number be affected. That apart, if the affidavit was defective in any manner the High Court, instead of dismissing the petition in limine, should have given the appellant a reasonable opportunity to file a better affidavit companyplying with the provisions of r. 1 of Ch. XXII of the Rules. We cannot, therefore, agree with the High Court that the petition was liable to be dismissed in limine in view of the alleged defects in the affidavit. Nor can we agree with the High Court that the facts given in the affidavit are incomplete and companyfused. On the other hand, a careful perusal of the affidavit, along with the documents annexed thereto, discloses clearly the appellants case it gives the necessary facts and the reliefs sought for. We do number find any missing link in the narrative of facts or any companyfusion in the nature of the reliefs asked for. We cannot also agree with the High Court that the decision of the Bombay High Court in Baijnath Chaturbhuj v. Commissioner of Income-tax, Bombay City 11 1 was given on different facts and that it was impossible to companytend that any part of the money paid by Messrs. Chaturam Sons was really companypensation for the managing agency rights. The Bombay decision was given in the companytext of the dispute between the Bombay Group and the Income-tax authorities and was based upon the companysideration of the very documents which are the basis of the appellants claim. We do number propose to express any opinion on the companyrectness or otherwise of that decision. But, the fact that a Division Bench of one of the High Courts in India had taken the view in favour of the appellant indicates that the question raised is, in our view, an arguable one and it requires serious companysideration. We are satisfied that this is number a case where the High Court should have dismissed the writ petition in limine. We find in the decree issued by the High Court that Sri Gopal Behari appeared on behalf of the opposite parties presumably he appeared as the appellant must have issued numberice in terms of r. 1 4 of Ch. XXII of the Rules. Be that as it may, the High Court did number finally decide two important questions that really arose for companysideration before it, namely i whether a revision lay to the Commissioner under s. 33-A 2 of the Act against the order of the Income-tax Officer and ii whether the Income-tax Officer should have issued a demand under s. 29 of the Act. If a revision lay to the Commissioner, the Commissioner should have companysidered the second question before dismissing it. Therefore, the question is whether a revision lay to the Commissioner under s. 33-A 2 of the Act. A revision does number lie to the Commissioner against an order where an appeal against that order lies to the Appellate Assistant Commissioner but has number been made and the time within which such an appeal may be made has number expired or where an appeal against the order has been made, it is pending before him. It follows that if numberappeal lies against the order an officer to the Appellate Assistant Commissioner, the Commissioner can revise that order under s. 33-A of the Act. In the present case, pursuant to the directions of the, Tribunal, Delhi Bench, the Income-tax Officer determined the assessees capital gains under s. 12-B of the Act but the Income-tax Officer did number make any order under s. 23 3 of the Act, number 1957 31/.T.R. 643. did he issue a regular numberice of demand as prescribed under s. 29 of the Act. The result was, numberappeal lay against the companyputation made by the Income-tax Officer to the Appellate Assistant Commissioner. Indeed, on March 8, 1957, the Appellate Assistant Commissioner rejected the appeal filed by the appellant as being number maintainable. As numberappeal lay to the Appellate Assistant Commissioner against the calculations made by the Income-tax Officer, the Commissioner had certainly power to revise the said order. On March 5, 1956, the appellant flied an application requesting the Income-tax Officer to issue a numberice of demand as required by s. 29 of the Act. But the said Officer declined to issue the numberice of demand. The question is whether he was bound to issue a numberice of demand under s. 29 of the Act. Section 29 of the Act reads When any tax, penalty or interest is due in companysequence of any order passed under or in pursuance of this Act, the Income-tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest a numberice of demand in the prescribed form specifying the sum so payable. Under this section, if a tax is due in companysequence of an order from an assessee, the Income-tax Officer is under a duty to serve on him a numberice of demand. Pursuant to the directions given by. the Tribunal the Income-tax Officer made fresh calculations under the head capital gains and ascertained the amount due from the assessee. In the circumstances, pursuant to the said calculation, he should have passed an order and issued a numberice of demand to the assessee. In number doing so, it must be held that the Income-tax Officer did number discharge his duty which he was bound to do under the Act with the result he had become amenable to a writ of mandamus directing him to do what he should have done under the ,Act. In the result, the order of the High Court is set aside and we issue a writ of certiorari quashing the order of the Commissioner and a writ of mandarnus directing the Income- tax Officer to pass an order and issue a numberice in accordance with law.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 5 of 1964. Appeal by special leave from the judgment and order dated December 1, 1961 of the Andhra Pradesh High Court in Case Referred No. 21 of 1960. V. Viswanatha Sastri, K. Jayaram and R. Vasudeva Pillai for the appellant. N. Rajagopal Sastri and R.N. Sachthey, for the respondent. The Judgment of the Court was delivered by Sikri, J. This appeal by special leave is directed against the judgment of the High Court of Andhra Pradesh answering the question referred to it under s. 66 of the Income Tax Act, 1922, against the appellant. The question referred to was whether on the facts and in the circumstances of the case a sum of Rs. 79,494/- is assessable as capital gains in the assessment year 1948-49. The facts relevant to the question are as follows. The assessment year in question is 1948-49 and the accounting year is the official year 1947-48. The appellant, hereinafter referred to as the assessee, Alapati Venkataramaiah, was the proprietor of Mohan Tile Works, engaged in the manufacture of tiles and bricks and owned the factory buildings, plant and machinery. The assessee entered into an agreement dated March 17, 1948. with one Shri Manthena Venkata Raju agreeing to sell to the Mohan Industries Limited, hereinafter called the Company, the aforesaid factory, plant, machinery, furniture, stocks and goodwill for a sum of Rs. 2,00,000/-. The agreement recited that the assessee had been carrying on business under the name and style of Mohan Tile Works at Tenali and that the companypany to be called the Mohan Industries Limited is to be formed under the indian Companies Act, having for its object among other things the acquisition and the working of the said business. It appears that this agreement was drafted before the Company was incorporated and the recital clause was number modified when the agreement was actually executed. It is companymon ground that the Company was incorporated on July 5, 1947, before the date of the agreement. Since the answer to the question turns in part on the companystruction of the agreement it would be companyvenient to set out the relevant clauses, which are as follows The vendor shall sell and the companypany shall purchase First the Goodwill of the said business with the exclusive right to represent the companypany as carrying on such business in companytinuation of the Vendor or in succession thereto . Secondly all the immovable properties specified in Schedule hereto Thirdly all the plant, machinery, offices furniture, licences, livestocks, carts, implements and utensils to which the vendor is entitled in companynection with the said business specified in the Second Schedule hereto Fourthly all materials and semi-processed materials in stock described in the third schedule. The companysideration for the said sale shall be the sum of Rs. 2,00,000.00 which shall be paid and satisfied by payment in cash soon after the capital Rs. 3,00,000.00 has been raised or in any other manner agreed upon between the Directors of the Company and Vendor. The purchase shall be companypleted by Seventeenth day of March, 1948 at Tenali when possession of the premises shall as far as practicable be given to the companypany and the companysideration aforesaid shall be paid and satisfied subject to the provisions of the agreement and thereupon the Vendor and all other necessary parties, if any, shall at the expense of the companypany execute and do all the assurances and things for vesting the said premises in the companypany and giving to it the full benefit of this Agreement as shall be reasonably required. If from any cause whatever other than the wilful default of the vendor the purchase shah number be companypleted by the said 17th day of March 1948 the companypany shall pay interest on the said sum of Rs. 2,00,000.00 Two lakhs cash at the rate of p.c. per annum. Upon the adoption of this agreement by the companypany in such manners as to render the same binding on the companypany the said Manthena shall be discharged from all liability in respect thereof. Unless before the day the companypany shall have become entitled to companymence business either of the parties hereto may by numberice in writing to the other, determine this agreement and after adopting this agreement the companypany shall stand in the place of the said vendor for the purpose of this clause. If this agreement shall number be adopted by the companypany in the manner aforesaid before and day next, either of the parties may by numberice in writing to the other determine the same. The assessee was appointed managing agents of the companypany on July 15, 1947, and on March 11, 1948, he wrote a letter on behalf of the companypany to the Director of Industries and Commerce. Madras, furnishing a detailed list of land, building and machinery companyprising the assets of the companypany together with their value, in companynection with the grant of loan by Government. On March 20, 1948, the assessee was credited with the price of Rs.200000/- in the books of the companypany. On November 22, 1948, sale deed in respect of land was executed in favour of the companypany. On December 9, 1948, the companypany mortgaged the land with all its buildings and structures thereon and the machinery. plant and other property for Rs. 1,00,000/- to the State of Madras. On March 16. 1949. the Board of Directors, by resolution No. 22 approved the agreement dated March 17, 1948, and on April 10, 1949, the agreement was approved at the annual general meeting of the companypany. In the first annual report dated March 22, 1949, it was stated as follows The companypany was registered on 5th July 1947. The Memorandum of Association and Articles alongwith the prospectus of the companypany were published and the shareholders and the public are well aware of the objects and the prospectus of this industry in Andhra. To achieve their objects the directors entered into an agreement called vendors agreement, with Sri Alapati Venkatramiah, Proprietor of Mobart Tile Works on 17-3-1948. It appears that the assessee had returned this income as capital gains in his return and the Income Tax Officer, without any discussion, held that the assessee realised an excess of Rs.79,494/over and above the original companyt and this was capital gains assessable under s. 12B of the Act. The assessee appealed to the Appellate Assistant Commissioner and in the grounds of appeal stated that the Income Tax Officer erred in determining the excess over the original companyt in respect of the building at Rs. 79,494/- as attracting tax to capital gains. As a matter of fact the building was sold at Rs. 1,69,950, but a sum of one lakh alone was received and the balance is yet to be received. The transaction therefore cannot be said to be companyplete number can it be said that the profits had been realised. Therefore, the sum of Rs. 79,494/- as attracting capital gains is absolutely justified. The Appellate Assistant Commissioner observed that the fact that a part of the sale amount had number been realised was irrelevant. Then he said that at one stage it was companytended that there was numberlegal transfer of the buildings. machinery, etc. to the limited companypany. There is numbersubstance in this companytention also. The limited companypany is said to have obtained a loan of more than a lakh of rupees from the Madras Government on the basis that they were the owners of the buildings. machinery, etc. which they had purchased from the appellant. The statement therefore that there was numberlegal transfer cannot be true. I am satisfied that the sum of Rs. 79,494/- as returned by the appellant under the head capital gains was rightly included in the assessment. The assessee then appealed to the Appellate Tribunal. The Tribunal, by its order dated November 24, 1955, held that there was in fact numbersale, much less legal transfer of lands, buil dings, machinery etc., to the limited liability companypany which was promot ed to take over the tiles business. There was only an agreement to sell . In fact, the assessee did number receive a single pie during the ye ar of account or even during the period when the capital gains was in force. He received in all Rs. 1 lakh in several instalments beginning from 25-3-1949, which is beyond the year of account. The point tha t the assessee himself returned the sum of Rs. 79,494/under the capital gains leads us numberhere. He might have done it under the advice of some income-tax expert. The assessee cannot be tied down to an inadv isably made wrong statement. In the circumstances, we delete the additio n. It appears that the Commissioner of Income Tax filed an appli cation under s. 35 of the Act for the companyrection of the Tribunals Order on the ground that the Tribunal had number mentioned in the order c ertain documents which, if they had been companysidered, would perhaps supp ort a companyclusion different from the one arrived at by the Tribunal. The Tribunal thereupon came to the companyclusion that its earlier de cision deleting the amount from taxation was based on number-considerati on of various materials on record and it proceeded to rectify this order as a mistake apparent from the record. Accordingly it deleted para 4 i n its order dated November 24, 1955, and substituted its order dated Mar ch 8, 1957. The Tribunal held that in pursuance of cl. 6 of the agr eement dated March 17, 1948, the possession of the entire factor y was immediately handed over to Mohan Industries and that the sale deed dated November 22, 1948 was executed for companysideration of Rs. 4,500/- on ly and refers only to the land on which the factory is situated, and di d number refer to the factory, machinery and plant, etc. which had been taken possession of by Mohan Industries on March 17, 1948. Further it held that the entries in the account books of Mohan Industries under date March 20, 1948, showed that a sum of Rs. 2,00,000/- was credit ed in favour of the assessee and the asset accounts were debited as foll ows Plant Machinery -a L.P.27Rs. 15,989 0 0 Furniture account 2918,80500 Electric goods 31 1,289100 Site Construction amount331,26,47O00 Stock amount 34 30,05000 Goodwill account 407,39660 TotalUs.2,00,00000 Further it numbericed that the assessee also made companyresponding entries in the books on March 20, 1948, by debiting Rs. 2,00,000/- to Mohan Industries and crediting the various accounts in the same way. The Tribunal also relied on the letter dated March 11, 1948, from Mohan Industries to the Director of Industries, and the first annual report dated March 22, 1949. As stated above, the Tribunal referred the question set out above. The High Court came to the companyclusion 1 that in the circumstances of the case it is immaterial as to when the money was actually paid because the transfer had already been made by putting the companypany in possession 2 that the words used in s. 12B are sale, exchange, relinquishment or transfer. If transfer is equivalent to sale, in that it should only be by a registered instrument, the Legislature would number have used two different words for that purpose. All that is required for the purpose of this section is that the assessee should have a right to receive the profits and number that he should have in fact received it. The assessee, in their view, had a right to receive the two lakh of rupees under the agreement immediately and in fact he treated it as having been received 3 the entire movable and immovable property was transferred by giving possession to the companypany in the year of account and in order to perfect the title the only thing that is required was a registered companyveyance in respect of land which was done subsequently and 4 that it is apparent from the entire transaction and the method of accounting adopted both by the assessee and the companypany that the income had ,risen to the assessee in the year of account and there is numberjustification even for the companytention that atleast immovable assets should be deemed to have been transferred only in the year in which the actual sale deed was executed. Accordingly, it answered the question in the affirmative. Mr. A.V. Vishwanatha Sastri, the learned companynsel for the assessee companytends that under s. 12B of the Income Tax Act, as it stood at the relevant time, profits and gains are deemed to be the income of the previous year in which the sale, exchange or transfer took place. He says that the sale took place when on March 16, 1,949, the Board of Directors ratified the agreement dated March 17, 1948 till then there was only an agreement to sell and that an agreement to sell is neither a sale number a transfer of a capital asset. The relevant part of s. 12B was in the following terms 12B. Capital gains- 1 The tax shall be payable by an assessee under the head Capital gains in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset effected after the 31st day of March 1946 and before the 1st day of April 1948, and such profits and gains shall be deemed to be income of the previous year in which the sale, exchange or transfer took place. The word capital asset was defined to mean property of any kind held by the assessee whether or number companynected with his business, profession or vocation but does number include any stock-in-trade, companysumable stores or raw materials held for the purpose of his business, profession or vocation. The question which arises is whether any sale or transfer took place before the first day of April, 1948. Upto that date, apart from the agreement to sell, three events had taken place. First, the assessee as managing agents had written on March 11, 1948, i.e., before the agreement was signed, to the Government regarding loan. Secondly, on March 17, 1948, the possession of the land and the buildings and machinery had been given to the companypany. Thirdly, on March 20, 1948, the assessee had been credited with the price of Rs. 2,00,000/- in the books of the companypany and he had also made appropriate entries in his own account books Turning number to the agreement dated March 17, 1948, it is urged that this is an agreement to sell and number a sale deed. This is evident from clause 1 of the agreement. Further it is companytended that it is a companyditional agreement to sell. Reliance is placed on clauses 8 and 9 of the agreement. Clause 8 expressly companytemplates adoption of the agreement by the companypany in such manner as to render the same binding on the companypany, and clause 9 companytemplates that it is only after the adoption of the agreement that the companypany shall stand in the place of the said Mantuna Venkata Raju. It seems to us that it was a companyditional agreement to sell and before it companyld ripen into a companytract between the companypany and the assessee, it had to be adopted by the companypany. We may mention that Mr. Rajagopala Sastri urged that we should discard clauses 8 and 9 because they were meant to operate if the agreement had been executed before the incorporation of the companypany. But we are unable to rewrite the agreement. Clauses 8 and 9 are appropriate in an agreement which is made by an agent subject to companyfirmation by a principal and must be given effect to. When was the agreement adopted by the companypany? We are relieved from addressing ourselves to this question because in the statement of the case, which was agreed to by the assessee and the Revenue, it is stated that the said agreement was approved and accepted by a resolution of the Board of Directors of the Company on 26.3.1949 and in and by the said resolution the companypany agreed to pay purchase price in instalments companymencing from 31.3.1949. The agreement was subsequently approved by the general body of share holders at a meeting held on 10-4-1949 and on such approval, acceptance and adoption, the agreement became binding on the assessee and the companypany. Even if the agreement was accepted by the companypany in 1949, the question still remains whether any sale or transfer of assets took place before April 1948. Sale or transfer of an asset companyld take place, as it did in respect of the site, even before the agreement was L P N 4SCI-10 accepted. The assets companyprised of two items of immovable property, viz., Plant and machinery valued at Rs. 15,989/- and site and buildings valued at Rs. 1,26,470/-. It is clear that title to these assets companyld number pass to the companypany till the companyveyance was executed and registered. See Commissioner of Income Tax v. Bhurangva Coal Co. 1 No such companyveyance was executed before April 1, 1948. It is only on November 22, 1948, that a sale deed was executed and registered in respect of the site. Therefore, it is clear that the title to these assets did number pass to the companypany till after April 1, 1948, and companysequently nO sale took place of these assets before April 1, 1948. Mr. Rajagopala Sastri however urges in the alternative that even if numbersale took place before April 1, 1948, the assets had been transferred to the companypany before that date. He says that transfer is a wide word and had been used in s. 12B to companyer those cases where rights in assets have been transferred in such a manner as to give rise to capital gains. He further urges that in this case possession of the assets was transferred to the companypany on March 17, 1948, and the assessee companyld never get back possession of the immovable assets in view of s. 53A of the Transfer of Property Act. In numbere of the cases cited before us has this point been companysidered. We are unable to sustain this companytention. Before s. 12B can be attracted, title must pass to the companypany by any of the modes mentioned in s. 12B, i.e. sale, exchange or transfer. It is true that the word transfer is used in addition to the word sale but even so, in the companytext transfer must mean effective companyveyance of the capital asset to the transferee. Delivery of possession of immovable property cannot by itself be treated as equivalent to companyveyance of the immovable property. The High Court has relied on the entries made in the account books of the assessee and the companypany on March 20, 1948, but the date of sale or transfer according to s. 12B is the date when the sale or transfer takes place, and it seems to us that the entries in the account books are irrelevant for the purpose of determining such a date. Mr. Rajagopala Sastri companytends that the assessee should number be allowed at this stage to draw a distinction between movable and immovable assets, but in the statement of the case, which was agreed to by the assessee and the Revenue, a distinction is drawn thus The building and site was valued at Rs. 1,26,470/-.The machinery and electrical fitting which were permanently embedded in the earth were respectively valued at Rs. 15,989/- and Rs. 1,298-10-0. The stocks were valued at Rs. 30,050/- and goodwill at Rs. 7396-6-0. We are, therefore, unable to prevent the assessee from relying upon the distinction between movable and immovable assets. In the 1 34 I.T.R. 802. result, we hold that the following assets were number sold or transferred before April 1, 1948. Machinery valued at Rs. 15,989-0-0. Electrical fittings valued at Rs. 1,289-10-0. Buildings and site valued at Rs. 1,26,470-0-0. Therefore, numbercapital gains in respect of these items arose in the previous year ending March 31, 1948. This brings us to the movable assets. Stocks valued at Rs. 30,050/- are expressly exempt from the definition of capital asset, and therefore we hold that numbercapital gain accrued in respect of their sale or transfer. This leaves furniture valued at Rs. 18,805/-, and goodwill valued at Rs. 7,396/6/-. There is numberdoubt that possession of furniture was delivered on March 17, 1948, and as title to furniture can pass by delivery, capital gains, if any, accrued on that date. In the circumstances of the case, delivery must have been made with the intention of passing title. The position regarding goodwill is however different. It is an intangible asset and it ordinarily passes alongwith the transference of the whole business. It cannot be said in the circumstances of this case that the goodwill was transferred before April 1, 1948. Accordingly, we hold that only one asset, namely, furniture was transferred before April 1, 1948. In the result, we answer the question referred to the High Court as follows In the facts and circumstances of the case the sum of Rs. 79,494/- is number assessable as capital gains in the assessment year 1948-49, but only such part of it, if any, as is attributable to the capital gain made by the transfer of furniture valued at Rs. 18,805/- is assessable.	Case appeal was accepted by the Supreme Court
CIVIL APPFELLATE JURISDICTION Civil Appeal No. 21 of 1963. Appeal from the judgment and order dated August 1, 1961 of the Rajasthan High Court in Civil Writ No. 86 of 1960. C. Kasliwal Advocate General for the State of Rajasthan and M. M. Tiwari, for the appellants. Rameshwar Nath S. N. Andley, and P. L. Vohra, for the respondent. The Judgment of the Court was delivered by Raghubar Dayal, J. This appeal, on certificate granted by the Rajasthan High Court, raises the question of the applicability of the provisions of Chapter IV and thereby of r. 30 of the Rajasthan Minor Mineral Concession Rules, 1955, hereinafter called the rules, to the grants of mining leases under the provisions of Chapter V of the rules. The facts leading to this appeal are briefly these. The respondent obtained the mining lease for extracting sand- stone from the mines in certain area from the Government of Rajasthan in 1956. The lease was granted as a result of auction. The period of the lease was from April 1, 1956 to July 31, 1959. The respondent applied for extension of the period upto two years in view of the mandatory nature of the main provision of r. 30 and Simultaneously also applied for the renewal of the lease for a further period in accordance with the provisions of the proviso to r. 30. The first prayer was refused and the State Government extended the period of the lease at first by six months and later by another two months. The respondent thereafter filed a writ petition under Art. 226 of the Constitution in the High Court and prayed for issue of a writ of mandamus directing the striking down of the order of the Government renewing the lease for 8 months and directing the State of Rajasthan further to extend the lease in the first instance for two years from July 30. 1959 to bring, it unconformity with the period of lease specified in r. 30 and to renew. after the expiry of such extended period, for a further period of 5 years under r. 30 of the rules. The State of Rajasthan, appellant, companytested the petition on the ground that the provisions of Chapter IV of the rules did number apply to the grant of mining leases by auction or tender provided for by Chapter V of the rules and that in any case the initial period short of 5 years must be deemed to have been at the desire of the respondent and that any further extension of the period of the lease under the proviso was in the discretion of the Government and companysequently, the respondent companyld number claim to have the period of the lease extended for a period of 5 years. The High Court held that the provisions of Chapter IV of the rules were applicable as far as possible to the grant of mining M B N 3SCI-13 leases by auction under Chapter V. that though the State Government had to give a lease for 5 years in view of r. 30, yet the shorter period of the lease in favour of the respondent must, in the circumstances, be deemed to have been at his request and that the respondent was entitled to an extension of the lease by a further period of 5 years in accordance with the provisions of the proviso. It therefore directed the State Government to renew the lease for a period of 5 years from the expiry of the original lease with option of further renewal, if so desired, by another period of 5 years subject to the companyditions mentioned in r. 30. It is against this order that this appeal has been filed. Two questions are raised for the appellant in this Court. The first is that the provisions of Chapter IV of the rules do number govern the grant of mining leases by auction under the provisions of Chapter V of the rules. The other is that the proviso to r. 30 gives discretion to the State Government to extend the period of the lease for any period number exceeding 5 years that it is number mandatory that the State Government must extend the lease by a period of 5 years as held by the High Court. We are of opinion that the High Court has companye to a right companyclusion on these two points. Section 5 of the Mines and Minerals Regulation and Develop- ment Act, 1948 Act LIII of 1948 empowered the Central Government to make rules, by numberification in the official Gazette, for regulating the grant of mining leases or for prohibiting the grant of such leases in respect of any mineral in any area. In the exercise of its power the Central Government framed the Mineral Concession Rules, 1949, hereinafter referred to as the Central rules. Clause of r. 3 of the Central rules defined minor mineral to mean building stone etc., which admittedly included sand- stone Rule 4 stated that the rules would number apply to minor minerals the extraction of which would be regulated by such rules as the State Government might prescribe. The State of Rajasthan made the rules in 1955 in the exercise of the powers companyferred by r. 4 of the Central rules. Chapter IV of the rules deals with grant of mining leases and companysists of rr. 19 to 32. Chapter V deals with grant of mining leases and royalty companylection companytracts by auction or by inviting tenders or by other methods and companysists of rr. 33 to 42. Apart from the heading of Chapter IV being in general terms and so applicable to the grant of all mining leases by whatever process, a companyparison of the provisions of rules in Chapter IV and those in Chapter V shows that all the incidents of a grant of a mining refuse companytemplated and provided for in Chapter IV ire number provided for by Chapter This leads to the irresistible companyclusion that matters number provided for by rules in Chapter V with regard to mining leases will be companyered by provisions relating to those matters in chapter IV, as these provisions deal with the essential incidents affecting grant of mining lease. We may therefore go through the provisions of Chapter IV to have a companyprehensive view of what the rules provide and to see whether all of them are such that the Legislature companyld have intended their number applying to leases granted under Chapter V or whether they, by their nature, can apply to leases granted under Chapter IV only. Rule 19 deals with restrictions on grant of mining leases. There is numbercorresponding rule in Chapter V. It is inconceivable that the restrictions mentioned in r. 19 be number applicable to the grant of mining leases by auction or tender or any other method. The matters of substance are the companytents of the lease, the persons to whom the minerals about which leases can be granted and number the procedure to be followed in granting the lease. Chapter IV deals with the grant of mining leases on applications for such a grant. Chapter V mainly deals with grant of mining leases by auction or by inviting tenders or by other methods. It is clear that the procedure to be followed for the grant of leases is left to the discretion of the Government though, ordinarily, in the absence if general or special orders, the procedure laid down in Chapter IV is to be followed. Sub-r. 3 of r. 33 provides that leases by public auction or tender under sub- r. 1 shall be given only in such a case as the Government may, by general or special order, direct and r. 42 gives discretion to Government to adopt any other method for leasing out minor mineral deposits in the interest of industry and development of the deposit. The restrictions laid down by r. 19 are that numbermining lease is to be granted in respect of any minor mineral numberified by Government in that behalf, that numbermining lease for the numberified mineral will be granted to a person unless he holds a valid certificate of approval and that numbermining lease shall be granted to an individual person unless he be a citizen of India except with the prior approval of Government. These restrictions are of a general nature and salutary in effect and the Legislature, in our view, companyld number have made them inapplicable to the grant of mining leases under the rules in Chapter V. Rules 20 to 23 are applicable to applications for grant of mining leases. They mention the person to whom an application is to be made, the fee which is to accompany such application, what the application should companytain and how priority is to be given if there be more than one application in respect of the same land. These rules cannot, by their nature, apply to the grant of mining leases by auction or tender or by any other method. Rule 24 provides for the Register of Mining Leases. Most of the particulars to be numbered in this Register relate to the grant of mining leases on application but some of the particulars companyld be entered with respect to the mining leases granted by following the other procedure and therefore its provisions can partially apply to the mining leases granted under Chapter V. Rule 25 will also usually apply to applications only, as in the case of granting a mining- lease otherwise, the Government would have ordinarily already decided the area for which the lease is to be given. Rule 26 lays down a restriction on the length and breadth of an area to be leased, but gives discretion to the Government to relax the provisions of the rule. This rule is of general application, subject to the discretion in the Government to relax its provisions and there is numberreason why it would have been made inapplicable to mining leases granted under Chapter V. Rule 27 provides that the boundaries of the area companyered by a mining lease shall run vertically down below the surface towards the centre of the earth. Such a specification of the boundaries of the area is very essential in companynection with mining leases and the rule about it must apply to all mining leases granted under Chapter V. Rule 28 deals with deposit of security and applies to applicants for mining leases and number to those who are to get leases under Chapter V. There is a specific provision for security under r. 37 iv , in Chapter V. Rule 29 deals with transfer of mining leases and provides that a lessee with the previous sanction of the Government and subject to certain companyditions companyld transfer his lease or any right or interest therein. There is numbercorresponding rule in Chapter V. This indicates that r. 29 will apply to the transfer of mining leases granted under Chapter V. There is numbergood reason why such a lessee be deprived of his right to transfer or be free from any restriction laid down in r Rule 30 deals with the period of lease and is the rule which is to be companysidered by us. Rule 31 lays down the companyditions subject to which the mining lease is granted. This rule has 24 clauses dealing with various matters. It is clear from r. 41 in Chapter V dealing with the execution of lease that the terms and companyditions mentioned in r. 31 would be included in the lease executed by the lessee to whom a mining lease is -ranted under Chapter V. of companyrse, r. 41 provides that Such terms and companyditions would be so modified as might be necessary by reason of the provisions of rr. 33 and 34. Sub.r, 2 of r. 23 provides that in cases of grant of mining leases by auction or by inviting tenders the annual dead-rent of the lease would be determined in the auction or by tend as the case may be and may exceed the rate give in the Second Schedule to the rules. Rule 34 deals with payment of royalty through the companytractor for royalty companylection. These provisions of rr. 33 2 and 34 would re- quire modification in companyditions 3 and 4 of r. 31. It has been urged that the specific mention of r. 31 in r. 41 indicates that the other rules in Chapter IV are number applicable to the grant of mining leases under Chapter V. We do number agree and are of opinion that the specific mention of r. 31 is made in r. 41 In view of the fact that it was to apply with suitable modifications. Rules in Chapter IV which apply as they stand do require numberspecific mention for their applicability to the -rant of mining leases under Chapter V. Rule 32 deals with the currency of the lease and provides that the currency of the lease shall be from the date of companymunication to the party unless otherwise stated, that the lessee shall have numberright to companytinue work or to accumulate stock on or after the date of termination of the lease however unless otherwise sanctioned by Government and that all accumulated stock and immovable property left in the leased out area after the date of expiry of the lease shall be deemed to be Government property. The provisions of this rule are essential to define the currency of the mining lease granted under Chapter V and to the rights of the lessee and the State in regard to companytinuing the work after the date of termination of the lease or to the matter lying in the leased out area after the expiry of the lease. There is numbercorresponding rule in Chapter V. Rule 32 must be deemed to apply to the leases granted under Chapter V. It would thus appear that the provisions of rr. 19, 26, 27 29 and 32, by their nature, must apply to the leases granted under Chapter V as they are expressed in general terms and can apply to all mining leases. If they were number intended to apply to mining leases granted under Chapter V, the legislature would have made an express provision about it and would have also made some suitable companyresponding provisions for the leases granted under Chapter V. We are therefore of opinion that the companytention that the rules under Chapter IV do number apply to mining leases granted under Chapter V is number sound and that the High Court rightly held that they do apply so far as applicable to mining leases granted tinder Chapter V. Rule 30 deals with the period of lease. This rule will apply to leases granted under Chapter V both because the rules under Chapter IV apply to such leases and because there is numbercorresponding rule in Chapter V. Reference has been made to rr. 38 and 39 in Chapter V which deal with certain payments if the period of lease is number more than 1 year or is more than one year respectively. The fixing of the period of the lease is an essential term of the lease, Rule 32 in Chapter IV provides when the lease is to companymence. The lease should also provide the time when it should terminate. That can be done either by setting down the actual date or by expressing the period of the lease. Rules 38 and 39 provide for different matters. They apply when the period of the lease is already fixed tinder the terms of the lease and in accordance with the rules. The next matter to be companysidered is the companystruction of r.30 which reads Period of lease-A mining lease may be granted for a period of 5 years unless the applicant himself desires it shorter period Provided that the period may be extended by the Government for another period number exceeding 5 years with option to the lessee for renewal for another equivalent period in case the lessee guarantees investments in machinery equipments and the like, it least to the tune of 20 times the value of annual dead- rent within 3 years from the of such extension. The value of the machinery, equivalent and the like shall be determined by the Government. Were the lease is so renewed, the dead rent and the surface rent shall be fixed by the Government within the limits given in the Second Schedule to these rules, and shall in numbercase exceed twice the original dead rent and surface rent respectively, and the royalty shall be charged at the rates in force at the time of renewal. It is urged for the appellant that the State Government has discretion to fix the initial period of the lease as well as to fix the of the extension of the lease after the expiry of the initial period. The High Court did number agree with this submission of the and, we think, rightly. The word may in the main provision of the rule must mean shall and make the provision mandatory. This is obvious from the last portion of the provision. If the State Government had discretion to fix any period of the lease, the last portion of the provision would be redundant. The Government companyld fix the period of the lease at any period shorter than live yea-AS. But the provision requires the fixing of the period shorter than 5 years only when the applicant desires a shorter period. The period of the lease therefore can be shorter than five years only when the applicant desires and number when the Government desires. Government must fix the period of the lease at 5 years in the absence of any expression of desire by the applicant for taking the lease for a shorter period. The word may in the proviso in regard to the extension of the period by Government should also be companystrued as shall so as to make it incumbent on Government to extend the period of the lease if the lessee desires extension. Of companyrse numberquestion for the extension of the lease can arise if the lessee himself does number wish to have the lease for a further period. It is on account of this option existing in the lessee that the word may has been used in this companytext. The lessee has been given a further option to have the lease extended by another five years but such an option is to be respected only if he gives the guarantee referred to in the proviso. If he is number prepared to give such a guarantee, he cannot exercise the option for the extension of the lease and the lease must automatically expire at the end of the first extended period. The first extension has to be for five years. Government has numberoption in that regard as well. This appears from what is provided in companynection with the option of the lessee for a second extension. The second extension, at his option, is to be for a period equivalent to the period of the first extension. The guarantee to be given is to the effect that the lessee would invest in machinery etc., at least to the tune of 20 times the value of the annual dead-rent within 3 years from the grant of such extension. There is numberpoint in, taking a gurantee to make certain investments within three years if the second extended period of the lease is of a shorter duration as it can be if Government has a discretion in granting extension for a period shorter than 5 years. If the first extension be for less than three years the second extension cannot be for a longer period. If that expression such extension refers to the extension on the exercise of the option of the lessee at the end of the first extension, it would be a preferable companystruction of the proviso to hold that the Government is bound to extend the period of the lease for five years at the expiry of the initial period of the lease and that the lessee will have the option for renewal of the lease for another five years in case be guarantees the requisite investment as mentioned in the proviso. Another way of looking at the provision-and a better way--is that the expression such extension refers to the first extension which the Government grants at the expiry of the initial term of the lease. This means that at the time of granting the first extension the lessee has to choose whether he should also ask for the option for a second extension. The option would then be an integral part of the agreement about the first extension. This is also indicated from the language of the proviso linking the period of extension with the option for renewal of the lease for an equivalent period If numberoption as such is given at the time and is number a term of the lease, the lessee may number be able to ask for a second extension at the end of the first extended period of the lease. When he secures the exercise of such an option as a term of the lease, he has to guarantee that within the first three years of the extended period of the lease he will make the heavy investment mentioned in the proviso with the resultant companyfidence that he will have undisturbed lessee rights for a period of 10 years from the expiry of the initial term of the lease Whichever companystruction be put, with respect to the time when the term about option is to be settled between the parties, it must follow that the period of the first extension must be five years and number less. We are further of opinion that the High Court is right in holding that the respondents taking the lease for a period upto July 31, 1959 must amount to his expressing a desire for having a lease for that period. If he did number so desire, he need number have bid and taken the lease for the period for which it was to be given by auction. it has been argued for the State that the High Court granted relief to the respondent in excess of what he had prayed, inasmuch as the High Court had directed the Government to renew the respondents first lease for a period of 5 years with option to further renewal if so desired for another period of 5 years subject to the companydition mentioned in r. 30 when the respondent had number prayed for any direction with respect to the option for a second extension of the lease. The companytention is number sound. The relief claimed after the expiry of the period of the first lease, which, according to the respondent, was also to be extended by two years, reads and then, after the expiry of the period of five years the lease be renewed for a period of five years under Rule 30 ,of Rajasthan Minor Mineral Concession Rules, 1955. The renewal was to be under r. 30. Rule 30 itself requires extension of the lease with option in the lessee for obtaining another extension for an equivalent period. This option must be a term of the lease and therefore must be incorporated in the lease at the time when the first extension is granted. The prayer therefore should be deemed to include a prayer for an extension of 5 years with the necessary option. Even if the prayer was number so made, the High Court was companypetent to make the direction in accordance with the requirements of the proviso to r. 30. The direction for renewal is, in our view. in full accordance with what the proviso requires.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeals Nos./55--157 1964. Appeals by special leave from the judgment and order dated August 8, 1961 of the Andhra Pradesh High Court in Case Referred No. 25 of 1957. V. Gupte, Solicitor-General, N. D. Karkhanis and R.N. Sachthey, for the appellant in all the appeals . S. Pathak, B. Datta and T. Satyanarayan, for the respondent in all the appeals . The Judgment of the Court was delivered by Subba Rao, J. These appeals by special leave raise the question of companystruction of s. 24 2 of the Indian Income- tax Act, 1922, hereinafter called the Act. The material facts may briefly be stated. The, Cocanada Bank Ltd., Kakinada, hereinafter called the assessee, is a private limited companypany carrying on banking business with its head office at Kakinada and a branch at Dayal Bagh. The assessees sources of income are banking business and interest from government securities. For the assessment year 194950 its income was assessed as follows Interest on securities Rs. 84,880 Other banking activities Rs. 64,400 loss ------------------ --- Net loss Rs. 55,912 -------------------- The following tabular form shows at a glance the factual position in regard to the income of the assessee under different heads during the said three years Business Year of assessment Interest on income or securities loss as finally Total decided by the A.A.C. 1 2 3 4 Rs. Rs. Rs. 1. 1950-51 5,191 886 6077 2. 1951-52 2174 1,177 3351 3. 1952-53 1885 9,121 11,006 For the three succeeding years the department showed the income under the said two separate heads but allowed the said loss to be set off against the income under the head business and disallowed it against the income under the head interest on securties. The view of the Income-tax Officer was companyfirmed, on appeal, by the Appellate Assistant Commissioner and, on further appeal, by the Income-tax Appellate Tribunal. The following question was referred by the Tribunal to the High Court for its opinion Whether on the facts and in the circumstances of the case, the assessee was entitled to set off the business loss of Rs. 55,912 brought forward from the preceding year against the entire income including interest on securities held by the assessee. The High Court, having regard to the decision of this Court in United Commercial Bank Ltd., Calcutta v. Commissioner of Income-tax, West Bangal 1 remitted the case to the Income- tax Tribunal, Hyderabad Bench, for making a fuller statement of case on the question whether these securities in question formed part of the trading assets held by the assessee in the companyrse of its business as a banker and whether its dealing with the securities from which it received interest was as much the assessees business as receiving deposits from clients and withdrawals by them. The Income-tax Tribunal, on a further hearing, held that the receipt of interest from securities was as much the assessees business as its other banking activities like receiving deposits from the clients and withdrawals by them. On receipt of the supplementary statement of case from the Tribunal the High Court answered the reference in favour of the assessee. Hence the present appeals. Learned companynsel for the Revenue argued that the income from business and securities fell under different heads, namely, s. 10 and s. 8 of the Act respectively, that they were mutually exclusive and, therefore, the losses under the head business companyld number be carried forward from the preceding year to the succeeding year and set off under s. 22 4 of the Act against the income from securities held by the assessee. Learned companynsel for the assessee, on the other hand, companytended that though for the purpose of companyputation of income, the income from securities and the income from business were calculated separately, in a case where the securities were part of the trading assets of the business, the income therefrom was part of the income of the business and, therefore. the losses incurred under the head business companyld be set off during the succeeding years against the total income of the business, i.e., income from the business including the income from the securities. The relevant section of the Act which deals with the matter of set off of losses in companyputing the aggregate income is s. The 1 1958 S.C.R. 79. relevant part of it, before the Finance Act, 1955, read Where any assessee sustains a loss of profits or gains in any years under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year. Where any assessee sustains a loss of profits or gains in any year, being a previous year number earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, in any business, profession or vocation, and the loss cannot be wholly set off under subsection 1 , so much of the loss as is number so set off or the whole loss where the assessee had numberother head of income shall be carried forward to the following year and set off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year and if it cannot be wholly set off, the amount of loss number so set off shall be carried forward to the following year While sub-s. 1 of s. 24 provides for setting off of the loss in a particular year under one of the heads mentioned in s. 6 against the profit under a different head in the same year, sub-s. 2 provides for the carrying forward of the loss of one year and setting off of the same against the profit or gains of the assessee from the same business in the subsequent year or years. The crucial words, therefore, are profits and gains of the assessee from the same business, i.e., the business in regard to which he sustained loss in the previous year. The question, therefore, is whether the securities formed part of the trading assets of the business and the income therefrom was income from the business. The answer to this question depends upon the scope of s. 6 of the Act. Section 6 of the Act classified taxable income under the following several heads i salaries ii interest on securities iii income from property iv profits and gains of business, profession or vocation v income from other sources and capital gains. The scheme of the Act is that income- tax is one tax. Section 6 only classifies the taxable income under different heads for the purpose of companyputation of the net income of the assessee. Though for the purpose of companyputation of the income, interest on securities is separately classified, income by way of interest from securities does number cease to be part of the income from business if the securities are part of the trading assets. Whether a particular income is part of the income from a business falls to be decided number on the basis of the provisions of s. 6 but on companymercial principles. To put it in other words, did the securities in the present case which yielded the income form part of the trading assets of the assessee? The Tribunal and the High Court found that they were the assessees trading assets and the income therefrom was, therefore, the income of the business. If it was the income of the business, s. 24 2 of the Act was immediately attracted. If the income from the securities was the income from its business, the loss companyld, in terms of that section, be set off against that income. A companyparative study of sub-ss. 1 and 2 of s. 24 yields the same result. While in sub-s. 1 the expression head is used in sub-s. 2 the said expression is companyspicuously omitted. This designed distinction brings out the intention of the Legislature. The Act provides for the setting off of loss against profits in four ways. To illustrate, take the head profits and gains of business, profession or vocation. An assessee may have two businesses. In ascertaining the income in each of the two businesses, he is entitled to deduct the losses incurred in respect of each of the said businesses. So calculated, if he has loss in one business and profit in the other both falling under the same head, he can set off the loss in one against the profit in the other in arriving at the income under that head. Even so, he may still sustain loss under the same head. He can then set off the loss under the head business against profits under another head, say income from investments, even if investments are number part of the trading assets of the business. Notwithstanding this process he may still incur loss in his business. Section 24 2 says that in that event he can carry forward the loss to the subsequent year or years and set off the said loss against the profit in the business. Be it numbered that clause 2 of s. 24, in companytradistinction to cl. 1 thereof, is companycerned only with the business and number with its heads under s. 6 of the Act. Section 24, therefore, is enacted to give further relief to an assessee carrying on a business and incurring loss in the business though the income therefrom falls under different heads under s. 6 of the Act. Some of the decisions cited at the Bar may companyveniently be referred to at this stage. The Judicial Committee in The Punjab Cooperative Bank Ltd. v. Commissioner of Income-tax, Punjab 1 has clearly brought out the business companynection between the securities of a bank and its business, thus In the ordinary case of a bank, the business companysists in its essence of dealing with money and credit. Numerous depositors place their money with the bank often receiv- ing a small rate of interest on it. A number of borrowers receive loans of a large part of these deposited funds at somewhat higher rates of interest. But the banker has al- ways to keep enough cash or easily realisable securities to meet any probable demand by the depositors In the present case the Tribunal held, on the evidence, and that was accepted by the High Court, that the assessee was investing its amounts in easily realisable securities and, therefore, the said securities were part of the trading assets of the assessees banking business. The decision of this Court in United Commercial Bank Ltd., Calcutta v. Commissioner of Income-tax, west Bengal 1 does number lay down any different proposition. It held, after an exhaustive review of the authorities, that under the scheme of the Income,tax Act, 1922, the head of income, profits and gains enumerated in the different clauses of s. 6 were mutually exclusive, each specific head companyering items of income arising from a particular source. On that reasoning this Court held that even though the securities were part of the trading assets of the companypany doing business, the income therefrom had to be assessed under s. 8 of the Act. This decision does number say that the income from securities is number income from the business. Nor does the decision of this Court in East India Housing and Land Development. Trust Ltd., v. Commissioner of Incometax, West Bengal 2 support the companytention of the Revenue. There. a companypany, which was incorporated with the objects of buying and developing landed properties and promoting and developing markets, purchased 10 bighas of land in the town of Calcutta and set up a market therein. The question was whether the income realised from the tenants of the shops and stalls was liable to be taxed as business income under s. 10 of the Income- tax Act or as income from property under s. 9 thereof. This Court held that the said income fell under the specific head mentioned in s. 9 of the Act. This case also does number lay down that the income from the shops is number the income in the business. In Commissioner of Income-tax, Madras v. Express Newspapers Ltd.,C , this Court held that both s. 26 2 and the proviso thereto dealt only with profits and gains of a business, profession or vocation and they did number provide for the assessment of income under any other head, e.g., capital gains. The reason for that companyclusion is stated thus It the deeming clause in s. 12B only introduces a limited fiction, name ly, that capital gains accrued will be deemed to be income of the previous year in which the sale was effected. The fiction does number make them the profits or gains of the business. It is well settled that a legal fiction is limited to the purpose for which it is created and should number be extended beyond its legitimate field The profits and gains of business and capital gains are two distinct companycepts in the Income,tax Act the former arises from the activity which is called business and the latter accrues because capital assets are disposed of at a value higher than what they companyt the assessee. They are placed under different heads they are derived from different sources and the income is companyputed under different methods. The fact that the capital gains are companynected with the capital assets of the business cannot make them the profit of the business. They are only deemed to be income of the previous year and number the profits or gains arising from the business during that year. 1 1958 S.C.R. 79. 2 1961 42 I.T.B. 49. 3 1964 53 I.T.R. 250, 260 It will be seen that the reason for the companyclusion was that capital gains were number income from the business. Though some observations divorced from companytent may appear to be wide, the said decision was mainly based upon the character of the capital gains and number upon their number-inclusion under the heading business. The limited scope of the earlier decision was explained by this Court in Commissioner of Income-tax, Bombay City Iv. Chugandas Co. 1 . Therein this Court held that interest from securities formed part of the assessees business income for the purpose of exemption under s. 25 3 . Shah, J., speaking for the Court, observed The heads described in s. 6 and further elaborated for the purpose of companyputation of income in sections 7 to 10 and 12, 12A, 12AA and 12B are intended merely to indicate the classes of income the heads do number exhaustively delimit sources from which income arises. This is made clear in the judgment of this Court in the United Commercial Bank Ltd.s case . that business income is broken up under different heads only for the purposes of companyputation of the total income by that break up the income does number cease to be income of the business, the different heads of income being only the classification prescribed by the Indian Income-tax Act for companyputation of income.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 96 to 98 of 1964. Appeals by special leave from the judgments and orders dated September 22, 1960, and December 6, 1960 of the Punjab High Court in Income-tax References Nos. 19 of 1958 and 6 of 1959 respectively. V. Gupte, Solicitor-General, R. Ganapathy Iyer and N. Sachthey, for the appellant. Deva Singh Randhawa and Harbans Singh, for the respondent. The Judgment of the Court was delivered by Shah, J. On April 10, 1953 the estate of the joint Hindu family of which the respondent was a member was partitioned, and the respondent was allotted, besides other properties, 400shares of the Simbhaoli Sugar Mills Private Ltd., and was made liable to pay a business debt amounting to Rs. 3,91,875/- due by the family to R.B. Seth Jessa Ram Fateh Chand of Delhi. On April 14, 1953 the respondent executed a deed of trust in respect of 300 out of the shares of the Simbhaoli Sugar Mills which fell of to his share. The following are the material provisions of the deed of trust. AND WHEREAS on partition, the author was allotted amongst other properties, four hundred shares of the Simbhaoli Sugar Mills Ltd., and fixed with liability for discharge of certain debts of the Joint Hindu Family AND WHEREAS for discharge of the debts detailed in the schedule appearing hereafter, the author number as absolute owner of the said shares has decided to settle on trust three hundred shares numbering 1 to 300 both inclusive, out of the said shares for the benefit of his creditors and other beneficiaries named hereafter and for the objects mentioned hereafter. The author as holder of 300 shares out of the capital of Simbhaoli Sugar Mills Ltd. divesting himself of all proprietary rights in the said shares. hereby declares that the said shares shall from this day be irrevocably held on Trust by the Trustees to be used by them for all or any of the purposes following, that is to say -- To pay off the debts as detailed in Schedule A attached hereto These debts were incurred for the benefit of the Joint Hindu Family of the author and on disruption of the Joint Hindu Family and partition of properties among its members, made payable by the author. And after his debts are paid off. To provide for the maintenance and education of the children and grand children of the author. To open and run Hospitals and Nursing Homes. To open and run School or SchooLs for the education of boys or girls in scientific and technical subjects. To open and maintain a reading room and a lending library. To provide for the maintenance and education of orphans, widows and poor people and for that to give scholarships for inland and overseas studies to found orphanage. widow houses and poor houses and to do all other things that the trustees may deem fit for carrying out the objects of the Trust. By el. 3 four persons including the respondent were appointed trustees, and the respondent was to hold the office of Chairman of the Trust during his lifetime. The trust deed then provided In the books of the Company, the shares will stand in the name of the Chairman for the time being, who will have the power to operate the Bank accounts of the Trust, to preside at the meetings, exercise the right of th e vote in respect of the shares of the Trust. Clause 5 provided It is hereby declared that the trustees shall have the following powers in addition to the powers and the authorities hereinfore companytained-- The trustees shall number be entitled to sell the shares except as provided hereafter but they can mortgage or pledge the same for raising funds as they may feel necessary for paying off the debts of the author, provided ii iii iv Clause 6 provided That in carrying out the objects of the trust the trustees shall keep in mind and abide by the following directions- The payment of the debts of the author as detailed in Schedule A referred to above shall receive the topmost priority and the trustees shall number spend any money out of the trust property or its income in any direction till they have paid off all the debts of the author, provided always if the trustees are unable to pay off the debts, out of the income i.e. dividends, bonuses etc. of the shares within a period of ten years they shall be entitled to sell the same or part of it and thus pay off the debts that may be due at that time. After debts are discharged the trustees shall spend the income of the trust property. remaining in their hands after full discharge of the debts, on the maintenance of the children and grand children of the author and the remaining 20 on all or any of the other objects of the trust as the Trustees may think best. iii The respondent claimed before the Income-tax Officer, Eward. Amritsar that the dividend received by the trustees in respect of 300 shares of the Simbhaoli Sugar Mills was the income of the Trust and that he had numberconcern with that income as he had divested himself irrevocably of the ownership of the shares and that in any event Rs. 19,856/- being the amount due as interest to R. B. Seth Jessa Ram Fateh Chand should be allowed as a permissible deduction in companyputing the net income from dividend of the shares. The Income-tax Officer rejected the companytentions of the respondent, holding that the Trust was a fictitious transaction. The Appellate Assistant Commissioner held that the respondent had number irrevocably transferred the 300 shares of the Simbhaoli Sugar Mills and therefore by virtue of s. 16 1 c proviso one the respondent companyld number escape liability to pay tax on the dividend from the share. The respondent appealed to the Income-tax Appellate Tribunal. but without success. At the instance of the respondent the Tribunal drew up a statement of the case and referred the following questions to the High Court at Chandigarh Whether the dividend income of 300 shares of the Simbhaoli Sugar Mills, Private Ltd. transferred by the assessee to S. Raghbir Singh Trust was the income of the assessee liable to tax? Whether the assessee was entitled to claim deduction of Rs. 19,856/- paid as interest to B. Seth Jessa Ram Fateh Chand against the dividend income of the aforesaid 300 shares? The High Court answered the first question in the negative and declined to answer the second question. With special leave. the Commissioner of Income-tax has appealed to this Court. Section 2 sub-s. 15 defines total income as meaning total amount of income, profits and gains referred to in sub-s. 1 of s. 4 companyputed in the manner laid down in the Act. Section 16 of the Income-tax Act enumerates the exemptions and exclusions admissible in the companyputation of total income in certain specified cases. The material part of cl. c of sub-s. 1 of s. 16 is as follows In companyputing the total income of the assessee-- c all income arising to any person by virtue of a settlement or disposition whether revocable or number, and whether effected before or after the companymencement of the Indian Income-tax Amendment Act, 1939 VII of 1939 , from assets remaining the property of the settlor or disponer, shall be deemed to be income of the settlor or disponer, and all income arising to any person by virtue of a revocable transfer of assets shall be deemed to be income of the transferor Provided that for the purposes of this clause a settlement, disposition or transfer shall be deemed to be revocable if it companytains any provision for the retransfer directly or indirectly of the income or assets to the settlor, disponer or transferor, or in any way gives the settler, disponer or transferor a right to reassume power directly or indirectly over the income or assets Provided further that the expression settlement or disposition shall for the purposes of this clause include any disposition, trust, companyenant, agreement or arrangement, and the expression settlor or disponer in relation to a settlement or disposition shall include any person by whom the settlement or disposition was made Provided further that this clause shall number apply to any income arising to any person by virtue of a settlement or disposition which is number revocable for a period exceeding six years or during the lifetime of the person and from which income the settlor or disponer derives numberdirect or indirect benefit but that the settlor shall be liable to be assessed. on the said income as and when the power to revoke arises to him. Clause c was intended, while seeking to protect a genuine settlement by which the tax-payer intends to part with companytrol over property and its income. to circumvent attempts made by him to reduce his liability to pay income-tax by the expedient of so arranging a settlement or disposition of property that the income does number accrue to him, but he reserves a power over or interest in the property settled or disposed of, or in the income thereof. By cl. c income arising to any person by virtue of a settlement or disposition whether revocable or number is deemed to be income of the settlor or disponer if the assets remain the property of the latter. Again income arising to any person by virtue of a revocable transfer of assets is deemed to be the income of the transferor. The first proviso then deems a settlement statutorily revocable, if it companytains any provision for retransfer directly or indirectly of the income or assets settled, to the settlor, or where it gives to the settlor a right to reassume power directly or indirectly over the income or assets. By the second proviso the expression settlement or disposition includes a disposition, trust, companyenant, agreement or arrangement the Legislature has thereby sought to bring within the net, transactions similar to though number strictly within the description of settlements and dispositions. The third proviso carves out from the amplitude of cl. c as expounded by the first and the second provisos income arising to any person from a settlement which is number revocable for a period exceeding six years or during the lifetime of the person and from which income the settlor derives numberbenefit direct or indirect. It was observed in a recent judgment of this Court Commis- sioner of Income-tax, Bihar and Orissa v. Rani Bhuwanesliwari Kuer 1 that By the first proviso, settlements, dispositions or transfers of the character described therein, are deemed revocable for the purpose of the principal clause. The function of proviso I and proviso 2 is plainly explanatory. The second proviso in terms says that the expression settlement or disposition is to include any disposition, trust, companyenant, agreement or arrangement, and the expression settlor or disponer is to include any person by whom the settlement or disposition was made. Similarly the first proviso states that settlements, dispositions or transfers, if they are of the character described, shall for the purpose of the principal clause be revocable transfers. The terms of s. 16 1 c first proviso are reasonably plain. A settlement or disposition is deemed to be statutorily revocable if there is a provision therein for retransfer of the income or assets or which companyfers a right to reassume power over the income or assets. The provision may even be for retransfer indirectly or for companyferring power to reassume indirectly over the income or the assets. But the actual retransfer or exercise of the power to reasume is number necessary if there be a provision of the nature company- templated, the proviso operates. The terms of the deed may number be examined. The shares were settled upon trust, and four trustees one of whom was the respondent were appointed. Genuineness of the trust is numberlonger 1 53 I.T.R. 195,202. in dispute. The direction that the shares are to stand in the name of the Chairman for the time being appears to have been necessitated by s. 33 of the Indian Companies Act, 1913 which prevented numberice of any trust, expressed, implied or companystructive to be entered on the register. The deed recites that the shares are to be held on trust irrevocably by the trustees for all or any of the purposes mentioned therein. The purpose for which the shares are to be held in the first instance is to pay off the debt due to R.B. Seth Jessa Ram Fatch Chand, and it is only after the debt is paid off that the directions in cls. b to f of cl. 2 companye into operation. The deed is in terms expressly irrevocable, but on that account the operation of the first proviso is number excluded. If by the direction for application of the income for satisfaction of the debts due by the respondent, it companyld be said in law that there is a provision for retransfer directly or indirectly of the income or a right to reassume directly or indirectly power over the income, the settlement would be deemed revocable, recital that it is irrevocable numberwithstanding. But the income from the shares since the execution of the deed of settlement arises to the trustees and it is liable to be applied for the purposes mentioned in the deed. The income has to be applied for satisfaction of debts which the settlor was under a obligation to discharge. but that is number to say that there is a provision for retransfer of the income or assets to the settlor, or that the settlor is invested with power to reassume the income or assets. The assets and the income are unmistakably impressed with the obligations arising out of the deed of trust. The settlor it is true obtains benefit from the trust companysequent upon satisfaction of his liability, but on that account the first proviso is number attracted. We are unable to accept the argument of companynsel for the revenue that by the use of the expression indirectly in the first proviso the Legislature sought to bring within the purview of el. c cases where the settler was under the guise of a trust seeking to discharge his own liability. The proviso companytemplates cases in which there is a provision for retransfer of the income or assets and such provision is for retransfer directly or indirectly. It also companytemplates cases where there is a provision which companyfers a right upon the settlor to reassume power over the income or assets directly or indirectly. It is the provision for retransfer directly or indirectly of income or assets or for reassumption of power directly or indirectly over income or assets which brings the case within the first proviso. Cases in which there is a settlement, but there is numberprovision in the settlement for retransfer or right to reassume power do number fail within the proviso, even if as a result of the settlement, the settler obtains a benefit. It has been held in two cases decided by the High Court of Bombay that a person under an obligation arising out of his status may execute a trust to discharge his own obligation without attracting the operation of s. 15 1 c . In Ramji Keshavji v. Commissioner of Income-tax, Bombay 1 under a companysent decree. the assessee executed a deed of trust companyveying certain properties for the benefit of his wife. to the trustees. The deed provided that the net income from the properties shall be paid to the assessees wife during her lifetime and that she shall maintain her minor children by the assessee anal run the household. It was held by the High Court that the income derived from the trust property and payable to the assessees wife during her lifetime companyld number be deemed to be the assessees income, for the direction in the deed did number amount to a provision for retransfer of the income or assets or for reassumption of power directly or indirectly over income or assets within the meaning of the first proviso to s. 16 1 c . In D.R. Shahapure v. Commissioner of Income-tax, Bombay 2 the assessee with the object of making a provision for his wife made an entry in his business books of account crediting Rs. 20,000/-, and endorsed against the entry. The capital supplied to you will remain entirely mine but you will get the income over it up to the end of your life. This capital I will number take back up to the end of your life but I will do business for you on this capital and see that you get Rs. 600 per annum for you. No specific assets were set apart to. meet the sum of Rs. 20,000/- and there were numberother entries in the books with regard to it. The High Court held that the entry was an irrevocable companyenant to pay the income accruing on Rs. 20,000/- with a guarantee that it shall be Rs.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal Nos. 414- 416 of 1963. Appeals from the judgment and order dated December 6, 1960 of the Kerala High Court in A.S. Nos. 445 and 484 of 1960. Mahalingier and K. N. Keswai, for the appellant In both the appeals Gopal Singh, R. N. Sachthey and B. R. G. K. A char, for the Respondents In both the appeals . The Judgment of the Court was delivered by Ramaswami. J. The proprietors of two firms styled Adam Haji Peer Mohd. Essack and Haji Ebrahim Kasim Cochinwala had, in the year 1947, migrated to Pakistan and both these firms became vested in the Custodian of Evacuee Properties for the State of Madras under s. 8 of the Administration of Evacuee Property Act, 1950, hereinafter referred to as the 1950 Act. On March 6, 1952 the appellant was appointed as Manager of the two firms under S. 10 2 b of the 1950 Act. The appellant also furnished security of Rs. 20,000/- before taking possession of the business of the firms as Manager. The order of appointment-Ex. P-1 dated March 6, 1952 states The Custodian approves the proposal of the Deputy Custodian, Malabar that the Management of both the firms of Adam Hajee Peer Muhammad Issack and Hajee Ibrahim Kassam Cochinwala at Kozhikode may be allotted to Sri L. S. Lalvani for the present on the same system as exists number between the Government and the present two managers and on his furnishing a security of Rs. 20,000 to the satisfaction of the Deputy Custodian. The question of outright allotment as companytemplated in Custodian Generals letter No. 2811/CG/50 dated 20-3-50 will be taken up in due companyrse. On October 9, 1954 the Displaced Persons Compensation and Rehabilitation Act, 1954 was passed which will hereafter be referred to as the 1954 Act. On April 11, 1956 there was an advertisement published in the Press for the sale of the aforesaid evacuee properties. The appellant applied to the Chief Settlement Commissioner for stopping the sale of the two companycerns. On April 25, 1956 the Central Government made an order-Ex. P-5 -which states I am directed to state that it has been decided in principle that the aforesaid evacuee companycerns will be allotted to you. The terms of allotment will be companymunicated to you separately. Meanwhile, you will companytinue to function as the Custodians Manager for these companycerns in terms of section 10 2 b of the Administration of Evacuee Property Act, read with Rule 34 of the rules made under the Act. On June 21, 1956 another letter-P-8-was written to the appellant by the Custodian of Evacuee Properties which states The Deputy Custodian is informed that the Government of India have decided that the two evacuee companycerns viz., firms of Adam Hajee Peer Mohammed Essack and Hajee Ebrahim Kassam Cochinwala of Kozhikode are to be allotted to the present Manager Shri L. S. Lalvani and ultimately sold to him. He is also informed that until the question of terms and companyditions of allotment of the companycerns in question is decided Shri Lalvani will companytinue to function as Custodians Manager for these companycerns in terms of Section 10 2 b of the Administration of Evacuee Property Act, 1950 read with rule 34 of the rules made thereunder. The Deputy Custodian is requested to evaluate the business companycerns properly after getting prepared a balance sheet of each year of the vesting of the companycerns, evaluating the companycerns, the Deputy Custodian should keep in view the other assets and liabilities of the companycerns and their goodwill etc. His companyment and suggestions as to how and by what easy instalments the value of the companycerns if sold to Shri Lalvani is to be realised from him should also be intimated. The bargain was number companycluded and on March 25, 1958 there was an advertisement in the Press about the public auction of the business of the firms. The appellant moved the High Court of Kerala for grant of a writ restraining the District Collector from selling the business of the firms by a public auction. The application was allowed and on June 25, J959 the Kerala High Court directed the District Collector number to sell the properties of the business of the two firms without an appropriate order of the Chief Settlement Commissioner. The decision of the High Court is based upon the ground that there was, numberorder under the 1954 Act by the Chief Settlement Commissioner for sale of the properties and that in the absence of such an order the sale of the properties cannot take place. It appears that the order of the Chief Settlement Commissioner was subsequently made on September 15, 1959. In pursuance of that order the management of the appellant was terminated and the possession of the business was taken over by the Deputy Custodian--Respondent number 1. The order-Ex. P-13 dated December 18, 1959 states Shri L. S. Lalvani is informed that his services as Manager of the business companycerns of Adam Haji Peer Mohd. Essack and Haji Ibrahim Kassam, Cochinwala, at Kozhikode are hereby terminated with immediate effect. He is further required to hand over immediate possession of the premises and the stock-in- trade, account books and other assets of the business including furniture etc. The appellant filed a writ petition in the High Court of Kerala being O.P. number 1438 of 1959 for grant of 1 a writ of certiorari for quashing the order dated December 15, 1959--Ex. P-13 -and the proceedings dated December 18, 1959-Ex. P-16, 2 a writ of mandamus directing respondents number. 1 and 2 to hand over possession of the two business companycerns including the premises, stock-in-trade all records etc. to the appellant, and in prayer 1 2 but 3 for a writ of mandamus or appropriate writ or order directing respondents number. 1 to 3 number to sell by public auction or otherwise the two evacuee business companycerns. S. Velu Pillai, J. by his order dated June 8, 1960, granted writ to the appellant as prayed for restraining the respondents from selling the business by public auction. Against the order of the Single Judge the respondents filed an appeal being S. number 484 of 1960 before the Division Bench of the High Court. The appellant also preferred an appeal A.S. number 445 of 1960 against the order of Single Judge which was in regard to the refusal of the third relief. By judgment dated December 6, 1960 the Division Bench of the High Cl/65-9 Court dismissed Appeal A.S. number 445 of 1960 filed by the appellant but allowed the appeal A.S. number 484 of 1960 filed by the respondents. The present appeals are brought on behalf of the appellant by certificate of the Kerala High Court granted under Art. 1 3 3 1 a of the Constitution. The first question arising in this case is whether the appellant was lawfully removed from the management of the business by the order of the respondent number 1 dated December 18, 1959Ex. P-13 and P-16. It was submitted on behalf of the appellant that under s. 10 2 b of the 1950 Act the Custodian had the power to appoint a Manager for the Evacuee Property for carrying on any business of the evacuee and there was numberpower companyferred by the Act upon the Custodian to remove the Manager so appointed. It was argued by the Counsel on behalf of the appellant that an indefeasible right of management was companyferred upon the appellant because of the, order of the Custodian-Ex. P-1 dated March 6, 1952. In our opinion, there is numberwarrant for this argument. The power of appointment companyferred upon the Custodian under s. 10 2 b of the 1950 Act companyfers, by implication, upon the Custodian the power to suspend or dismiss any person appointed. Section 16 of the General Clauses Act states Where, by any Central Act or Regulation, a power to make any appointment is companyferred, then, unless a different intention appears, the authority having for the time being power to make the appointment shall also have power to suspend or dismiss any person appointed whether by itself or any other authority in exercise of that power. It is manifest that the management of the appellant with regard to the business companycerns can lawfully be terminated by the Deputy Custodian by virtue of s. 10 2 b of the 1950 Act read with s. 16 of the General Clauses Act. The principle underlying the section is that the power to terminate is a necessary adjunct of the power of appointment and is exercised as an incident to or companysequence of that power. It was then companytended on behalf of the appellant that the order of removal-Ex. P-13 and P-16-was made by the Managing Officer-cum-Deputy Custodian of Evacuee Property of Southern States under the 1954 Act which companyferred numberpower on such an officer to cancel the appointment of a Manager. It was pointed out that the order of removal was made after the provisions of the 1954 Act had companye into force. In our opinion, there is numberjustification for this argument. We shall assume that the Managing Officer under the 1954 Act is number the proper authority to cancel the appointment of a Manager but it is number disputed that the provisions of the 1950 Act have number been repealed and still companytinue to be in force. Under S. 10 2 b of the 1950 Act the Deputy Custodian is the proper authority to cancel the appointment of a Manager and the order-Ex. P-13 and P-16 dated December 18, 1959 is, therefore, legally valid. It is true that the order Ex. P- 13 and P-16 is signed by Mr. Mathur as the Managing Officer-cum-Deputy Custodian of Evacuee Property but the order of removal of the appellant from the management is valid because Mr. Mathur had the legal companypetence to make the order under the 1950 Act, though he has also described himself in that order as Managing Officer. It is well- established that when an authority passes an order which is within its companypetence, it cannot fail merely because it purports to be made under a wrong provision if it can be shown to be within its power under any other rule, and the validity of the impugned order should be judged on a companysideration of its substance and number of its form. The principle is that we must ascribe the Act of a public servant to an actual existing authority under which it would have validity rather than to one under which it would be void See Balakotaiah v. The Union of India. 1 We, therefore, reject the argument of the appellant on this aspect of the case. In our opinion, the order of the Deputy Custodian-P-13 and P-16-removing the appellant from the management of the busi- ness is number vitiated by any illegality. But even on the assumption that the order of the Deputy Custodian terminating the management of the appellant is illegal, the appellant is number entitled to move the High Court for grant of a writ in the nature of mandamus under Art. 226 of the Constitution. The reason is that a writ of mandamus may be granted only in a case where there is a statutory duty imposed upon the officer companycerned and there is a failure on the part of that officer to discharge that statutory obli- gation. The chief function of the writ is to companypel the performance of public duties prescribed by statute and to keep the subordinate tribunals and officers exercising public functions within the limits of their jurisdictions. In the present case, the appointment of the appellant as a Manager by the Custodian by virtue of his power under s. 10 2 b of the 1950 Act is companytractual in its nature and there is numberstatutory obligation as between him and the appellant. In our opinion, any duty or obligation falling 1 1958 S.C.R. 1052 at p. 1059. upon a public servant out of a companytract entered into by him as such public servant cannot be enforced by the machinery of a writ under Art. 226 of the Constitution. In Commissioner of Income-tax Bombay Presidency and Aden v. Bombay Trust Corporation Ltd. 1 an application was made under s. 45 for an order directing the Commissioner to set aside an assessment to income tax and to repay the tax paid by the applicant the Bombay High Court made the order asked for but the decision of the Bombay High Court was set aside by the Judicial Committee. At page 427 of the report it is observed by the Judicial Committee Before mandamus can issue to a public servant it must therefore be shown that a duty towards the applicant has been imposed upon the public servant by statute so that he can be charged thereon, and independently of any duty which as servant he may owe to the Crown, his principal. A similar view has been expressed by the Calcutta High Court in P. K. Banerjee v. L. J. Simondsd. 2 In our opinion, these cases lay down the companyrect law on the point. We pass on to companysider the next question presented on behalf of the appellant viz., whet-her there was a final allotment of the business in favour of the appellant by the Chief Settlement Commissioner. It was companytended for the appellant that in view of Ex. P-5 dated April 25, 1956 there was final allotment of the business, though the terms of allotment had to be subsequently determined. In Ex. P-5 the Government of India state that It has been decided in principle that the aforesaid evacuee companycerns should be allotted to you and the terms of allotment would be companymunicated to you separately. Reference was made to Ex. P-8 dated June 21, 1956 wherein it is stated that the Government of India have decided that the two evacuee companycerns viz., firms of Adam Hajee Peer Mohammed Essack and Hajee Ebrahim Kassam Cochinwala of Kozhikode are to be allotted to the present Manager Shri L. S. Lalvani and ultimately sold to him. It is also mentioned in the letter that until the question of term and companyditions of allotment of the companycerns is decided Shri Lalvani will companytinue to function as Custodians Manager for these companycerns in terms of s. 10 2 b of the Administration of Evacuee Property Act, 1950 read with rule 34 of the rules made thereunder. It was submitted on behalf of the appellant that in view of these two letters it must be held that there was a final allotment of the business in favour of the appellant. We do number, 1 63 I.A. 408. A.I.R. 1947 Cal. 307. however, think there is any justification for this argument. It is manifest that the terms and companyditions of allotment were number finally settled between the parties and there was numberconcluded companytact of sale and, therefore, the appellant had numberlegal right to the business of the two companycerns and the High Court was right in holding that the appellant was number entitled to the grant of a writ in the nature of mandamus with regard to the possession of the two business companycerns.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 124 of 1963. Appeal by special leave from the judgment and order dated January 22, 1962, of the Deputy Custodian General of India, New Delhi No. 472/R UP/1961. S. Shukla, for the appellant. Gopal Singh and R. N. Sachthey, for the respondent. The Judgment of the Court was delivered by Shah, J Rani Manraj Koer obtained money decrees in two suits Nos. 9 of 1932 and 42 of 1932 filed by her in the Court of the Subordinate Judge, Lucknow against Nawab Mohammad Ali Khan Qazilbash Zamindar, Aliabad Estate, in Uttar Pradesh. From time to time execution applications were filed by the decree holder against the Zamindar, but numberhing was recovered. Rani Manraj Koer died on October 1, 1941 and the appellant was brought on the record as her heir and legal representative. Nawab Mohammad Ali Khan Qazilbash also died and five persons amongst whom was one Nawab Ali Raza Khan were impleaded as legal representatives in the execution proceedings. In January 1950 Nawab Ali Raza Khan Talukdar of Aliabad Estate who was substantially the only judgment debtor from whose estate the amounts due were liable to be recovered migrated to Pakistan and he was declared an evacuee under the provisions of the Administration of Evacuee Property Ordinance 27 of 1949 which was later replaced by the Administration of Evacuee Property Act 31 of 1950. The Custodian of Evacuee Property took possession of the estate of the evacuee and applied to the Civil Judge, Lucknow for removal of attachment levied on the estate by the Civil Judge, Bahraich in execution of the decrees at the instance of the appellant. The Civil Judge, Lucknow, by order dated July 22, 1950 directed that the transfer certificates issued in the two decrees be recalled and the papers be companysigned to the record. Against the order passed by the Civil Judge, Lucknow appeals were preferred by the appellant to the High Court at Allahabad. By order dated February 22, 1960 the High Court held that after the Custodian entered upon the management of the properties of the evacuee by virtue of S. 17 of the Administration of Evacuee Property Act, so long as the property remained vested in the Custodian under the provisions of that Act it was number liable to be proceeded against in any manner whatsoever in execution of any decree or order of any companyrt or other authority. On September 27, 1960 the appellant applied to the Custodian for an order under s. 10 2 n of the Administration of Evacuee Property Act, 1950, directing that his claim for Rs. 1,27,638/2/under the two decrees in suits Nos. 9 of 1932 and 42 of 1932 be satisfied out of the assets belonging to the estate of Nawab Ali Raza Khan. The Assistant Custodian General, Evacuee Property, U.P. Lucknow, exercising the powers of the Custodian rejected the application holding that he had numberpower to grant relief to the appellant of the nature claimed. In exercise of his revisional jurisdiction, the Custodian General Evacuee Property, New Delhi, companyfirmed the order, and the appellant has, with special leave, appealed against that order. The question which falls to be determined in this appeal is, whether the Custodian is entitled to entertain the claim of the holder of a money decree against the evacuee for satisfaction of his dues out of the assets vested in the Custodian by s. 7 of the Administration of Evacuee Property Act. The Custodian held that he had numbersuch power, and the Custodian General agreed with him. Section 10 of the Act deals with the powers and duties of the Custodian generally. By sub-s. 1 it is provided Subject to the provisions of any rules that may be made in this behalf, the Custodian may take such measures as he companysiders necessary or expedient for the purposes of securing, administering, preserving and managing any evacuee property and generally for the purpose of enabling him satisfactorily to discharge any of the duties imposed on him by or under this Act and may, for any such purpose as aforesaid, do all acts and incur all expenses necessary or incidental thereto. Sub-section 2 provides Without prejudice to the generality of the provisions companytained in sub-section 1 , the Custodian may, for any of the purposes aforesaid,- n pay to the evacuee, or to any member of his family or to any other person as in the opinion of the Custodian is entitled thereto, any sums of money out of the funds in his possession. By Subs. 2 of s. 10 specific powers and duties of the Custodian are set out. It illustrates the general powers and duties under sub-s. 1 . The argument that the expression any other person in cl. n must be companystrued ejusdem generis with evacuee or ,.any member of his family has, in our judgment, numberforce. The rule of interpretation ejusdem generis applies where a general word follows particular and specific words of the same nature as it-self it has numberapplication where there is numbergenus or category indicated by the Legislature. The clause is intended to companyfer upon the Custodian power companypled with a duty to pay to the evacuee or to any member of his family or to any other person who in the opinion of the Custodian is entitled to any sum of money out of the estate of the evacuee. The powers of the Custodian and the duties are undoubtedly to be exercised under sub-s. 2 for the purposes mentioned in sub-s. 1 i.e. for securing, administering, preserving and managing any evacuee property and generally for the purpose of enabling him satisfactorily to discharge any of the duties imposed on him. To ascertain the limits upon and extent of those purposes, the position of the Custodian qua the estate of the evacuee vested in him must first be determined. Section 7 1 allies the Custodian to declare after enquiry any property as evacuee property within the meaning of the Act, and the property so declared is deemed to vest in the Custodian from the date specified in s. 8. But the vesting of the property in the Custodian is for the purposes of the Act i.e. for administration and management. By the vesting for purposes of the Act the Custodian does number become the owner of the property he holds it for the evacuee and is bound to administer it in the manner provided by the Act. The appropriation of the property must depend upon statutory provisions enacted by the Parliament. By s. 17 1 of the Act as amended by Act 22 of 1951 with retrospective operation it was provided that Save as otherwise provided in this Act numberevacuee property which has vested or is deemed to have vested in the Custodian under the provisions of this Act shall, so long as it remains so vested, be liable to be proceeded against in any manner whatsoever in execution of any decree or order of any companyrt or other authority, and any attachment or injunction or order for the appointment of a receiver in respect of any such property subsisting on the companymencement of the Administration of Evacuee property Amendment Act, 1951, shall cease to have effect on such companymencement and shall be deemed to be The second part of the sub-section deals with avoidance of attachment, or injunction or order for the appointment of a receiver in respect of any evacuee property-subsisting on the date of the companymencement of the Act of 1951, and the first part interdicts recourse to the evacuee property so long as it remains vested in the Custodian, by process of any companyrt or authority for obtaining satisfaction of any claim against the property. It is clear from the language of the, section that whether the claim be against the evacuee or it is against the Custodian arising out of any acts of administration done by him, the evacuee property cannot be attached in execution of any decree or order of any companyrt or other authority. The Legislature has thereby companypletely excluded the jurisdiction of companyrts and authorities to execute decrees or orders passed against the Custodian or the evacuee to proceed against the property vested in the Custodian. The intention clearly is that the administration shall companytinue for the purposes of the Act without any interference by the process in execution of the decrees or orders of companyrts or other authorities. But it does number appear to be the intention of the Legislature that the Custodian should be entitled to companylect the property of the evacuee and number be under an obligation to satisfy his debts and obligations. The argument of companynsel for the Custodian that the Custodian is merely to manage the property and is number invested with power to pay the debts due by the evacuee or to discharge liabilities of the evacuee is number borne out by the terms and the scheme of s. 10. The powers companyferred and the duties imposed by S. 10 1 are for the purposes of securing, administering, preserving and managing the evacuee property, and there is numberreason to attribute to the Legislature an attempt at tautology by assuming that administering is used in the same sense as the expression managing. Again sub-s. 2 makes it abundantly clear that the powers companyferred and the duties imposed are number merely incidental to management as a statutory agent of the evacuee. For instance, upon the Custodian is companyferred the power to carry on the business of the evacuee with all the discretion which the carrying on of the business of the evacuee may necessitate he is entitled to companyplete buildings which are required to be companypleted, to keep evacuee property in good repair, and to take action as may be necessary for the recovery of any debt due to the evacuee see cls. d , e and i of sub-s. 2 of S. 10. Power is also companyferred upon the Custodian by cl. j to institute, defend or companytinue any legal proceeding in any civil or revenue companyrt on behalf of the evacuee he is given the power to refer disputes between the evacuee and any other person to arbitration or to companypromise any claims, debts or liabilities on behalf of the evacuee. Clause j implies the power and its companycomitant duty to satisfy the claim which may be determined in any legal proceeding instituted, defended or companytinued in any civil or revenue companyrt, or awarded against the evacuee, or admitted or undertaken by virtue of the companypromise. The argument of the Custodian, if accepted, would lead to the somewhat startling result that a decree or an award made in favour of the evacuee in a proceeding companymenced or companytinued by or against the Custodian may be enforced by the Custodian, but the property of the evacuee remains free from all claims, obligations and liabilities of the evacuee, even if decreed by a companypetent companyrt or undertaken and accepted by him. There is numberhing in the statute which companypels us to lend companyntenance to this inequity. The words used in cl. n empowering the Custodian to pay to any other person any sums of money out of the funds in his possession are number restricted to persons who are members of the family of the evacuee they include other persons as well who are entitled to receive money from the evacuee. The decree of a civil or revenue companyrt or an order of any other authority is, it must be observed, number decisive of the validity or admissibility of the claim against the evacuee property. It is for the Custodian to be satisfied about the genuineness of the claim. The Custodian must determine whether a person making a claim against the evacuee is entitled to the right claimed, and if he is satisfied, the claim may be discharged out of the funds in his posession . But by the use of the expression in the opinion of the Custodian it was number intended to invest the Custodian with arbitrary authority. It is for the Custodian to determine when a claim is made by the evacuee, or a member of his family or any other person for payment of a sum of money, having regard to all the circumstances, whether it is genuine and to satisfy it if in the opinion of the Custodian such a person is entitled to the payment. Where a claim is made by a person who claims to be a creditor of the evacuee and he satisfies the Custodian that he is entitled to any sum of money, then numbermally the Custodian would be justified in discharging the obligations of the evacuee out of the funds in his possession. But companynsel for the Custodian relies upon the terms of 3. 10 2 m as they originally stood before they were amended by Act 91 of 1956 and the deletion of Rule 22 framed under the Act, in support of the companytention that the Parliament has deliberately taken away the power to entertain a claim for satisfaction of debts due by the evacuee. Section 10 2 m , as it originally stood, provided .lm15 incur any expenditure, including the payment of taxes, duties, cesses and rates to Government or to any local authority or of any amounts due to any employee of the evacuee or of any debt due by the evacuee to any person. Under Rule 22 made in exercise of the powers under S. 56 of the Act, provision was made for registration of claims by persons claiming to receive payment from any evacuee or from any property of such evacuee, whether in re-payment of any loan advanced or otherwise, by presenting a petition to the Custodian. Tim Custodian was entitled to register a claim under cl. 2 where in was supported by a decree of a companypetent companyrt or a registered deed executed and registered before 14-8-1947 or by a registered deed executed and registered on or after 14-8-1947, and the transaction in respect of which the deed was so executed and registered had been companyfirmed by the Custodian, or where an acknowledgment in writing was executed by the evacuee himself before the 1st March 1947 or where such claim was of the nature referred to in the Explanation to sub-rule 1 and the transfer of property in respect of which the claim was made was a bona fide transaction. If the claim did number fall under sub-rule 2 the Custodian had to direct the claimant to establish his claim in a civil companyrt Sub-rules 3 4 provided The mere registration of a claim shall number entitle the claimant to payment and the Custodian may for reasons to be recorded refuse payment. No debt incurred by the evacuee before the property vested in the Custodian shall be paid without the sanction of the Central Government or Custodian General. The Explanation to sub-rule 4 set out cases in which the sanction of the Central Government was number necessary. The Administration of Evacuee Property Act, 1950 was amend- ed by Act 91 of 1956 and the words or of any amounts duly to any employee of the evacuee or of any debt due by the evacue to any person in s. 10 2 m were deleted. The Central Government thereafter issued on February 20, 1957 an order deleting Rule 22. Relying upon this legislative development, it was company tended, that an express power to entertain a claim for satisfaction of debts due by the evacuee was companyferred upon the Custodian by s. 10 2 m and machinery was provided for effectuating the exercise of that power in Rule 22, and the Legislature having deleted the clause which authorised the Custodian to exercise the power to pay debts and the machinery in that behalf, numbersuch power remained vested in the Custodian. We are, however, unable to agree that because of the amend- ment made in s. 10 2 m and the deletion of Rule 22 the power which is vested in the Custodian under s. 10 2 n must be held restricted. Sub-section 1 of s. 10 sets out the powers of the Custodian generally, and the diverse clauses in sub-s. 2 illustrate the specific purposes for which the powers may be exercised, and there is numberreason to think that the clauses in sub-s. 2 are mutually exclusive. If power to pay the debts was derived both under cls. m n as it appears it was, deletion of the provision which authorised the Custodian to pay debts due by the evacuee to any person from cl. m and of Rule 22 setting up the machi- nery for registration of debts did number, in our judgment, affect the power which is companyferred by cl. n by sub-s. 2 and also by s. 10 1 . In our judgment, the power to administer is number merely a power to manage on behalf of the evacuee so as to authorise the Custodian merely to recover and companylect the assets of the evacuee, but to discharge his obligations as well. The power to administer for purposes mentioned, having regard to the diverse clauses in sub-s. 2 , includes the power to pay such debts which in the opinion of the Custodian are binding upon the evacuee. Specific enunciation of that power in cl. n authorising the Custodian to pay to any other person who in the opinion of the Custodian is entitled to any sum of money supports that companyclusion. As already observed, the decree of the civil companyrt is number decisive of the question whether a person making a claim is entitled to the sum of money claimed by him. It is for the Custodian to determine whet-her the claimant is entitled to receive the sum of money claimed by him out of the funds in his possession. He has to form his opinion on this question of companyrse, in forming his opinion he must act judicially and number arbitrarily. As the Tribunals below have determined the claim raised before them only on the question of jurisdiction to entertain it and number on the merits, we are unable to pass any effective order in favour of the appellant. The orders passed by the Custodian and the Cus- todian General must therefore be set aside and the proceeding remanded to the Custodian to determine the question whether in the opinion of the Custodian the appellant is entitled to any sum of money out of the funds in his possession and whether for the purpose of administration and management of the evacuee property or for enabling him to satisfactorily discharge his duties under the Act the amount claimed should be paid. The appeal is therefore allowed.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 468 of 1965. Appeal by special leave from the judgment and order dated March 1. 1965 of the Punjab High Court at Delhi in Second Appeal from Order No. 235/D of 1963. Parushottam Trikamdas and D. Goburdhan, for the appellant. V. Viswanath Sastri and B. N. Kirpal, for the respondents. The Judgment of the Court was delivered by Gajendragadkar, C.J. The short question of law which arises in this appeal is whether the partition of the companyarcenary property among the companyarceners can be said to be an acquisition by transfer within the meaning of s. 14 6 of the Delhi Rent Control Act, 1958 Act No. 59 of 1958 hereinafter called the Act . This question arises in this way. The premises in question are a part of a bungalow situate at Racquet Court Road, Civil Lines, Delhi. The bungalow originally belonged to the joint Hindu family companysisting of respondent No. 2, Mr. B. S. Poplai and his two sons, respondent No. 1, Major Ajit Kumar Poplai and Vinod Kumar Poplai. The three members of this undivided Hindu family partitioned their companyarcenary property on May 17, 1962, and as a result of the said partition, the present premises fell to the share of respondent No. 1. The appellant V. N. Sarin had been inducted into the premises as a tenant by respondent No. 2 before partition at a monthly rental of Rs. 80. After respondent No. 1 got this property by partition, he applied to the Rent Controller for the eviction of the appellant on the ground that he required the premises bona fide for his own residence and that of his wife and children who are dependent on him. To this application, he impleaded the appellant and respondent No. 2. The appellant companytested the claim of respondent No. 1 of three grounds. He urged that respondent No. 1 was number his landlord inasmuch as he was number aware of the partition and did number know what it companytained. He also urged that even if respondent No. 1 was his landlord, he did number require the premises bona fide and so, the requirements of s. 14 1 e of the Act were number satisfied. The last companytention raised by him was that if respondent No. 1 got the property in suit by partition, in law it meant that he had acquired the premises by transfer within the meaning of s. 14 6 of the Act and the provisions of the said section make the present suit incompetent. The Rent Controller held that respondent No. 1 was the exclusive owner of the premises in suit by virtue of partition. As such, it was found that he was the landlord of the appellant. In regard to the plea made by respondent No. 1 that he needed the premises bona fide as prescribed by s. 14 1 e , the Rent Controller rejected the case of respondent No. 1. The point raised by the appellant under s. 14 6 of the Act was number upheld on the ground that acquisition of the suit premises by partition cannot be said to be acquisition by transfer within the meaning of the said section. As a result of the finding recorded against respondent No. 1 under s. 14 1 e however, his application for the appellants eviction failed. Against this decision, respondent No. 1 preferred an appeal to the Rent Control Tribunal, Delhi. The said Tribunal agreed with the Rent Controller in holding that respondent No. 1 was the landlord of the premises in suit and had number acquired the said premises by transfer. In regard to the finding recorded by the, Rent Controller under s. 14 1 e , the Rent Control Tribunal came to a different companyclusion. It held that respondent No.1 had established his case that he needed the premises bona fide for his personal use as prescribed by the said provision. In the result, the appeal preferred by respondent No. 1 was allowed and the eviction of the appellant was ordered. This decision was challenged by the appellant by preferring a second appeal before the Punjab High Court. The High Court upheld the findings recorded by the Rent Control Tribunal on the question of the status of respondent No. 1 as the landlord of the premises and on the plea made by him that his claim for eviction of the appellant was justified under s. 14 1 e . In fact, these two findings companyld number be and were number challenged before the High Court which was dealing with the matter in second appeal. The main companytention which was raised before the High Court was in regard to the companystruction of s. 14 6 and on this point, the High Court has agreed with the view taken by the Rent Control Tribunal and has held that respondent No. 1 cannot be said to have acquired the premises in suit by transfer within the meaning of the said section. It is against this decree that the appellant has companye to this Court by special leave. Mr. Purshottam for the appellant argues that the view taken by the High Court about the companystruction of s. 14 6 is erroneous in law. That is how the only point which arises for our decision is whether the partition of the companyarcenary property among the companyarceners companyld be said to be an acquisition by transfer under s. 14 6 of the Act. The Act was passed in 1958 to provide, inter alia, for the companytrol of rents and evictions in certain areas in the Union Territory of Delhi. This Act companyforms to the usual pattern adopted by rent companytrol legislation in this companyntry. Section 2 e defines a landlord as meaning a person who, for the time being, is receiving, or is entitled to receive, the rent of any premises, whether on his own account or on account of or on behalf of, or for the benefit of, any other person or as a trustee, guardian or receiver for any other person or who would so receive the rent or be entitled to receive the rent, if the premises were let to a tenant. It has been found by all the companyrts below that respondent No. 1 is a landlord of the premises and this position has number been and cannot be disputed in the appeal before us. Section 14 1 of the Act provides for the protection of tenants against eviction. It lays down that numberwithstanding anything to the companytrary companytained in any other law or companytract, numberorder or decree for the recovery of possession of any premises shall be made by any companyrt or Controller in favour of the landlord against a tenant. Having thus provided for general protection of tenants in respect of eviction, clauses a to 1 of the proviso to the said section lay down that the Controller may, on an application made to him in the prescribed manner, make an order for the recovery of possession of the premises on one or more of the grounds companyered by the said clauses clause e of s. 14 1 is one of such clauses and it refers to cases where the premises let for, residential purposes are required bona fide by the landlord for occupation as therein described. The Rent Control Tribunal and the High Court have recorded a finding against the appellant and in favour of respondent No. 1 on this point and this finding also has number been and cannot be challenged before us. That takes us to s. 14 6 . It provides that where a landlord has acquired any premises by transfer, numberapplication for the recovery of possession of such premises shall lie under sub-section 1 on the ground specified in clause e of the proviso thereto, unless a period of five years has elapsed from the date of the acquisition. It is obvious that if this clause applies to the claim made by respondent No. 1 for evicting the appellant, his application would be barred, because a period of five years had number elapsed from the date of the acquisition when the present application was made. The High Court has, however, held that where property originally belonging to an undivided Hindu family is allotted to the share of one of the companyarceners as a result of partition, it cannot be said that the said property has been acquired by such person by transfer and so, s. 14 6 cannot be invoked by the appellant. The question which we have to decide in the present appeal is whether this view of the High Court is right. Before companystruing s. 14 6 , it may be permissible to enquire what may be the policy underlying the section and the object intended to be achieved by it. It seems plain that the object which this provision is intended to achieve is to prevent transfers by landlords as a device to enable the purchasers to evict the tenants from the premises let out to them. If a landlord was unable to make out a case for evicting his tenant under s. 14 1 e , it was number unlikely that he may think of transferring the premises to a purchaser who would be able to make out such a case on his own behalf and the legislature thought that if such a companyrse was allowed to he adopted, it would defeat the purpose of s. 14 1 . In other words, where the right to evict a tenant companyld number be claimed by a landlord under s. 14 1 e , the legislature thought that the landlord should number be permitted to create such a right by adopting the device of transferring the premises to a purchaser who may be able to Prove his own individual case under s. 14 1 e . It is possible that this provision may, in some cases, work hardship, because if a transfer is made by a landlord who companyld have proved his case under s. 14 1 e , the transferee would be preluded from making a claim for the eviction of the tenant within five years even. though he, in his turn, would also have proved his case under s. 14 1 e . Apparently, the legislature thought that the possible mischief which may be caused to the tenants by transfers made by landlords to circumvent the provisions of s. 14 1 e required that an unqualified and absolute provision should be made as prescribed by s. 14 6 . That, in our opinion, appears to be the object intended to be achieved by this provision and the policy underlying it. Mr. Purshottam, however, companytends that when an item of property belonging to the undivided Hindu family is allotted to the share of one of the companyarceners on partition, such allotment in substance amounts to the transfer of the said property to the said person and it is, therefore, an acquisition of the Said property by transfer. Prima facie, it is number easy to accept this companytention. Community of interest and unity of possession are the essential attributes of companyarcenary property and so, the true effect of partition is that each companyarcener gets a specific property in lieu of his undivided right in respect of the totality of the property of the family. In other words, what happens at a partition is that in lieu of the property allotted to individual companyarceners they, in substance, renounce their right in respect of the other properties they get exclusive title to the properties allotted to them and as a companysequence, they renounce their undefined right in respect of the rest of the property. The process of partition, therefore, involves the transfer of joint enjoyment of the properties by all the companyarceners into an enjoyment in severality by them of the respective properties allotted to their shares. Having regard to this basic character of joint Hindu family property, it cannot be denied that each companyarcener has an antecedent title to the said property, though its extent is number determined until partition takes place. That being so, partition really means that whereas initially all the companyarceners have subsisting title to the totality of the property of the family jointly, that joint title is by partition transformed into separate titles of the individual companyarceners in respect of several items of properties allotted to them respectively. If that be the true nature of partition, it would number be easy to uphold the broad companytention raised by Mr. Purshottam that Partition of an undivided Hindu family property must necessarily mean transfer of the property to the individual companyarceners. As was observed by the Privy Council in Girja Bal v. Sadashiv Dhunadiraj and Others. 1 Partition does number give him a companyarcener a title or create a title in him it only enables him to obtain what is his own in a definite and specific form for purposes of disposition independent of the wishes of his former company sharers. Mr. Purshottam, however, strongly relies on the fact that there is preponderance of judicial authority in favour of the view that a partition is a transfer for the purpose of s. 53 of the Transfer of Property Act. It will be recalled that the decision of the question as to whether a partition under Hindu Law is a transfer within the meaning of s. 53, naturally depends upon the definition of the word transfer prescribed by s. 5 of the said Act. Section 5 provides that in the following sections, transfer of property means an act by which a living person companyveys property, in present or in future. to one or more other living persons, or to himself, or to 1 43 I.A. 151 at p. 161. himself and one or more other living persons. It must be companyceded that in a number of cases, the High Courts in India have held that partition amounts to a transfer within the meaning of s. 53, vide, for instance, Soniram Raghushet Others v. Dwarkabai Shridharshet Another 1 , and the cases cited therein. On the other hand, there are some decisions which have taken a companytrary view, vide Naramsetti Venkatappala Narasimhalu and Anr. v. Naramsetti Someswara Rao and Anr., 2 and Gutta Radhakrishnayya v. Gutta Sarasamma 3 . In this companynection, Mr. Purshottam has also relied on the fact that under s. 17 1 b of the Indian Registration Act, a deed of partition is held to be a number-testamentary instrument which purports to create a right, title or interest in respect of the property companyered by it, and his argument is that if for the purpose of s. 17 1 b of the Registration Act as well as for the purpose of s. 53 of the Transfer of Property Act, partition is held to be a transfer of property, there is numberreason why partition should number be held to be an acquisition of property by transfer within the meaning of s. 14 6 of the Act. In dealing with the present appeal, we propose to companyfine our decision to the narrow question which arises before us and that relates to the companystruction of s. 14 6 . What s. 14 6 provides is that the purchaser should acquire the premises by transfer and that necessarily assumes that the title to the property which the purchaser acquires by transfer did number vest in him prior to such transfer. Having regard to the object intended to be achieved by this -provision, we are number inclined to hold that a person who acquired property by partition can fall within the scope of its provision even though the property which he acquired by partition did in a sense belong to him before such transfer. Where a property belongs to an undivided Hindu family and on partition it falls to the share of one of the companyarceners of the family, there is numberdoubt a change of the landlord of the said premises, but the said change is number of the same character as the change which is effected by transfer of premises to which s. 14 6 refers. In regard to cases falling under s. 14 6 , a person who had numbertitle to the premises and in that sense, was a stranger, becomes a land- lord by virtue of the transfer. In regard to a partition, the position is entirely different. When the appellant was inducted into the premises, the premises belonged to the undivided Hindu family companysisting of respondent No. 1, his father and his brother. After partition, instead of the undivided Hindu family, respondent No. 1 A.I.R. 1951 Bom. 94. 2 A.I.R. 1943 Mad. 505. A.I.R. 1951 Mad. 213. alone bad become landlord of the premises. We are satisfied that it would be unreasonable to hold that allotment of one parcel of property belonging to an undivided Hindu family to an individual companyarcener as a result of partition is an acquisition of the said property by transfer by the said companyarcener within the meaning of s. 14 6 . In our opinion, the High Court was right in companying to the companyclusion that s. 14 6 did number create a bar against the institution of the application by respondent No. 1 for evicting the appellant. In this companynection, we may refer to a recent decision of this Court in the Commissioner of Income-tax, Gujarat v. Keshavlal Lallubhai Patel. 1 In that case, the respondent Keshavlal had thrown all himself-acquired property into the companymon hotchpotch of the Hindu undivided family which companysisted of himself, his wife, a major son and a minor son. Thereafter, an oral partition took place between the members of the said family and properties were transferred in accordance with it in the names of the several members. The question which arose for the decision of this Court was whether there was an indirect transfer of the properties allotted to the wife and minor son in the partition within the meaning of s. 16 3 a iii and iv of the Indian Income-tax Act. 1922. This Court held that the oral partition in question was number a transfer in the strict sense and should number, therefore, be said to attract the provisions of s. 1 6 3 a iii and iv of the said Act. This decision shows that having regard to the companytext of the provision of the Income-tax Act with which the Court was dealing it was thought that a partition is number a transfer. Considerations which weighed with the Court in determining the, true effect of partition in the light of the provisions of the said section, apply with equal force to the interpretation of s. 14 6 of the Act.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 447 of1963. Sup.C-I/65 Appeal by special leave from the judgment and order dated April 19, 1960 of the Punjab High Court in Letters Patent Appeal No. 128 of 1960. Gopal Singh, for the appellant. R. Chaudhuri, for respondent No. 1. P. Malhotra and R. N. Sachthey, for respondent No. 2 to The Judgment of the Court was delivered by Ramaswami J. This appeal is brought by Special Leave from the judgment and decree of the Punjab High Court dated 19th April, 1960 in Letters Patent Appeal No. 128 of 1960. In the year 1955, companysolidation proceedings under East Punjab Holdings Consolidation and Prevention of Fragmenta- tion Act, 1948 hereinafter called the Act were started in the village Bholpur of District Ludhiana. In accordance with the provisions of the Act, a scheme for companysolidation of holdings was published on 29th March, 1956. On 14th May, 1956 that scheme was companyfirmed under s. 20 of the Act. The Consolidation Officer accordingly re-allotted parcels of land to the appellant and respondents Nos. 1 and 8 in the village of Bholpur. Being dissatisfied with the allotment, respondents 1 and 8 preferred appeals under s. 21 3 of the Act but these appeals were dismissed by the Settlement Officer. Respondents 1 and 8 thereafter preferred further appeals under s. 21 4 of the Act to the Assistant Director, Consolidation of Holdings. The Assistant Director partially allowed the appeal of respondent No. 1 by his order dated 29th October, 1957 but dismissed the appeal of respondent No. 8. On 10th February, 1958, the appellant moved the State Government under s. 42 of the Act for revision of the order passed by the Assistant Director in the appeal of respondent No. 1. The Revision Petition was ultimately accepted on 29th August, 1958 by the Director, Consolidation of Holdings. The Director held that the original order made by the Assistant Director on 29th October, 1957 was companytrary to the scheme and was based upon a mistake of fact. The Director accordingly allowed the Revision Petition of Harbhajan Singh on 29th August, 1958. It appears that Harbhajan Singh had filed two companyies of the application under s. 42 of the Act and on one companyy the Director of Consolidation of Holdings passed an order on 17th February, 1958 that the application should be put up with previous papers. On the second companyy of the application the Director passed an order on 3rd April, 1958 to the following effect - The order of Assistant Director, Consolidation of Holdings, under s. 21 4 need number be amended. File Inform. On the companyy of the application on which the order of 17th February, 1958 was passed, the Director heard the parties and passed his order on 29th August, 1958 by which he allowed the application of Harbhajan Singh and set aside the order of the Assistant Director. Respondent No. 1 thereafter moved the Punjab High Court under Art. 226 of the Constitution for quashing the order of the Director, Consolidation of Holdings, made on 29th August, 1958. The application was allowed by the High Court on 11 th January, 1960 on the ground that the Director, Consolidation of Holdings, was number companypetent to pass the order dated 29th August, 1958 in view of his previous order dated 3rd April, 1958 dismissing the application of Harbhajan Singh. The appellant took the matter in appeal under Letters Patent but the appeal was dismissed on 19th April, 1960. The question of law presented for determination in the appeal is, whether the Director, Consolidation of Holdings, had power to review his previous order dated 3rd April, 1958 dismissing Harbhajan Singhs application, and whether his subsequent order made under s. 42 of the Act dated 29th August, 1958 is legally valid ? S. 42 of the Act states The State Government may at any time for the purpose of satisfying itself as to the legality or propriety of any order passed, scheme prepared or companyfirmed or repartition made by any officer under this Act call for and examine, the record of any case pending before or disposed of by such officer and may pass such order in reference thereto as it thinks fit Provided that numberorder, scheme or repartition shall be varied or reversed without giving the parties interested numberice to appear and opportunity to be heard except in cases where the State Government is satisfied that the proceedings have been vitiated by unlawful companysideration. There is numberprovision in the Act granting express power of review to the State Government with regard to an order made under s. 42 of the Act. In the absence of any such express power, it is manifest that the Director, Consolidation of Holdings, cannot review his previous order of 3rd April, 1958 dismissing the application of Harbhajan Singh under s. 42 of the Act. It follows therefore that the order of the Director dated 29th August, 1958 is ultra vires and without jurisdiction and the High Court was right in quashing that order by the grant of a writ under Art. 226 of the Constitution. In Drew v. Willis 1 , Lord Esher, M. R. pointed out that ,no companyrt and I would add numberauthority has a power of setting aside an order which has been properly made, unless it is given by statute. In another case Hession v. Jones 2 Bankes, J. pointed out that the companyrt, under the statute, has numberpower to review an order deliberately made after argument and to entertain a fresh argument upon it with a view to ultimately companyfirming, or reversing it and observed Then as to the inherent jurisdiction of the Court. Before the Judicature Acts the Courts of companymon law bad numberjurisdiction whatever to set aside an order which had been made. The Court of Chancery did exercise a certain limited power in this direction. All Courts would have power to make a necessary companyrection if the order as drawn up did number express the intention of the Court the Court of Chancery however went somewhat further than that, and would in a proper case recall any decree or order before it was passed and entered but after it had been drawn up and perfected numberCourt or Judge had any power to interfere with it. This is clear from the judgment of Thesiger L.J. in the case of in re. St. Nazaire Co. 1879 12 Ch. D. 88. The same principle was laid down by the Madras High Court in Anantharaju Shetty v. Appu Hegada 3 in which Seshagiri Aiyar, J. observed It is settled law that a case is number, open to appeal unless the statute gives such a right. The power to review must also be given by the statute. Prima facie a party who has obtained a decision is entitled to keep it unassailed, unless the Legislature had indicated the mode by which it can be set aside. A review is practically the hearing of an appeal by the same officer who 1 118911 1 Q.B.450. A.I.R. 1919 Madras 244. 2 1914 2 K.B. 421. decided the case. There is at least as good reason for saying that such power should number be exercised unless the statute gives it, as for saying that another tribunal should number hear an appeal from the Trial Court unless such a power is given to it by statute. The same principle has been affirmed by the Judicial Committee in Baijnath Ram Goenka v. Nand Kumar Singh 1 in which a mahal was sold for arrears of revenue. Two appeals to annul the sale were preferred to the Commissioner under the Bengal Land Revenue Sales Act, 1859, s. 33, as amended by the Bengal Land Revenue Sales Act, 1868. One of these appeals was by the respondent, a companysharer of the mahal, and was dismissed on the ground that the auction purchaser had number been made a defendant. A Second Appeal was preferred by the other companysharers in the mahal, and in this appeal the Commissioner, on March 23, 1900, made an order annulling the sale on the ground of an irregularity in the sale numberice. This order related to the entire mahal. On June 21, 1900, the Commissioner having companye to the companyclusion that his order of March 23, 1900, was wrong in law, reviewed it, and made an order upholding the sale. The respondent thereupon brought the suit giving rise to the appeal to the Judicial Committee praying for a declaration that the order of June-. 21, 1900, was ultra vires and illegal. The Additional Subordinate Judge declared that the order setting aside the sale was a final order and was number open to review. The High Court companycurred with the decision of the Additional Subordinate Judge. While dismissing the appeal of the defendant-appellant, Lord Atkinson said Their Lordships are clearly of opinion that the order of March 23, 1900, was final and companyclusive, and that, so far as the Commissioner was companycerned, he bad numberpower to review that order in the way in which he has reviewed it. The same principle has been reiterated by this companyrt recently in Patel Chunibhai Dajibhai etc. v. Narayanrao Khanderao Jambekar and Another 2 . In that case respondent No. 1 was a landlord and the appellant was a tenant. On May 1, 1956, respondent No. 1 gave a numberice to the appellant under s. 14 of the Bombay Tenancy and Agricultural Lands Act, 1948 Bombay Act LXVII of 1948 terminating his tenancy. On December 25, 1956 respondent No. 1 gave another numberice to the appellant under s. 31 termination the tenancy. On July 10, 1957, respondent No. 1 filed an application under s. 29 read with s. 14 for recovery of 1 40 I.A. 54. 2 1965 2 C.R. 328. possession of the lands. By an order dated December 25, 1957 the Mahalkari allowed respondent No. 1s application under s. 29 read with s. 14 filed on July 10, 1957, and directed that the tenancy be terminated and possession of the lands be delivered to respondent No. 1. The appellant applied to the Collector of Baroda on August 9, 1958 and again on August 26, 1958 under s. 17A for revision of the Mahalkaris order dated December 25, 1957. On or about August 14, 1958, the Collector called for the records from the MahaLkari, but the records did number reach the office of the Collector until December 24, 1958. On or-about October 3, 1958 the Collector rejected these revision applications. On October 6, 1958 the appellant again applied to the Collector for revision of the Mahalkaris order, but this application also was disposed of by the Collector on October 17, 1958. On November 7, 1958, the local Congress Mandal Samiti passed a resolution requesting the Collector to reconsider his previous orders. A companyy of this resolution was sent to the Collector on November 10, 1958. On November 14, 1958, the appellant again applied to the Collector under s. 76A for revision of the Mahalkaris order. On February 17, 1959, the Collector acting under s. 76A reversed the Mahalkaris order and directed that possession of the disputed lands be restored to the appellant. S. 76-A of the Bombay Tenancy and Agricultural Lands Act, 1958 Bombay Act LXVII of 1948 provides as follows Where numberappeal has been filed within the period provided for it, the Collector may, suo motu or on a reference made in this behalf by the Divisional Officer or the State Government at any time,- a call for the record of any enquiry or the proceedings of any Mamlatdar or Tribunal for the purpose of any order passed by, and as to the regularity of the proceedings of such Mamlatdar or Tribunal, as the case may be, and b pass such order thereon as he deems fit Provided that numbersuch record shall be called for after the expiry of one year from the date of such order and numberorder to such Mamlatdar or Tribunal shall be modified, annulled or reversed unless opportunity has been given to the interested parties to appear and be heard. An application for revision preferred by respondent No. 1 on March 24, 1959 was dismissed by the Tribunal on February 23, 1961. An application under Art. 227 of the Constitution pre- ferred by respondent No. 1 on June 15, 1961 was allowed by the High Court on November 5, 1963. In this state of facts, it was held by this companyrt that in the absence of any power of review the Collector had numberpower to reconsider his previous decisions dated October 3, October 4 and October 17, 1958 and the subsequent order of the Collector dated February 17, 1959 re-opening the matter was illegal, ultra vires and without jurisdiction. The majority judgment of this Court states Though s. 76A, unlike s. 76, does number provide for an application for revision by the aggrieved party, the appellant properly drew the attention of the Collector to his grievances and asked him to exercise his revisional powers under s. 76A. Having perused the applications for revision filed by the appellant, the Collector decided to exercise his suo motu powers and called for the record on August 14, 1958 within one year of the order of the Mahalkari. But before the record arrived and without looking into the record, the Collector passed orders on October 3, October 4 and October 17, 1958 rejecting the applications for revision. By these orders, the Collector decided that there was numberground for interference with the Mahalkaris order All these orders were passed by the Collector in the exercise of his suo motu power of revision. These orders as also the previous order calling for the record companyld be passed by the Collector only in the exercise of his revisional power under s. 76-A. As he refused to modify, annul or reverse the order of the Mahalkari, he companyld pass these orders without issuing numberice to the 2nd respondent. These orders passed by the Collector in the exercise of his revisional powers were quasi-judicial, and were final. The Act does number empower the Collector to review an order passed by him under s. 76A. In the absence of any power of review, the Collector companyld number subsequently reconsider his previous decisions and hold that there were grounds for annulling or reversing the Mabalkaris order. The subsequent order dated February 17, 1959 re- opening the matter was illegal, ultra vires and without jurisdiction. The High Court ought to have quashed the order of the Collector dated February 17, 1959 on this ground. We are of the opinion that the same principle applies to the present case and the Director, Consolidation of Holdings had numberpower to review his previous order dated 3rd April, 1958 rejecting the application of Harbhajan Singh under s. 42 of the Act. It follows that the subsequent order of the Director, Consolidation of Holdings dated 29th August, 1958 allowing the application of Harbhajan Singh was ultra vires and illegal and was rightly quashed by the High Court.	Case appeal was rejected by the Supreme Court
ORIGINAL JURISDICTION Writ Petition No. 17 of 1965. Petition under Art. 32 of the Constitution of India for the enforcement of Fundamental Rights. D. Karkhanis, E. C. Agarwala and P. C. Agarwala, for the petitioner. K. Daphtary, Attorney-General, S. V. Gupte, Solicitor- General, R. Ganapathy Iyer and R. H. Dhebar, for the respon- dent. The Judgment of GAJENDRAGADKAR C.J., WANCHOO, SHAH and SIKRI, JJ. was delivered by SHAH J. HIDAYATULLAH J. delivered a Separate Opinion. Shah, J. The petitioner. who is a trader at Meerut was ordered by the Income-tax Officer, D-Ward, Meerut, to pay Rs. 1,800/- as annuity deposit under Ch. XXII-A of the Income-tax Act, 1961. The petitioner has filed this petition challenging the validity of the demand on the plea that Ch. XXII-A of the Income-tax Act is unconstitutional and is otherwise violative of the fundamental right guaranteed by Art. 14 of the Constitution. The Indian Income-tax Act 43 of 1961 was enacted by the Parliament to companysolidate and amend the law relating to income-tax and super-tax. The Act came into force on April 1, 1962. The Parliament enacted Finance Act 5 of 1964 to give effect to the financial proposals of the Central Government for the financial year 1964-65, and by S. 3 1 of that Act it was provided Save as otherwise provided in Chapter XXII-A of the Income-tax Act, annuity deposit for the assessment year companymencing on the 1st day of April, 1964 shall be made by every person to whom the provisions of that Chapter apply at the rates specified in the Second Schedule. By s. 44 of the Finance Act, Ch. XXII-A relating to annuity deposits companytaining ss.280-A to 280-X was introduced into the Income-tax Act. By that chapter taxpayers of certain categories are required to make annuity deposits for every assessment year companymencing from the assessment year 1964-65. By the Second Schedule to the Finance Act, rates of annuity deposits are prescribed. The deposit has to be made by the specified categories of taxpayers, having a total income exceeding Rs. 15,000 at the prescribed percentages rising from 5 to 12 1/2 on the adjusted total income. By the Explanation to the Second Schedule, the expression total income under the Schedule means the total income companyputed in the manner laid down in the Income-tax Act without making any allowance under s. 280-0 of that Act. A taxpayer who is a resident and falls within any of the following categories is liable to make the annuity deposit an individual, who is a citizen of India, a Hindu undivided family, an unregistered firm, an association of persons or a body of individuals, whether incorporated or number other than a companypany or a companyperative society , and an artificial juridical person referred to in sub- clause vii of cl. 31 of S. 2 of the Income-tax Act other than a companyporation established by a Central, State or Provincial Act . All number-residents and all companypanies and companyporations and company operative societies established by Central State or Provincial, Acts are accordingly exempted from the operation of the annuity deposits scheme. But a taxpayer who is required by s. 280-A, to make an annuity deposit may exercise his option number to make it, by a numberice in writing to the Income-tax Officer before the 30th of June of the assessment year. The option once exercised is irrevocable, and operates in respect of the assessment year and all subsequent years. The taxpayer who exercises the option has to pay beside the income-tax payable on his total income, additional income-tax which is equal to half of the amount which he saves by number making the deposit. But an individual who on the last day of the relevant previous year is more than seventy years of age is exempt from payment of this additional Income-tax. Section 280B defines, amongst other expressions, adjusted total income, a percentage of which is by the Second Schedule liable to be deposited as annuity deposit. Annuity deposit has to be made in advance on the adjusted total income of the previous year, at the rate or rates prescribed by any Central Act. Authors, playwrights, artists, musicians and actors are permitted to make at their option, deposit up to 25 of the amount derived from their profession, in addition to the amount which they are required to make. A person receiving gratuity from his employer in excess of the amount exempt from income-tax has the option of making an annuity deposit number exceeding 50 of the amount of gratuity chargeable to income-tax, in addition to the amount he is-required to make. The annuity deposit is repayable in ten annual equated instalments of principal and interest at such rates as may be prescribed. The amount of annuity deposit payable by a taxpayer in any year is admissible as a deduction in companyputing his total income charged to tax for that year. If the adjusted total income of an assessee includes income chargeable to income-tax under the head salaries, allowance has to be made in companyputing the income under that head, and if there be numberincome under that head or the annuity deposit required to be made exceeds the salary income, the whole of the balance of the annuity deposit is allowable as a deduction in companyputing the total earned income. The instalment of annuity due on any annuity deposit is chargeable to income-tax as earned income of the taxpayer in the year in which it becomes due. The Income-tax Officer on or after the 1st day of April in the financial year, may by order in writing, require the depositor who has been previously assessed to make an advance deposit companyputed in accordance with S. 280-E. The Income-tax Officer is also authorised to issue a demand numberice and also to modify, if necessary, the numberice of demand after regular assessment has been made. A depositor may make his own estimate of his adjusted total income before the last instalment is due, that his adjusted total income for the previous year is less than the income in respect of which. he is required to make the deposit. A taxpayer who fails to pay the annuity deposit by the due date is exposed to a penalty which may amount to as much as 50 of the deposit required to be made by him. A taxpayer who receives income of. the nature of companymission, which forms part of his adjusted total income, may defer making advance deposit, when companymission is receivable periodically and is number received or adjusted by the payer in the depositors account. A person who has number been previously assessed to income-tax is liable to pay penalty if he fails to make an advance deposit on his own estimate. The Income- tax Officer is entitled to determine annuity deposit on the basis of provisional assessment or regular assessment and he is entitled to recompute the annuity deposit, when the total income of the assessee is enhanced or reduced, or the status under which he is assessed is altered, or when the registration of a firm is cancelled. Arrears of annuity deposit and penalty are recoverable in the manner provided in Ch. XXII-D of the Income-tax Act for the recovery of income-tax. Broadly stated, the scheme of Ch. XXII-A is that certain classes of taxpayers in the companyparatively higher income groups are required to make out of their total income deposits at the specified rates on the adjusted total income, with the Central Government. The amount so deposited is made returnable with interest in ten annual instalments. In companyputing the total income of the year in which it is made the deposit is an admissible deduction. But the instalment due in any year is liable to be adjusted in the total income of the year in which it is due. The taxpayer however has the option number to pay the deposit, and pay tax on his total income and fifty per cent of the amount saved by number making the deposit. The petitioner submits that the scheme of annuity deposit incorporated in Ch. XXII-A is invalid because a the Parliament had numbercompetence to incorporate in the Indian Income-tax Act, a provision which was substantially one relating to borrowings by the Central Government from a class of taxpayers b the provisions companytained in Ch. XXII-A are enacted in companyourable exercise of legislative power, and that in any event they are so harsh and unconscionable that they may be regarded as expropriatory and on that account number within the legislative companypetence of the Parliament and c the provisions of s. 280 and Sch. II are discriminatory and infringe the fundamental freedom under Art. 14 of equality before the law. In our view there is numbersubstance in any of the companytentions. The Parliament has by Art. 246 read with Entry 82 in List I of the Seventh Schedule power to levy taxes on income other than agricultural income. The Indian Income-tax Act, 1961 and the provisions of the annual Finance Acts of the Parliament which authorise levy of income-tax at the rates prescribed thereby are undoubtedly enacted in exercise of the powers companyferred by Entry 82 in List I. Granting that the scheme of Ch. XXII-A is for borrowing money by the Central Government from the taxpayers in the higher income group at the rates prescribed, which is repayable in instalments, power to legislate in that behalf is still within the companypetence of the Parliament by virtue of Entry 97 of List I of the Seventh Schedule. Counsel for the petitioner does number companytend that power to companylect annuity deposit is outside the Parliaments companypetence he merely urges that the Parliament companyld number incorporate the provisions relatable to the exercise of the power of borrowing exercisable under Entry 97 in a legislation which was exclusively enacted in exercise of the powers under Entry 82. But if the Parliament has the power to legislate for companylecting annuity deposits from taxpayers, there is numberhing in the Constitution which disentitles the Parliament as a matter of legislative arrangement to incorporate the provisions relating to borrowing from taxpayers in the Income-tax Act or any other statute. There is numberprohibition against the Parliament enacting in a single sta- tute, matters which call for the exercise of power under two or more entries in List I of the Seventh Schedule. Illustrations of such legislation are number wanting in our statute book, and the fact that one of such entries is the residuary entry does number Also attract any disability. The question is one of companyvenience and number of power. It appears that the Parliament thought, that the provisions relating to annuity deposits companyld appropriately be incorporated in the Indian Income-tax Act, 1961. The Parliament did enact the Compulsory Deposit Scheme Act, 1963, as a separate statute, but that does number mean that it had numberpower to incorporate it within the Income-tax Act, if the Parliament so desired. The Income-tax Act, 1961, is a longish statute and incorporation of other provisions therein may make it somewhat unwieldy. But it must be said that the Chapter relating to the annuity deposit scheme is closely related to the scheme of levy of income-tax. LI Sup. C.I./66-3 The power of assessment, and companylection of annuity deposit is entrusted to Income-tax Officers, and the machinery of the Income-tax Act is utilised for that purpose. The annuity deposit is based on the total income of the taxpayer if the taxpayer pays the deposit he is entitled to deduction of the amount in the companyputation of income tax, and if he exercises the option number to pay the deposit, he is rendered liable to Day additional income-tax. The annuity deposit and the penalty payable for failure to make the deposit without exercising the option are made recoverable in the manner provided by Ch. XVII-D for the recovery of arrears of income-tax. If the Annuity Deposit Act were enacted as a separate Act, several provisions requiring references to the Income-tax Act and companyferment of power upon the authorities companystituted under the Income-tax Act would have had to be duplicated. To avoid repetition and cross references the Legislature has thought it proper to enact within the Indian Income-tax Act those provisions relating to annuity deposits and has companyferred upon the Income-tax Officer power to assess and companylect annuity deposits, and exercise of that power may number be caviled at even by a purist in draftsmanship. The argument that Ch. XXII-A is - a companyourable exercise of legislative power has numbersubstance. As pointed out by this Court in K. C. Gajapati Narayan Deo and others v. The State of Orissa the doctrine of companyourable legislation does number involve any question of bona fides and mala fides on the part of the legislature. statute is companystitutional or number is question of power if the Constitution of a State distributes the legislative powers amongst different bodies, which have to act within their respective spheres marked out by specific legislative entries, or if there are limitations on the legislative authority in the shape of fundamental rights, questions do arise as to whether the legislature in a particular case has or has number, in respect of the subject-matter of the statute or in the method of enacting it, transgressed the limits of its companystitutional powers. Such transgression may be patent, manifest or direct, but it may also be disguised, companyert and indirect, and it is to this latter class of cases that the expression companyourable legislation has been applied in certain judicial pronouncements. The idea companyveyed 1 1954 S.C.R. 1. by the expression is that although apparently a legislature in passing a statute purported to act within the limits of its powers, yet in substance and in reality it transgressed these powers, the transgression being veiled by what appears, on proper examination, to be mere presence or disguise. It is number suggested that the power to legislate for companylection and repayment of annuity deposits is within the power of the States under List II of the Seventh Schedule. If the Parliament has the power to enact legislation for levying, assessing and companylecting annuity deposits and for repayment in annual instalments, by enacting that legislation the Parliament does number trespass upon powers outside its domain. In exercising power to legislate for companylecting annuity deposits, the Parliament has number sought to resort to any presence, disguise or subterfuge with the object of trespassing upon power number vested in it by the Constitution. The doctrine of companyourable legislation therefore can have numberapplication where the Parliament is invested with the authority to legislate in respect of annuity deposit and it exercises that power. It was urged that even if the exercise of the powers to companypel deposits be regarded as number unconstitutional, its exercise is harsh and the demands made by the State are excessive. Exercise of the taxing power of the State has undoubtedly to be tested in the light of the fundamental freedoms guaranteed by Ch. III of the Constitution. It is number a power which transcends fundamental rights, as was assumed in certain earlier decisions Ramjilal v. Income- tax Officer 1 Laxmanappa Hanumantappa v. Union of India 2 and the view expressed by Venkatarama Ayyar, J., in S. Anantha Krishnan v. State of Madras 3 . But it is number settled by decisions of this Court e.g. Kunna that Thathunni Moopil Nair, v. The State of Kerala and Another 4 that a taxing statute is subject to the companyditions laid down in Art. 13 of the Constitution. A taxing statute may. accordingly be open to challenge on the ground that it is expropratary or that the statute prescribes numberprocedure or machinery for assessing tax, but it is number open to challenge merely on the ground that the tax is harsh or excessive. The argument that the scheme of annuity deposit makes an unlawful discrimination between taxpayers is also devoid of force. Article 14 of the Constitution guarantees equality before the law, and equal protection of the laws. But thereby the power of the Legislature to make a reasonable classification of persons, objects 1 1951 S.C.R. 127. 2 1955 1 S.C.R. 769. I.L.R. 1952 Mad. 933. 4 1961 3 S.C.R. 77. or transactions for attaining certain objectives is number excluded. If a classification is based on some real and substantial distinction, bearing a just and reasonable relation to the objects sought to be achieved, it is valid. It is true that an assessee whose total income does number exceed Rs. 15,000/- is number liable to pay any annuity deposit, and the demand for annuity deposit, unlike income- tax is based on a progressively increasing percentage of the adjusted total income, and for a person having a total income exceeding Rs. 70,000/- the rate of deposit is as high as 12 1/2 per cent. But neither the exemption of taxpayers having an income below Rs. 15,000/- number the progressively steeper rates of demand can be regarded as unreasonable. What is sought to be achieved by the Act is the twin objective of mobilisation of private savings for public purposes and imposing curbs on the inflationary trends in the economy of our companyntry. To secure this purpose, provision has been made to companylect what may reasonably be assumed to be surplus income or private savings so as to make them available for national development. The Legislature has been of the view that persons who have an income exceeding Rs. 15,000/- per annum at the present level of taxation, and the ruling prices, may be able to make savings which may usefully augment the public finances. Nothing has been placed before us to show that the view is number reasonable. The view of the Legislature that in the higher income groups there would be larger savings cannot also be said to be unreasonable. It is true that a slab system in vogue for the companyputation of number-corporate income- tax has number been adopted, and the demand of deposit is made at a steeply rising percentage on the adjusted total income. But that by itself is number a ground for regarding the levy as unreasonable. In order to do away the anomalies the Schedule of rates has provided marginal adjustments. It may also be numbericed that simultaneously with the introduction of the annuity deposits scheme, the personal rates of income- tax have been reduced. Again it may be numbericed that the scheme for the annuity deposits is in a sense number companypulsory. By making a declaration it is open to an assessee number to make the companytribution as required by the Act. He may elect number to make the deposit, and pay income- tax on his total income. If he has number attained the age of seventy years on the last day of the previous year he will also have to pay additional income-tax as prescribed by sub- s. 2 of S. 280-X. There is undoubtedly a distinction made between persons who are below the age of seventy years on the last day of the previous year, and those who have attained that age the former on exercising the option number to pay annuity deposits will have to pay tax on the total income and additional income-tax, the latter will only pay tax on total income but number additional income-tax. The Legislature is apparently of the view, having regard to the life span in our companyntry, capacity to engage in gainful employment and other relevant circumstances, that the latter should be exempted from payment of additional tax. Every taxpayer who is otherwise required to make a deposit is permitted to declare his option under s. 280-X 1 and once he does so, he is number liable to make the annuity deposit. Such a taxpayer will be obliged to pay income-tax on his total income. Only a section out of this class of taxpayers are exempted from liability to pay additional income-tax. It is difficult to regard the provision exempting this class of persons from liability to pay additional tax as depriving other taxpayers below the age of seventy who have exercised the option under s. 280-X 1 of the guarantee of equal protection of the laws. The classification is prima facie reasonable, and the petitioner has placed numbermaterials before us to prove that it is number genuine or has numberrational nexus to the object sought to be achieved by the Parliament. The petition fails and is dismissed with companyts. Hidayatullah, J. I agree that this petition should be dismissed with companyts. I agree generally with the reasons given by my brother Shah, but I wish to say that I do number rest my decision on entry No. 97 of List I of the Seventh Schedule. It was argued that entry No. 97 of List I must in any event companyer this tax even if the entry relative to Income-tax was inadequate to companyer it. The very frequent reliance on entry No. 97 makes me say these few words. That entry, numberdoubt, companyfers residuary powers of legislation or taxation but it is number an entry to avoid a discussion as to the nature of a law or of a tax with a view to determining the precise entry under which it can companye. Before recourse can be had to entry No. 97 it must be found as a fact that there is numberentry in any of the three Lists under which the impugned legislation can companye. For if the impugned legislation is found to companye under any entry in List 11, the residuary entry will number apply. Similarly, if the impugned legislation falls Within any entry in one of the other two Lists recourse to the residuary entry will hardly be necessary. The entry is number a first step in the discussion of such problems but the last resort. One cannot avoid the issue by taking its aid unless such a companyrse is open. It is always necessary to examine the pith and substance of any law impugned on the ground of want of legislative companypetence with a view to ascertaining the precise entry in which it can companye. The entries in the three Lists were intended to be exhaustive and it would be a very remote chance that some entry would number suit the legislation which is impugned. I shall, therefore, examine the law relating to annuity- deposits from this angle first. The relevant provisions have been summarized by my brother in great detail. The essence of these provisions, apart from the machinery sections which are either supplementary to or fitted into, the scheme of the Indian Income-tax Act 1961, is that a person, with an income above a certain sum, may, if he so chooses and as an alternative to paying the full tax due on his income, make an annuity deposit and earn some present partial relief from taxation. It is number necessary to state the extent of the relief or the extent of the deposit. This is the scheme in a nut-shell. Now it is undoubtedly open to Parliament to give relief from a part of the income-tax the assesses have to pay on the companydition that a particular amount is put into an annuity deposit. The deposit is number obligatory. Any person can elect to pay the full tax and number take advantage of the scheme. The pith and substance of the impugned provisions, therefore, rightly belong to the topic of taxes on income. The annuity deposit is in lieu of some tax and the machinery sections also take the aid of the machinery of the Indian Income-tax Act. As the enforcement of the provisions is by the agency of the Income-tax Department-and they are intimately companynected with Income-tax-the provisions are very appropriately included in the Income-tax Act. -No doubt the provisions for the management of the annuity deposits deal with matters slightly out of place in a pure taxing measure but our Constitution has number created a water-tight companypartment as is to be found in the Commonwealth of Australia Act. Our Income-tax Act can reasonably companytain provisions on incidental matters and the management of annuity deposit under the scheme is such a matter. It is argued that this is a case of borrowing which is defined in Art. 366 4 to include the raising of money by the grant of annuities, and loan is also required to be companystrued accordingly. It is submitted that if money was to be raised by the grant of annuities the action should have been by an Act giving effect to Art. 292. Article 292 reads Borrowing by the Government of India. The executive power of the Union extends to borrowing upon the security of the Consolidated Fund of India within such limits, if any, as may from time to time be fixed by Parliament by law and to the giving of guarantees within such limits, if any, as may be so fixed. Borrowing under that Article is by executive action and it is on the security of the Consolidated Fund of India. A similar power is granted to the Executive of the State by Art. 293. This is number a legislative power except in so far as law may be made to fix the limits of borrowing and to the giving of guarantees within such limits. Otherwise it is a power for the exercise of the Executive. Here the Annuity deposit is an alternative to paying income- tax and is a means of reduction in the amount of income-tax. The provisions relating to it rightly came under entry No. 82 of List I dealing with taxes on income. The money so companylected is returned with interest in equal instalments spread over ten years and the amount is taxable in the year of refund. The entry thus companyers it. There is numberentry in List 11 which can be said to take in the law relating to Annuity Deposits. Entry No. 30 money- lending, and money lenders has to be mentioned and rejected. As the subject of the annuity deposit provisions is capable of being companyprehended in the entry relating to taxes on income do number feel called upon to invoke the aid of entry No. 97 by assuming that numberentry companyers such provisions. This will be a fundamental error in approach to such problems. The provisions are neither companyourable number discriminatory. They apply to upper income groups and this does number lead to discrimination. They are number companyourable because, though called annuity deposits, they only defer payment of tax on a part of the assessable income and the name does number matter at all. Instead of charging income-tax on the amount forthwith the amount is ordered to be kept in deposit with Government, one-tenth being returned with inte- rest every year. The returned amount then bears the tax. An election once made is final.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION - Civil Appeals Nos. 627 to 628 of 1964. Appeals from the judgment and order dated May 14, 1962 of the Calcutta High Court in Wealth Tax Matter No. 154 of 1960. V. Viswanatha Sastri, N. D. Karkhanis, R. H. Dhebar and N. Sachthey, for the appellant. A. Ramachandran, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the respondent. The Judgment of the Court was delivered by Sikri, J. Two questions were referred to the High Court by the Appellate Tribunal under s. 27 of the Wealth Tax Act XXVII of 1957 . We are only companycerned with the second question which reads as follows Whether on the facts and in the circumstances of the case, in companyputing the net wealth of the assessee, the arrears of tax as determined as per numberice under Section 18A of the Indian Income Tax Act for the two assessment years under companysideration companystitute a debt owed by the assessee within the meaning of section 2 m of the Wealth Tax Act as on the valuation date The facts and circumstances of the case are as follows. Demands in respect of the payment of tax under s. 18A of the Indian Income Tax Act were made against the respondent company- pany, M s. Standard Vacuum Oil Co. Ltd., for the two years ending December 31, 1956 and December 31, 1957, by numberices of demand dated May 28, 1956 and May 31, 1957, respectively. The final instalment of the amount of Rs. 47,69,653 for each of the two years was outstanding on the respective valuation daters. The assessee claimed that the demand for such, tax should be allowed as deduction in determining the net wealth of the assessee under the Wealth Tax Act. The Appellate Tribunal held that this sum should be deducted from the total companyputation of wealth if the said amount was outstanding for less than a year. It further held that the demand created under s. 18A of the Income Tax Act was a debt owed by the assessee, and it directed, the Wealth Tax Officer to ascertain whether the demand referred to in this case was outstanding for less than one year on the valuation date and if so, he will allow the same as a deduction. The High Court, following its decision in Assam Oil Co. Ltd. v. Commissioner of Wealth Tax Central , Calcutta 1 , answered the question in favour of the assessee. The Revenue having obtained certificates of fitness from the High Court filed these appeals in this Court. Mr. Viswanatha Sastri, learned companynsel for the Revenue, companytends that on a true interpretation of s. 18A the amount which is payable under it is number an ascertained amount as the assessee can estimate the amount which he should pay as advance tax. He says that the section companytemplates more or less the opening of a running account between the State and the assessee and the exact amount is number finalised till the 15th of March each year, which is the last date by which the assessee has to exercise his option to pay the amount demanded or a lesser sum. He says that the debt really becomes a debt on the 15th of March when 1 48 I.T. 49 numberoption is exercised to pay a lesser sum. In order to appreciate the companytentions of the learned companynsel it is necessary to companysider the relevant statutory provisions first of the Wealth Tax Act and then of the Income Tax Act. Section 2 m of the Wealth Tax Act defines net wealth as follows .lm15 net wealth means the amount by which the aggregate value companyputed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in this net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than,- debts which under section 6 are number to be taken into account and debts which are secured on, or which have been incurred in relation to, any asset in respect of which wealth-tax is number payable under this Act. Section 2 q defines valuation date as in relation to any year for which an assessment is to be made under this-Act, means the last day of the previous year as defined in clause 1 1 of section 2 of the Income-tax Act if an assessment were to be made under that Act for that year. It is number necessary to set out the proviso to this definition. Section 3 is the charging section which read as follows Subject to the other provisions companytained in this Act, there shall be charged for every financial year companymencing on and from the first day of April, 1957, a tax hereinafter referred to as wealth-tax in respect of the net wealth on the companyresponding valuation date of every individual, Hindu undivided family and companypany at the rate or rates specified in the Schedule. The question with which we are companycerned is whether the amounts directed to be paid by numberices of demand dated May 28, 1956 and May 31, 1957, are debts owed by the assessee within s. 2 m on the respective valuation dates. Now the numberices of demand were issued under s. 18A 1 of the Income Tax Act. The exact numberices of demand which were issued are number on record, but the learned companynsel drew our attention to the form of numberice prescribed under the Act. Section 18A 1 , inter alia, provides that the Income Tax Officer may by order in writing, require an assessee to pay quarterly to the credit of the Central Govern- L2Sup. CI/66 -- 7 32 0 ment on the 15th day of June, 15th day of September, 15th day of December and 15th day of March in that year, respectively, an amount equal to one-quarter of the income- tax and super-tax payable on so much of such income as is included in his total income of the latest previous year in respect of which he has been assessed. It is number necessary to refer to the rate at which he has to calculate the tax. Sub-section 2 of S. 18A enables an assessee to formulate his own estimate of the tax payable by him if he companysiders that the income is less than on which he has been required to pay tax, but he has to send this revised estimate ,of the tax payable by him before any one of the dates specified in sub-s. 1 a and adjust excess or deficiency in respect of any instalment already paid in a subsequent instalment or in subsequent installments. It is this provision which Mr. Sastri relies on strongly to show that the demand under S. 18A 1 is number a debt owed, within s. 2 m of the Wealth Tax Act. He further refers to sub-s. 5 which provides for payment of simple interest by the Central Government for any amount paid by the assessee in accordance with the provisions of S. 18A. He says that this shows that it is really the Government which ultimately becomes the debtor and there is numberquestion of any debt being owed by the assessee. He further urges that the word debt companynotes a ,definite fixed amount and does number include merely a liability to pay a sum which is number ascertained. In our opinion, the High Court was right in answering the question in favour, of the assessee. Section 18A 10 provides that if the assessee does number submit a revised estimate under sub-s. 2 of s. 18A, and he does number pay on the specified date any instalment of tax that he is required to pay under sub-s. 1 , he shall be deemed to be an assessee in default in respect of such instalment or instalments, and if he does submit a revised estimate but does number pay an instalment in accordance therewith on the date or dates specified in sub-s. 1 , he shall be deemed to be an assessee in default in respect of such instalment or instalments. Under sub-s. 11 any sum paid or recovered from the assessee in pursuance of the provisions of S. 18A is given credit towards the tax due in respect of the appropriate year. We cannot find any substantial difference between advance tax paid under the provisions of s. 18A and tax due and paid under a demand numberice passed after an assessment. The only difference is that if the facts so warrant, the assessee is enabled to pay less than the amount demanded by the Income Tax Officer. But till a new estimate is made by the assessee, the amount is ascertained and there is a statutory liability on the assessee to pay the amount 3 21 mentioned in the order under s. 18A. We agree with the observations of the Gujarat High Court in Commissioner of Wealth-Tax v. Raipur Manufacturing Company 1 that a companydition subsequent, the fulfilment of which may result in the reduction or even extinction of liability, would number have the effect of companyverting the liability which attaches under such numberice under s. 18A into a companytingent liability. In our opinion, a debt is owed when an order tinder s. 18A 1 is passed and a numberice of demand sent. The amount mentioned in the numberice begins to be owe till a new figure is substituted by the action of the assessee.	Case appeal was rejected by the Supreme Court
SHAH J. - On December 11, 1947, the appellant granted to the Shivrajpur Syndicate Ltd. rights for the mining manganese ore from lands in two villages, Shivrajpur and Bhat. The following are the materials terms of the indenture of lease In companysideration of the rents and royalties, companyenants and agreements by the and in these presents and in the Schedule here under written, reserved and companytained and on the part of the lessee to be paid, observed and performed, the lessor hereby grants and demises unto the lessee all those the mines, beds, veins, and seams of manganese ore situate, lying and being and under the land To hold the premises granted and demised unto the lessee for the term of twelve years which shall be deemed to have companymended from the first of December one thousand nine hundred and forty-five Yielding and paying therefore unto the lessor the several rents and royalties mentioned in part V of the Schedule at the respective times herein specified subject to the provisions companytained in Part VI of the said Schedule. In parts II, III, and IV of the Schedule liberties, powers, privileges, restriction and companyditions enjoyed by the lessee were set out. By part V the syndicate agreed to pay Rs. 2,629-8-8 as rent and royalty at the rate of 8 per cent. of the sale value of all manganese ore. By clause 1 of part VII it was agreed that The lessee shall pay the rent and royalty reserved by this lease at the time and in the manner provided in the Parts V and VI and shall also pay and discharge all taxes, rates, assessments and imposition whatsoever being in the nature of public demands which shall from time to time be charged, assessed or imposed upon or in respect of the mines or works of the lessee or any part thereof by authority of the Government of India or the Government of Bombay or otherwise except demands for land revenue The appellant received from the syndicate, besides rents and royalty, Rs. 16,309 in the year ending July 31, 1951, and Rs. 39,515 in the year ending July 31, 1952, being 3/16th of the amount of rent and royalty payable to the appellant in accordance with the terms of Part V of the lease. The syndicate described this payment as local fund cess. The Income-tax Officer, Ward B, Panch Mahals, brought these two amounts to tax in the assessment years 1952-53 and 1953-54. In appeal to the Appellate Assistant Commissioner of Income-tax, Baroda Range, it was maintained by the appellant that the to sums were number taxable, because they represented local fund cess companylected by him on behalf of the Government of Bombay or the Local Board, Panch Mahals, and in any event because they were receipts of a causal and number-recurring nature. The Appellant Assistance Commissioner upheld those companytentions of the appellant and directed that the said sums be excluded from the total income of the appellant. In the view of the Income-tax Appellant Tribunal, the appellant received the two sums from the syndicate under the clause 1 of part VII of the lease agreement and number as local fund cess on behalf of the Government of the Bombay or of the Local Board, Panch Mahals, and the amounts were number receipts of a causal and number-recurring nature. The Tribunal submitted a companysolidated statement of the case under section 66 2 of the Income-tax Act in respect of the years of assessment and submitted the following questions for the opinion of the High Court of Bombay Whether the sum of Rs. 16,309/Rs. 39,515 received by the assessee from the syndicate is income for the purpose of the Indian Income-tax Act, 192 ? II If the answer to the above question is in the affirmative, whether the income-receipt is exempt under section 4 3 vii of the Act by reason of its being of a causal and number-recurring nature ? In companypliance with an order of the High Court, the Tribunal submitted a supplementary statement of the case observing that the lands in question which were alienated villages between August 1, 1950, and August 15, 1950, had ceased to be alienated villages in companysequence of the application of the Bombay Taluqdari Abolition Act, 1949 62 of 1949 , that the total amount of assessment payable in respect of these villages was Rs. 1,222.92 and the local fund cess due in respect of the lands was Rs. 270.45 nP., that the total Jama payable to the appellant was Rs. 504.45 nP. and that the appellant under the Bombay Local Boards Act, 1923, to pay the cess as a percentage of land revenue and number of the Jama. The High Court, in the light of the supplementary statement of the case, recorded its answer on the first question in the affirmative, subject to the reservation that the amount of cess which the appellant was legally liable to pay under the Bombay Local Boards Act was number subject to income-tax and answered the second question in the negative. With certificate granted by the High Court, these appeals have been preferred. The relevant statutory provisions bearing on the questions referred to the by the Tribunal may be summerised. By the Bombay Taluqdari Tenure Abolition Act, 1949 62 of 1949 , all the incidents of the Taluqdari tenure attaching to the lands companyprised in the appellants estate were extinguished, and all Taluqdari were declared liable to payment of land revenue in accordance with the provisions Bombay Land Revenue Code, 1879, or Jama under an agreement or settlement recognised or declaration made under the Gujarat Talukdars Act. Under the Bombay Land Revenue Code, by section 3 13 superior holder is defined as meaning a landholder, entitled to receive rent or lent revenue from other landholders, whether or number he is accountable for such rent or land revenue or any part thereof to the Provincial Government and a tenant is defined in section 3 14 as meaning a lessee whether holding under an instrument or under an oral agreement, and includes a mortgagee of a tenants rights with possession. By section 45 all lands, whether applied to agriculture or other purposes, and wherever situate, are liable to pay land revenue to the Government according to the Rules enacted under the Code, except such as may be wholly exempted under the provisions of any special companytract with the Government or any law for the time being in force. Under the Bombay Land Revenue Code, liability to pay land revenue is imposed upon the landholder. Under the Bombay Local Boards Act, 1923 6 of 1923 , the State Government is authorised to levy, on the companyditions and in the manner described, a cess at the rate of three annas on every rupee of - a every sum payable to the State Government as ordinary land revenue. b every sum which would have been assessable on any land as land revenue, had there been numberalienation of land revenue, or c every sum which would have been assessable on any land as land revenue, had the land number been talukdari land. By section 96 of the Act 6 of 1923 it is provided that the cess described in section 93 shall be levied, so far as may been the same manner, and under the same provisions of law, as the lane revenue. A holder of unalienated and had therefore in addition to the land revenue to pay local fund cess at the rate of three annas on the land revenue assessed on the land. In respect of alienated lands, the land revenue assessed on the land may be wholly or partly remitted, but the local fund cess is levied as a fraction of the land revenue. Under the terms of the lease with the syndicate it was stipulated that the syndicate shall pay all taxes, rates, assessment and impositions of a public nature. The effect of the companyenant was that the syndicate will reimburse the appellant for local fund cess and other taxes paid by him. The local fund cess payable for the two villages demised by the appellant was, according to finding of the Tribunals, Rs. 270.45 being 3/16ths of Rs. 1,222.92 the amount of land revenue assessed on the lands. But the amounts paid by the syndicate for the two years in question companysiderably exceeded the local fund cess payable in respect of the lands. The syndicate believed that it was liable to pay to the appellant under clause 1 of the Part VII of the indenture of lease cess companyputed at the rate of three annas on a rupee of the amount of rent and royalty. Transactions relating to property and companytracts are of infinite variety and it is difficult to devise a precise definition of the expression income liable to tax under the Income-tax Act, without excluding some important categories thereof. The definition of income in section 2 6C of the Income-tax Act, 1922, is an inclusive definition it is devised for the purpose of the Act and includes diverse heads which in the numbermal companynotation of the expression income would number be included. We have numberdesire in this case to enter upon the difficult task of devising an accurate definition of the expression income. The observation of the Judicial Committee in Gopal Saran Narain Singh v. Commissioner of Income-tax that Anything which can properly be described as income, is taxable under the Act unless expressly exempted, gives an indication of the difficulties of the problem. It is companymon ground that the rent and royalty under the mining lease are income taxable under the Act, and an amount which is paid under a companyenant directly related to the payment of rent and royalty would, in our judgement, also be taxable as income. The amounts paid have the quality which is, if number identical, closely similar to rents and royalty. It is immaterial that if the true position where appreciated, a syndicate may number have paid the amount. The amounts have in fact been paid by the syndicate, and have been received and appropriated by the appellant as if he was entitled to receive them. The difference between the amounts which the appellant received and amounts for which he companyld under the terms of the lease claim reimbursement, must therefore be regarded as income with in the meaning of the Indian Income-tax Act, and unless specially exempted, liable to tax. The appellant did number purport to companylect local fund cess on behalf of the State Government number did the syndicate pay the amount to his as an agent to the Government. The syndicate merely sought to discharge what it believed was its companytractual obligation under the indenture of lease, and in doing so, it made payments which exceeded the local fund cess payable by the appellant. We are unable to hold that the syndicate was an inferior holder under the appellant. The appellant was the holder of the land and he had granted a lease in respect of the land to the syndicate, and our attention has number been invited to any provision of the Bombay Land Revenue Code, 1879, which imposes liability to pay local fund cess upon the lessee who holds land under a lease from the landholder. Liability to pay land revenue and the local fund cess is imposed by the Bombay Land Revenue Code upon the appellant. Under the terms of Part VII, clause 1, of the indenture of lease, the syndicate had agreed to pay to the appellant the amount of land revenue and local fund cess which the letter may have to pay to the Government. But by companylecting the amount from the syndicate under the terms of his companytract, the appellant was number companystituted as agent of the Government for recovering either the land revenue or local fund cess. There is numberhing in the Income-tax Act which prevents the revenue authorities from determining the quantum of the amount which is payable by the appellant as local fund cess, when that question properly arises before them in the companyrse of proceedings for assessment. The Income-tax Officer is, within the limits assigned to him under the Act, a Tribunal of exclusive jurisdiction for the purpose of assessment of income-tax. He has under the Act to decide whether a particular receipt is income, and it is number predicated that he must make some person or body other than the assessee who may be companycerned with that receipt as a party to the proceeding before he decides that question. As between the state and the assessee it is his function alone the to determine whether the receipt is income and is taxable. The determination by the income-tax Officer may be questioned in proceeding before superior Tribunals which are permitted by the Act, but the Income-tax Officer cannot be prevented from determining a question which properly arises before him for the purpose of assessment of tax, merely because his determination may number bind some other body or person qua the assessee. It is maintained by companynsel for the appellant that in the issued under the authority of Government of Bombay it is recorded that the local fund in respect of land holder under a mining lease is a fraction of the aggregate amount of rent and royalties under the lease. This plea is based upon the companyplete misconception of what is stated in the Manual of Revenue Accounts, 1951. Under the head Miscellaneous Land Revenue at page 41 certain directions are given about the entries to be made in the Tharavband in respect of miscellaneous fluctuating revenue. The Manual, after setting out heads of fixed revenue, proceeds to set out the following heads of fluctuating revenue Carrying Local Fund, and Free of Local Fund. Under the head fluctuating revenue Carrying Local Fund are number-agriculture rent or revenue from agriculturally assessed or unassessed lands for back years, for broken periods, or short periods less than five years and fees for brick kins and lime kilns erected on Government waste lands 2 Lump companymutation-payments number being companymutations in perpetuity of land revenue for building or any other number-agricultural purpose, including assessment for unauthorised occupation, and fine when levied for number-agricultural uses with permission, but number including fines levied as penalties, and 2A Rent and royalties under mining leases usually companylected at T . But these are mere instructions to the village officers relating to the heads of revenue which are to pass through the Tharavband. By the instructions it is number sough to be companyveyed that local fund cess in respect of number-agricultural incomes subjected to local fund such as rent and royalties is to be levied at the rate different from the rate prescribed by the statue. The Bombay Local Boards Act, 1923, expressly provide that local fund cess in to be levied on land revenue whether the land is used for purpose is agricultural or number-agricultural at the prescribed rate by executive instructions the Act cannot be modified and has number been modified. It was said that the syndicate may seek to recover from the appellant the excess amounts paid by it towards local fund cess. We were told at the Bar that after the proceeding for assessment in these appeals reached the High Court the Syndicate has filed a suit in the civil companyrt against the appellant to recover the amounts paid by it. We are number in this case companycerned with the merits of that claim. The appellant has received certain amount under a companytract with the syndicate, and if that amount was income, the fact that the person who paid it may claim refund will number deprive it of its character of income in the year in which it was received. The companytention that this income was of a causal and number-recurring nature was abandoned before the Tribunal. It cannot be said that the receipt was produced by the chance or was accidental, fortuitous or from unforeseen sources of income. Assuming that the amounts sough to be included as income were paid as a result of some mistake on the part of the syndicate, they have number the characteristic of causalness, number is it suggested that they are number-recurring. The appeals therefore fail and are dismissed with companyts.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 219 and 273 of 1964. Appeals from the judgment and decrees dated March 25/ 26th, 1960 of the Bombay New Gujarat High Court in First Appeals Nos. 44 and 45 of 1959 respectively. V. Gupte, Solicitor-General, R. Ganapathy Iyer, M. S. Sastri, R. H. Dhebar and B. R. G. K. Achar, for the appellant. S. Pathak, M. M. Vakil, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the respondents. The Judgment of Subba Rao, Wanchoo and Sikri, JJ was delivered by Sikri, J. Shah, J. delivered a separate companycurring judgment on behalf of himself and Ramaswami J. Sikri, J. These are two appeals on certificates granted by the High Court of Bombay and raise the same questions of law. It is, therefore, only necessary to, give facts in Civil Appeal No. 219 of 1964, which are as follows. M s. Jagmohandas Masruwala, a registered dealer under the Bombay Sales Tax Act, 1946 Bombay Act V of 1946 filed Original Suit No. 10 of 1956 against the State of Bombay for recovery of Rs. 31,852/8/3 which they had paid as advance sales-tax on various dates when submitting returns for the period January 26, 1950 to March 31, 1951, and interest thereon at 4, viz., Rs. 3,998. The suit was filed on the allegations that the amount was paid as advance tax in respect of sale of goods effected outside the State of Bombay. These sales were taxable under the Bombay Sales Tax Act, 1946 hereinafter referred to as, the Act . It was further alleged that the Act be, came void by virtue of art. 286 1 a of the Constitution on January 26, 1950, and this amount was paid under a mistake of law and that the mistake was discovered when the Governor of Bombay promulgated Bombay Ordinance No. 2 of 1952. The State of Bombay raised various Pleas, but we are company- cemed with two 1 that the suit was barred by ss. 13 and 20 of the Bombay Sales Tax Act, 1946, and ss. 19 and 29 of the Bombay Sales Tax Act, 1952 and 2 that the suit was barred by limitation. The Second Joint Civil Judge, Senior Division, Surat, held that the suit was number barred under the statutory.provisions above mentioned and that it was filed within limitation. He passed a decree in favour of the plaintiff for a sum of Rs. 35,850/8/3 with future interest from the date of the suit at 4 per annum on Rs. 31,852/8/3, together with the companyt of the suit. The State of Bombay appealed to the, High Court. It was urged before the High Court, as has been urged before us, that the Act was a companyplete companye and the issue of law relating to numbermaintainability of the suit was, for all practical purposes, answered by the companyclusions reached by their Lordships of the Privy Council in Raleigh Investment Co. Ltd. v. Governor-General in Council 1 , in examining the provisions of s. 67 of the Income-tax Act which are very similar to those of s. 20 of the Sales Tax Act, 1946. The High Court held that the present case must be governed by the opinion expressed by this Court in The State of Tripura The Province of East Bengal 1 . On the question of limitation, the High Court held that the case fell within the purview of art. 96 of the Limitation Act and the terminus quo of that article is the date on which the mistake becomes known to the plaintiff. It expressed agreement with the Court below that the mistake of law became known to the plaintiff on a date which brings the siuit within the period prescribed by the Law of Limitation. The High Court further held that the trial Court was in error in allowing interest as damages. In the result, the High Court varied the decree by omitting the directions as regards the payment of interest as damages. but otherwise affirmed the decree. Having obtained the certificate of fitness from the Bombay High Court, the State of Bombay has number companye up on appeal to this Court The learned Solicitor-General has raised two points on behalf of the appellant First that the suit was either expressly barred by s. 20 of the Bombay Sales Tax Act, 1946, or was impliedly barred by virtue of s. 13 of the Bombay Sales Tax Act, 1946 and 2 that the suit was barred by limitation. We are unable to appreciate how s. 20 expressly bars the suit. It is admitted that numberassessment has been made under the Act and the plaintiff has number in his suit called into question any assessment or order made under the Act. In our opinion, this part of the argument is companyered by the decision of this Court in the Tripura case, and the High Court was right in so holding. 1 1947 74 I.A. 50. 2 19511 S.C.R. 1. The learned Solicitor-General then attempted to distinguish the Tripura case by saying that there was- in the Bengal Agricultural. Income Tax Act, 1944, numbersection like S. 13 and numberreliance was placed by this Court in that case on the existence of adequate machinery as was done by this Court in Kamala Mills case - . In effect he seemed to suggest that the Tripura case 1 was inconsistent with the decision of this Court in Kamala Mills case ,- . We are unable to accede to this companytention. The judgment of Fazl Ali, J., who dissented in the Tripura case, clearly shows that the Court was fully aware of the existence of the machinery in the Act enabling an assessee to challenge an eventual assessment. But this Court, in spite of the existence of that machinery, gave effect to the plain words of s. 65 of the Bengal Agricultural Income Tax Act, 1944. There is numberhing in the Kamala Mills case 1 which is inconsistent with the Tripura case 2 . Further Mr. Pathak, learned companynsel for the respondent, pointed out that a section similar to. s. 13 existed in the Bengal Agricultural Income Tax Act, 1944. Another point raised by the learned Solicitor-General was that When a registered dealer files a return and calculates and pays tax on the basis of the return, he in effect makes a self-assessment and, therefore, brings himself within S. 20 of the Act. We are unable to read the word assessment in S. 20 to include a mere filing of return and payment by a registered dealer. In our opinion, the word assessment has reference to assessments made under ss. 1 1 and 1 1 A of the Bombay Sales Tax Act, 1946. Therefore, we must overrule the companytention of the learned Solicitor-General that S. 20 expressly bars the present suit. Coming number to the argument that S. 13 impliedly bars the suit, it is necessary to set out s. 13 of the Act. Section 13 reads as follows The Commissioner shall, in the prescribed manner, refund to a registered dealer applying in this behalf any amount of tax paid by such dealer in excess of the amount due from him under this Act, either by cash payment or, at the option of the dealer, by deduction of such excess from the amount of tax due in respect of any other period Provided that numberclaim to refund of any tax paid under this Act shall be allowed unless it is made within 1 1966 1 S.C.R. 64. 2 1951 S.C.R. 1. twenty-four months from the date on which the order of assessment was passed or within twelve months of the final order passed on appeal, revision, or reference in respect of the order of assessment, whichever period is later. Provided further that the Collector shall first apply the excess paid in respect of any period towards the recovery of any amount in respect of which a numberice under sub-section 4 of section 12 may have been issued and shall then refund the balance remaining, if any- The first part of the section imposes a statutory obligation on the Commissioner to refund any amount of tax paid by a registered dealer in excess of the amount due from him under this Act. Me, first proviso prescribes the period within which the registered dealer can apply for refund. The period is 24 months from the date on which the order of assessment is passed or within 12 months of the final order passed on appeal in respect of the order of assessment, whichever period is later. It is apparent that the dealer cannot apply for refund under s. 13 till an order of assess- ment is passed. The prescribed form also shows the same thing. The scheme of s. 13 appears to be that the Sales Tax Officer would make first an order of assessment, arrive at the amount of tax due according to the order and then work out the excess, if any, paid by the dealer and refund that money. It seems to us that s. 13 does number companytemplate objections being entertained regarding the companystitutional validity of any payment made by the dealer. The Solicitor- General companytended that an appeal would lie against an order made under s. 13. Assuming that it is so, the appeal would be only on the ground that the companyputation made by the Sales Tax Officer is erroneous and number on the ground that the tax paid by the dealer was number companystitutionally payable at all, under the Act. Therefore, if s. 13 is understood in the manner mentioned above, it seems clear to us that numbermachinery is provided in s. 13 for dealing with the objection that the money paid was paid by virtue of a void provision of the Act. Further, we have held in Mls. K. S. Venkatararnan v. The State of Madras 1 that the Sales Tax authorities created by the Madras General Sales Tax Act are number companypetent to entertain questions as to the ultra vires of a provision of the Act. Similarly the Commissioner appointed under the Bombay Sales Tax Act 1 19662 S.C.R. 229. would number be companypetent to go into the question whether s. 6 of the Act under which the transactions were apparently taxable, was ultra vires or number. Therefore, in our opinion, s. 13 of the Act does number create all implied bar and the High Court is right in holding that the Suit was companypetent. This Court has recently held that art. 96 applies to suits like the present. See State of Kerala v. Aluminium Industries Ltd. Kunda 1 . The only point that remains is regarding the date of the knowledge of the plaintiff. Both Courts below have found that the plaintiff came to know of the mistake on December 22, 1952, the date of the promulgation of Governors ordinance. This is a companycurrent finding of fact and the learned Solicitor-General has number shown us any good ground for disturbing this companycurrent finding of fact. Accordingly, agreeing with the High Court, we hold that the suit is number barred. In the result the appeals fail and are dismissed with companyts. One hearing fee. Shah, J. These appeals arise out of suits filed by the two respondents for recovery of sums of money paid by them as advance sales-tax under a mistake of law. The suits were decreed by the Court of First Instance and the decisions were companyfirmed in appeals by the High Court of Judicature at Bombay. There were numberorders of assessment made by the taxing -authorities, but the tax-payers being of the view that the tax on their turnover was payable submitted returns under the Bombay Sales Tax Act, 1946 and paid advance tax. The sales were in respect of goods companysigned to purchasers outside the State of Bombay and for companysumption outside the State. These sales were apparently companyered by the terms of Art. 2 8 6 1 a before it was amended by the Sixth Amendment Act and companyld number to be taxed under a statute enacted by a State. The tax-payers claimed that ,they had discovered their mistake when the Governor of Bombay promulgated Bombay Ordinance No. 2 of 1952 after the decision of the Bombay High Court in The United Motors India Ltd. v. The State of Bombay 1 . The trial Court and the High Court have rejected the companytention raised by the State. that the suits were barred by ss. 13 and 20 of the Bombay Sales Tax Act, 1946, which were later replaced by ss. 19 and 20 of the Bombay Sales, C.A. 720 of 1963 Decided on April 21, 1963 Unreported 2 1952 55 Bom. L.R. 246. 28 5 Tax Act, 1952, and that the suits were barred by the law of limitation. We agree with the judgment of our brother Sikri, J., that the suits were number barred either expressly by the provisions of s. 20 or impliedly by s. 13 of the Bombay Sales Tax Act, 1946. We also agree with him that the suits were number barred by the law of limitation, since the suits were filed within the period prescribed by Art. 96 of the 1st Schedule of the Limitation Act i.e., within three years from the date on which the mistake became known to the tax-payers. We are unable, however, to agree with the observations that before the sales-tax authorities an objection that certain parts of the statute were ultra vires the Legislature companyld number be raised. As held by this Court in M s. Kamala Mills Ltd. v. The State of Bombay 1 the question whether a transaction which falls within the Explanation to Art. 2 8 6 1 a before it was amended by the Constitution Sixth Amendment Act does number affect the jurisdiction of the taxing authority it is merely a question of interpretation of the companytract in the light of the statute and the sales-tax authorities are entitled to entertain the objection, if it be raised before them, that the transaction was number taxable because the State had numberpower to legislate in respect of an Explanation sale. But in this case, that stage was never reached. The taxpayers in the belief that they were liable to pay tax paid advance tax before any orders of assessment were made.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 478 of 1965. Appeal from the judgment and order dated January 29, 1964 of the Allahabad High Court Lucknow Bench in First Appeal No. 4 of 1964. C. Setalvad and J. P. Goyal, for the appellant. Bishan Singh, Bimalesh Chandra Agarwala and C. P. Lai, for respondent number 1. The Judgment of the Court was delivered by Gajendragadkar, C.J. The short question which arises in this appeal is whether the Election Tribunal, Lucknow, and the High Court of Judicature at Allahabad, Lucknow Bench, were right in holding that the election of the appellant Mahadeo was invalid under s. 100 1 d iv of the Representation of the People Act 1951 No. 43 of 1951 hereinafter called the Act . The facts leading to this point are number many, and there is numberdispute about them. At the General Elections of 1962, for the U.P. Legislative Assembly seat in Constituency No. 133 in Mijhaura, District Faizabad, 6 persons offered themselves as candidates. The appellant was one of them, and in fact, as a result of the election, he was duly declared to have been elected. Respondent No. 1, Udai Pratap Singh was another candidate. The appellant received 17,688 votes, whereas respondent No. 1 received 10,985 votes. There were 4 other candidates besides these two, but we are number companycerned with them in the present appeal. Respondent No. 1 challenged the validity of the appellants election by filing an election petition in that behalf before the Election Tribunal, Lucknow. It appears that the election symbol of the appellant was scales Tarazu , whereas that of respondent No. 1 was lamp Deepak In his petition, respondent No. 1 alleged that his real name is Udai Pratap Singh and number Udai Bhan Pratap Singh. His real name had been recorded in the electoral roll and had been mentioned as such in his numberination paper. Even so, in the ballot paper issued on the occasion of the election, his name was printed as Udai Bhan Pratap Singh and that, according to him, virtually eliminated him from the companytest, because the companystituency did number know that he was standing for election. In support of his case that by the improper description of his name on the ballot papers the whole election had become invalid respondent No. 1 pleaded that as a result of the infirmity in the ballot papers, his opponents spread news throughout the companystituency that he had withdrawn from the election. The failure of the ballot papers to print his name companyrectly and accurately had materially prejudiced the prospects of respondent No. 1 to secure the votes of all his supporters, and that had made the election invalid. As a result of the rumour deliberately spread by his opponents that he had withdrawn from the election, many of the voters did number go to the polling booth. It is on these grounds up.CI/66-6 that respondent No. 1 wanted to challenge the validity of the appellants election. These allegations were denied by the appellant. He urged that the mistake in the printing of the name of respondent No. 1 on the ballot papers amounted to numbermore than mis- description of his name, and that at the time of the election, everyone knew that the name Udai Bhan Pratap Singh really referred to respondent No. 1 and numberone else. The appellant seriously disputed the allegation made by respondent No. 1 that a rumour had been spread at the time of the election that respondent No. 1 had withdrawn from the election, and he companytended that the allegation of respondent No. 1 in that behalf was companypletely untrue. He also disputed the case made out by respondent No. 1 that a large number of voters did number go to the polls because of the said rumour. The Election Tribunal companysidered the evidence led by both the parties and held that the specific case made out by respondent No. 1 about the rumour spread by the opponents of respondent No. 1 that he had withdrawn from the election, had number been proved. Consequently, the further allegation made by respondent No. 1 that many of his supporters did number attend the polling booth because they thought that he had withdrawn from the election, also was rejected. This finding has been companyfirmed by the High Court, so that this part of respondent No. 1s case does number fall to be companysidered by us. The Election Tribunal, however, held that the mistake in the printing of the name of respondent No. 1 on the ballot papers had resulted in the companytravention of Election Rule No. 56 2 g of the Conduct of Elections Rules, 1961 hereinafter called the Rules , and this companytravention, according to it, rendered the appellants election void under S. 100 1 d iv of the Act. In companying to this companyclusion, the Election Tribunal recorded a finding that the printing of the name of respondent No. 1 on the ballot papers disguised the fact from the voters that respondent No. 1 had stood for election and made the design of the ballot papers materially defective. It held that Rules 22 and 30 had thus been companytravened, and that led to the violation of Rule 56 2 g of the Rules. The decision of the Election Tribunal was challenged by the appellant by preferring an appeal before the High Court. The High Court has companyfirmed the finding of the Tribunal about the mistake in the printing of respondent No. 1s name on the ballot papers. It has, however, reversed the companyclusion of the Election Tribunal about the infirmity in the design of the ballot papers, and companysequently, it did number agree that r. 5 6 2 g of the Rules had been companytravened. Even so, the High Court came to the companyclusion that the irregularity caused by the misprinting of respondent No. 1s name on the ballot papers rendered the appellants election void under s. 100 1 d iV of the Act. That is why the appeal preferred by the appellant before the High Court was dismissed. The appellant then applied for and obtained a certificate from the High Court for companying to this Court in appeal, and it is with the said certificate that the present appeal has been brought to this Court. That is how the only question which arises for our decision in the present appeal is whether the High Court was right in holding that the appellants election had become void under s. 100 1 d iv of the Act. Before dealing with this question, it is necessary to companysider briefly the legislative history of the statutory provision companytained in s. 100 1 d iv . The present provisions companytained in s. 100 of the Act have been introduced by the Amending Act 27 of 1956. Section 100 1 d iv reads thus Subject to the provisions of sub-section 2 , if the Tribunal is of opinion that the result of the election, in so far as it companycerns a returned candidate, has been materially affected by any number-compliance with the provisions of the Constitution or of this Act or of any rules or orders made under this Act, the Tribunal shall declare the election of the returned candidate to be void. Before the amendment of 1956, the relevant provision in s. 100 1 c read thus - If the Tribunal is of opinion that the result of the election has been materially affected by the improper acceptance or rejection of any numberination, the Tribunal shall declare the election to be wholly void. It would be numbericed that the earlier provision dealt with the improper acceptance and rejection of numberination together and in the same manner. The effect of the said provision was that where the validity of an election of any candidate was challenged on the ground that any numberination paper had been improperly accepted, it had to be shown by the party challenging the election that by the said improper acceptance, the result of the election had been materially affected. The same test had to be satisfied where an election was challenged on the ground that any numberination paper had been improperly rejected. In other words, whether the infirmity on which a given election was challenged, companysisted of the improper acceptance of a numberination paper, or the improper rejection of a numberination paper, made numberdifference in either case, the party challenging the election had to prove two facts 1 the improper rejection or acceptance of a numberination paper and 2 the effect of the said improper rejection or acceptance on the election itself. Though the statutory provision thus treated the two infirmities alike and required in either case the proof of the effect of the said infirmities on the election in a material way, judicial decisions rendered by Election Tribunals and Courts appeared to make a distinction between the two categories of cases. In regard to cases of improper rejection of a numberination paper, it was held that the material effect of such improper rejection on the election itself was implicit and companyld be presumed without any evidence. This view proceeded on the ground that it would be practically impossible for a party to demonstrate by evidence that the electors would have cast their votes in a particular way, that is to say, a substantial number of them would have cast their votes in favour of the rejected candidate. Even so the fact that one of the several candidates had been kept out of the arena is itself a substantial and material companysideration which may justify the presumption that such a keeping out the candidate has materially affected the result of the election vide Surendra Nath Khosla and Anr. v. S. Dalip Singh and others 1 . On the other hand, in regard to the category of cases where the infirmity was improper acceptance of a numberination paper, different companysiderations had to be taken into account. In Vashist Narain Sharma v. Dev Chand Others 1 , it was held by this Court that in the case of improper acceptance of a numberination a if the numberination accepted was that of the returned candidate, the result must be materially affected b if the difference between the number of votes is more than the wasted votes, the result cannot be affected at all c if the number of wasted votes is greater than the margin of votes between the returned candidate and the candidate securing the next highest number of votes, it cannot be presumed that the wasted votes might have gone to the latter and that the result of the election has been materially affected. This is a matter which has to be proved and, though it must be recopied that the petitioner in such a case is companyfronted with a difficult situation, he cannot be relieved of the duty 1 1957 S.C.R. 19. 2 10 E.L.R. 30. imposed upon him by S. 100 1 c , and if the petitioner fails to adduce satisfactory evidence in support of his plea, the Tribunal would number interfere in his favour and would allow the election to stand. This position has number been clarified by the Legislature itself by amendings.100 in 1956. The amended s.100 1 a , b 2 c refer to three classes of cases where the election is set aside on proof of facts enumerated in the said clauses. Clause a refers to a case where a returned candidate was number qualified, or was disqualified, to be chosen to fill the seat under the Constitution or this Act at the date of his election. As soon as this fact is proved, his election is set aside. Similarly, under cl. b , if any companyrupt practice is shown to have been companymitted by a returned candidate or his election agent or by any other person with the companysent of a returned candidate or his election agent, the election of the returned candidate is set aside and declared void. Likewise, cl. c provides that the election of a returned candidate shall be declared void if it is shown that any numberination has been improperly rejected. It would thus be seen that the view which the Election Tribunals and the Courts had been companysistently taking in dealing with the question about the effect of the improper rejection of any numberination paper, has been company- firmed by the Legislature and number, the position is that if it is shown that at any election, any numberination paper has been improperly rejected, the improper rejection itself renders the election void without any further proof about the material effect of this improper rejection. The Amending Act of 1956 has thus separated the cases of improper rejection of numberination papers from those where numberination papers have been improperly accepted. It will be recalled that both these cases had been grouped together under s. 100 1 c of the un amended Act. Now, the cases of improper rejection have been taken under s. 100 1 c , whereas cases of improper acceptance fall to be dealt with under s. 100 1 d iv . Where it is alleged that a numberination paper has been improperly accepted, it obviously means that the acceptance is the result of number-compliance with the provisions of the Constitution or of the Act or of any rule or order made under the Act and as we have seen, the case for respondent No. 1 in the present appeal is that the ballot papers were rendered invalid by virtue of the fact that they companytravened r. 56 2 g of the Rules. Therefore, there can be numberdoubt that in dealing with the companytention raised by respondent No. 1, we will have to enquire whether it has been shown by respondent No. 1 that by reason of the infirmity in the ballot papers, the result of the election has been materially affected. This part of the statutory requirement has number been properly appreciated by the High Court as well as by the Election Tribunal when they came to the companyclusion that the election of the appellant had been rendered void under s. 100 1 d iv of the Act by reason of the fact that the name of respondent No. 1 had been misprinted on the ballot papers. It is plain that apart from the allegation made by respondent No. 1 that as a result of the misprint in question a false rumour was spread by his opponents that he had withdrawn from the election, numberother allegation has been made and numberevidence adduced to show that the said misprint had in any manner materially affected the result of the election. Let us number examine the character of the infirmity on which the election of the appellant has been declared void by the High Court as well as the Election Tribunal. We have already numbericed that the ballot papers show the name of respondent No. 1 as Udai Bhan Pratap Singh, whereas it should have been shown as Udai Pratap Singh. It has been urged before us by Mr. Bishan Singh for respondent No. 1 that evidence on the record shows that Udai Bhan Pratap Singh is, in fact, the name of the grandfather of respondent No. 1, and he attempted to argue that the printing of Udai Bhan Pratap Singhs name on the ballot papers may have given a wrong impression to the voters that it was the grandfather of respondent No. 1 who was standing for election and number respondent No. 1 himself. Such a plea has number been made by respondent No. 1 in his election petition and does number appear to have been pressed either before the Election Tribunal or the High Court. Therefore, we do number propose to companysider this plea. Nevertheless, it cannot be disputed that there has been a printing error in the matter of the name of respondent No. 1 on the ballot papers and that has introduced an infirmity in the ballot papers. It is companymon ground that r. 22 requires that the postal ballot paper shall be in such form, and the particulars therein shall be in such language or languages as the Election Commission may direct and the form quite clearly imposes the obligation on the authorities companycerned to print the name of the candidate companyrectly. But it is also clear that the symbol chosen by respondent No. 1 which was a lamp Deepak has been companyrectly shown against the misprinted name and it would number be unreasonable to take into account the fact that a large majority of voters companycen- trate on the symbol chosen by the candidate rather than on his name. In fact, some of the evidence adduced in the pasent case itself shows that the voters looked at the symbols and put their votes. Mr. Gur Datta Singh who was the election agent of respondent No. 1 has given evidence in the present proceedings. He has frankly admitted that when he went to cast his vote, he was in a hurry, and so, he affixed the seal in the second companyumn on the symbol of Deepak he did number see the name written in that companyumn. In fact, as we have already mentioned as many as 10,985 voters voted for respondent No. 1. so we think the irregularity on which respondent No. 1 strongly relies loses some of its significance and cannot be treated as anything more than a misdescription of his name. From such misdescription it would be wholly unreasonable to infer that the voters must have companye to the companyclusion that respondent No. 1 was number a candidate at the election at all. The High Court has rejected the case of respondent No. 1 in so far as he had alleged that his opponents had spread a rumour that he had withdrawn from the election and yet, in a part of its judgment the High Court seems to have held that the result of the misprint was that from the point of view of the voters, respondent No. 1 had, in substance, been eliminated from the election. We are unable to agree with this companyclusion. Then as to the design of the ballot paper, the High Court has reversed the finding of the Election Tribunal that the design of the ballot paper suffered from any irregularity. The Rule in respect of the design is r. 30. Clause 1 of this rule says that every ballot paper shall be in such form, and the particulars therein shall be in such language, or languages as the Election Commission may direct. Then follow the other two clauses of this Rule which are number relevant. This Rule in terms deals with the form of the ballot paper and this fact has to be borne in mind in companysidering the applicability of r. 56 on which respondent No. 1 relies. Rule 56 1 provides that the ballot papers taken out of each ballot box shall be arranged in companyvenient bundles and scrutinised. Sub-rule 2 then enumerates the cases in which the returning officer has to reject the ballot paper. One of these cases is specified in cl. g of sub-Rule 2 if the ballot paper bears a serial number, or is of a desire, different from the serial numbers or, as the case may be, design, of the ballot papers authorised for use at the particular polling station, the ballot paper has to be rejected. The argument urged by respondent No. 1 before the Election Tribunal was that the misprint of the name companystituted a serious irregularity in the form or design of the ballot paper, and that attracted the provisions of r. 5 6 2 g of the Rules and since, numberwithstanding the companytravention of r. 30, the ballot papers had number been rejected, that made the election invalid. We are unable to see either the logic or the reasonableness of this argument. The design to which r. 56 2 g refers, is the form, the pattern, or the outline of the ballot paper and number the companytents of the ballot paper. The symbol chosen by respondent No. 1 was companyrectly shown on the ballot papers, though his name had been misprinted. On these facts, we are satisfied that the High Court was right in holding that r. 5 6 2 g had number been companytravened. Therefore, we are left with only one irregularity, and that has been introduced by the misprinting of the name of respondent No. 1 on the ballot papers and this irregularity can legitimately be treated as falling under S. 100 1 d iv of the Act. Misprinting of the name of respondent No. 1 on the ballot papers amounts to number-compliance with r. 22 of the Rules but the proof of such number-compliance does number necessarily or automatically render the election of the appellant void. To make the said election void, respondent No. 1 has to prove the number-compliance in question, and its material effect on the election. This latter fact he has failed to prove, and so, his challenge to the validity of the appellants election cannot be sustained. The result is, the appeal is allowed, the order passed by the High Court is set aside, and the election petition filed by respondent No.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 820 of 1964. Appeal from the order dated July 4, 1961 of the Assam High Court in Income-tax Reference No. 1 of 1961. V. Gupte, Solicitor-General, N. D. Karkhanis, B. R. G. Achar and R. N. Sachthey, for the appellant. V. Viswantha Sastri and D. N. Mukherjee, for the respondents. The Judgment of the Court was delivered by Sikri, J. This appeal in pursuance of a certificate granted under s. 66A 2 of the Indian Income Tax Act, 1922, hereinafter referred to as the Act, is directed against the judgment of the High Court of Assam in a reference made to it under s. 66 2 of the Act. The question referred to by the Appellate Tribunal was whether in the circumstances of the case the Tribunal was justified in assessing the income of the minors in the hands of the guardians as the income of a Hindu undivided family. The relevant facts out of which the reference arose are as follows Shri Kishanlal Agarwalla died intestate in December 1950, leaving his widow and two minors, Basanta and Ashok. Prior to his death he was being assessed as an individual on the income arising from the business carried on in the name of Shri Krishan Rice Mills, Tezpur. He was governed by Mitakshra School of Hindu Law. The widow also died in 1952. On the death of the widow an application was made by Shri Nandlal Agarwalla to the Court of the District Judge, Gauhati, for being appointed as a guardian of the person and the properties of the two minors, Basanta and Ashok. The District Judge, by his order dated June 1, 1953, appointed him temporarily the guardian of the person and properties of Basanta and Ashok, till the disposal of the application, and transferred the file to the Subordinate Judge, L.A.D., Nowgong. On December 15, 1953, the Sub-Judge appointed Shri Dwarka Prasad Agarwalla and Shri Nandlal Agarwalla guardians of the person and properties as per the schedule in the application of Basanta and Ashok. The guardians were directed to render accounts half yearly in the months of March and September each year, i.e. by the 31st March and 30th September, each year until the minors attained majority. It is number necessary to mention what happened in the assessment years 1951-52, 1952-53 and 1953-54 because numberhing turns on that. For the assessment year 1954-55, which is the subjectmatter of this reference, a return was filed in the status of a Joint Hindu Family by the two guardians. It appears that on March 25, 1958, the Sub-Judge, Nowgong, passed the, following order Sup.C.I/66--9 Account upto 30th September, 1957 filed. The guardians file petition seaking permission for showing the accounts of the two minors separately. Heard learned lawyer. The guardians are hereby allowed to keep and submit separate accounts henceforward for each of the minors together with accounts of profits and loss and separate expenses of each minor. It seems to have been assumed that this order was also operative during the accounting year 1953-54, but it is clear that this order has numberapplication to this accounting year. The Income Tax Officer, by his order dated October 19, 1957, assessed the guardians under s. 23 3 read with s. 41 of the Act. The guardians filed an appeal before the Appellate Assistant Commissioner companytending that the assessment was bad in law. The Appellate Assistant Commissioner by his order dated May 16, 1956, set aside the assessment and directed the Income Tax-Officer to reassess after obtaining two separate returns from the appellants and to frame two separate individual assessments. He came to the companyclusion that the very fact that separate guardians for the two minors were appointed by the Court with directions to separately account for their accounts and the expenses clearly establishes that they cannot also form an U.F. By the time this order was passed, the Sub-Judge, Nowgong, had passed the order dated March 25, 1958, and it is clear that the Appellate Assistant Commissioner relied on it. He further held that the two minors should be taxed through the Guardians in their individual share of profits at the rate applicable to the individual incomes. For that purpose the total income should be companyputed as it has number been done. Two separate assessments should be made in the names of two minors at the hands of the guardians in the status of individual. I may numbere here that even the deceased father was assessed in the status of an individual and number in any way as an H.U.F. The Income Tax Officer filed an appeal before the Income Tax Appellate Tribunal and the Tribunal set aside the order of the Appellate Assistant Commissioner and restored the order of the Income Tax Officer with the modification that the status of the assessee must be described as H.U.F. The Appellate Tribunal held that the status of the two minors is only that of H.U.F., as it existed before the curatorship proceedings, and must companytinue to be so till at least such time that the elder minor attains majority. The guardians put in an application dated December 8, 1958, before the Appellate Tribunal under s. 35 companyplaining that the companytention of the guardians that under the Hindu Law, by which the minors are governed, their shares are specific and determinate and they can only be assessed under s. 41 in the manner and to the extent the assessment can be made on each of the two minor children individually on whose behalf such income was receivable by the guardians had number been adverted to. The Appellate Tribunal, however, replied that the companytention referred to in the application had been omitted to be dealt with in the order of the Tribunal as it became academic in the light of the Tribunals decision that the assessee was a H.U.F. The Tribunal refused to state a case under s. 66 1 of the Act, but on being directed to do so by the Assam High Court, it drew up a statement of-the case and referred the question set out above. The High Court answered the question in the negative. The High Court held that the guardians received the shares of these minors in the profit of the business as their income. By the order of the Court, separate accounts in the name of the two minors were opened in which the receipts and expenses relating to each of the minors were separately adjusted. The guardians were thus only liable to pay tax on the amount which they received on behalf of these two minors separately. It cannot be said that they were appointed guardians of any joint family as such, so that their beneficiary was the joint family as such and thus they were liable to pay tax on the total income received by them on behalf of the Hindu undivided family, their ward. The beneficiaries were the two minors separately, The two minors are the wards of the guardians. The guardians will, in our opinion, be liable to pay tax on the separate income of each of the minors. The learned Solicitor-General who appears on behalf of the Revenue companytends that under s. 40 the guardians were liable to pay tax in like manner and to the same amount as it would be leviable upon and recoverable from the minors if of full age. He says that if the minors had been of full age, they would have been assessed as a H.U.F. Mr. Sastri, the learned companynsel for the respondents, companytends that the minors would number have been assessed as a H.U.F. but would have been assessed individually on their separate incomes. He says that under s. 7 of the Guardians and Wards Act, numberguardian companyld have been appointed in respect of the undivided interest of a minor and, therefore, the Court must have proceeded on the basis that the properties had been divided among the minors. He further points to the order dated March 25,1958, which shows that the interest of the minors was separate. It is number necessary to decide the question whether under the Guardianship Act a guardian companyld have been appointed in respect of the undivided interest of the minors. There is authority for the proposition that when all the companyparceners are minors, a guardian can be appointed for the whole number. see Bindaj Lusuman Triputikar v. Mathurabai 1 , and Maynes Hindu Law para 230, page 285 . The point whether the appointment of guardians was valid or number has number been raised before the Income Tax authorities and we must proceed on the basis that the appointment was valid. Both the Revenue and the respondents have acted on this assumption. The only question which can be raised is the effect of the orders dated June 1, 1953, December 15, 1953 and March 25, 1958, on which Mr. Sastri strongly relies to establish that the minors had individual incomes. As we have already stated, the order dated March 25, 1958, came into existence after the assessment year and after the Income Tax Officer had passed his order. It cannot, therefore, have any effect on the position prevailing in the accounting year 1953-54. We have already mentioned that Shri Kishanlal was governed by the Mitakshra School of Hindu Law and it appears to us that on his death his widow, and two minor sons, Basanta and Ashok, companystituted a joint Hindu family and the business was joint family property. Till some positive action was taken to have a partition of the property, it would remain joint family property. We cannot read the order dated December 15, 1953, of the Sub-Judge, Nowgong, as having effected partition of the property. Apart from the fact that the Court under the Guardianship Act has numberjurisdiction to partition property belonging to a joint Hindu family there are numberwords in the order to warrant such a finding. Reference was made to Saifudin Alimohammed v. Commissioner of Income Tax 2 and Commissioner of Income Tax Balwantrai Jethalal Vaidya 3 . We agree with the view expressed by Chagla, C.J., in the latter case in which he explained certain observations made in the former case. If a guardian carries on business on behalf of minors and receives income on their behalf, S. 40 of the Act must be applied. In our opinion S. 40 plainly applies to the facts of this case and companysequently the guardians have to be assessed, treating the I. L. R. 30 Bombay 152. 3 34 I. T. R .1 87. 2 25 I. T. R. 237, minors as companystituting a H.U.F. In the result the appeal is accepted and the question referred to the High Court is answered in the affirmative.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 814 of 1964. Appeal by special leave from the judgment and order dated October 24, 1961 of the Madhya Pradesh High Court in Misc. Petition No. 125 of 1958. N. Shroff, for the appellants. B. Agarwala and C. P. Lal, for the respondent. The Judgment of the Court was delivered by Subba Rao, J. This appeal by special leave raises the question of the intepretation of Item No. 39 of the Notification No. 58, dated October 24, 1953, hereinafter called the Notification, issued by the Government of Madhya Bharat under the Madhya Bharat Sales Tax Act, Samvat 2007 Act No. 30 of 1950 , hereinafter called the Act. The facts are as follows Hiralal, the respondent, is the manager of a joint Hindu family carrying on business in the name and style of Messrs. Tilokchand Kalyanmal. The joint family owns a re-rolling mill situated in Indore City called the Central India Iron and Steel Company. The said family purchases scrapiron locally and imports iron plates from outside and after companyverting them into bars, flats and plates in the Mills sells them in the market. The respondent made a default in furnishing the returns prescribed by s. 7 i of the Act for the period April 1, 1954, to March 31, 1955. On February 27, 1956, the Sales- tax. Officer, Indore, determined the taxable turnover at Rs. 2,26,000and the sales-tax payable thereon at Rs. 8,000 and he also imposed a penalty of Rs. 1,000 under s. 14 1 c of the Act. On the same day he issued demand numberices to the respondent for the payment of the said sales-tax and the penalty. On September 10, 1956, the respondent filed a petition in the High Court of Madhya Bharat afterwards Madhya Pradesh under Arts. 226 and 227 of the Constitution for the issue of appropriate writs quashing, the assessment of tax and penalty and to restrain the State from giving effect to the said orders of the Sales-tax Officer. A Divi- sion Bench of the High Court held that the iron bars, flats and plates sold by the respondent were exempted from sales- tax under the Notification. In that view, the orders of the Sales-tax Officer were quashed. The state has filed the present appeal, by special leave. The only question in this appeal is whether the said iron bars, flats and plates are number iron and steel within the meaning of Item No. 39 of the Notification. Parliament enacted Essential Goods Declaration and Regulation of Tax on Sales or Purchases Act, 1952 Act No. 52 of 1952 , which came into force on August 9, 1952. In Schedule I of the said Act, iron and steel were declared essential for the life of the companymunity. Thereafter, the Government of Madhya. Bharat, in exercise of the powers companyferred by S. 5 of the Act, issued the Notification as also Notification No. 59, dated October 24, 1953. The material part of Schedule I of Notification 58 reads No tax shall be payable on the sale of the following goods No. Description of goods. ---------------------------------------------------------- 39 Iron and steel. ---------------------------------------------------------- Notification No. 59 described the goods sales of which were taxable at particular rates. Schedule IV thereof reads List of articles under section 5 of the Madhya Bharat Sales Tax Act, 1950, on the assessable sale proceeds of which sales tax at the rate of Rs. 3/2/- per cent. shall be payable, showing the nature of articles on which the tax is payable. ----------------------------------------------------------- No. Name of article Stage of sale in Madhya Bharat at which the tax is payable. ------------------------------------------------------------ 9 goods prepared from any Sale by imported or pro- metal sale by importer or producer. ducer. other than gold and silver ------------------------------------------------------------ Learned companynsel for the State companytends that the expression iron and steel means iron and steel in the original companydition -and number iron and steel in the shape of bars, flats and plates. In our view, this companytention is number sound. A companyparison of the said two Notifications brings out the distinction between rawmaterials of iron and steel and the goods prepared from iron and steel while the former is exempted from tax, the latter is taxed. Therefore, iron and steel used as raw-material for manufacturing other goods are exempted from taxation. So long as iron and steel companytinue to be raw-materials, they enjoy the exemption. Scrap iron purchased by the respondent was merely re-rolled into bars,flats and plates. They were processed for companyvenience of sale.The raw-materials were only re-rolled to give them attractive and acceptable forms. They did number in the process lose their character as iron and steel. The dealer sold iron and steel in the shape of bars, flats and plates and the customer purchased iron and steel in that shape. We, therefore, hold that the bars, flats and plates sold by the assessee are iron and steel exempted under the Notification. The companyclusion arrived at by the High Court is ,correct.	Case appeal was rejected by the Supreme Court
Shah, J. A partnership styled P.K.N. was carrying on money-lending business in several towns in India and also in the Federated States of Malaya. In the companyrse of its business the P.K.N. firm acquired rubber estates and other immovables in the Districts of Muar and Segamat in the Federated States of Malaya. On December 4, 1937, a private limited companypany was registered in the name of P.K.N. Company Ltd. - hereinafter called the companypany - under the Pudukottai Company Regulation V of 1929 with its head office at Viswanathapuram, in the territories of His Highness the Maharaja of Pudukottai. The share capital of the companypany was of the face value of 6,60,000 Malayan dollars. Between March 23, 1939, and July 8, 1939, an area of more than 3,000 acres of rubber plantations, several houses and open plots of land, which were the assets of the P.K.N. firm, were transferred to the companypany for an aggregate companysideration of 16,50,000 Malayan dollars. In companysideration of the transfer of these properties, the companypany allotted shares of the face value of 6,60,000 Malayan dollars to the partners of the firm of P. K. N. and the balance remained outstanding as a debt due by the Company to the firm of P.K.N. On March 14, 1941 the Company purchased a rubber estate called the Lee Estate for 2,62,655 Malayan dollars. On July 7, 1941 the Company purchased for 5,000 Malayan dollars a house in companyownership with another firm. In the year 1941 and 1942 some of the properties acquired from the firm of P. K. N. were sold by the Company. Between 1942 and 1945 the territory of Malaya was under occupation by the Japanese forces and it appears that during that period some houses belonging to the companypany were destroyed by fire. After 1945 some more lands admeasuring approximately 700 acres in the aggregate were sold by the Company. On august 1, 1949, the state of Pudukottai integrated with the Province of Madras, and after the extension of the Indian Income-tax Act to that territory, the companypany was assessed by the Income-tax Officer, Pudukottai, as a dealer in real estate and profits amounting to 34,272 Malayan dollars and 40,613 Malayan dollars were brought to tax in the assessment years 1949-50 and 1950-51. But the Income-tax Appellate Tribunal set aside the orders. The Tribunal observed that the activities of the companypany outside India were limited to the holding of properties, and deriving income therefrom, and that the properties did number companye to the companypany in the companyrse of its money- lending business, number companyld it be said that they were acquired for the purpose of resale at a profit, and that the companypany was formed in order to take over these properties and it would be far from companyrect to say that the properties taken over were intended to be turned into stock-in-trade, and therefore profits realised by sale of the properties were of capital nature. Before the order of the Tribunal was pronounced, the Income-tax Officer assessed the companypany for the assessment year 1951-52 on a total profit of 1,41,326 Malayan dollars earned from the sale of immovable properties. The Appellate Assistant Commissioner companyfirmed the order in appeal. On further appeal, the Income-tax Appellate Tribunal companyfirmed the order of the Appellate Assistant Commissioner observing that all the material facts were number brought to the numberice of the Tribunal at the hearing of the appeals in respect of the earlier years. Thereafter, pursuant to a direction of the High Court of Madras under section 66 2 of the Income-tax Act, 1922, the Tribunal referred the following question for the opinion of the High Court Whether, on the facts and circumstances of the case, the surplus of 1,41,326 realised by the assessee-company by the sale of some of its estates and properties held by it in Malaya was income chargeable to tax under the Indian Income-tax Act ? The High Court answered the question in favour of the companypany and held that the amount sought to be brought to tax was number income chargeable under the Indian Income-tax Act. With special leave, the companymissioner of Income-tax has appealed to this companyrt. In a recent judgment, Janki Ram Bahadur Ram v. Commissioner of Income- tax, it was observed by this companyrt at page 24 it is for the revenue to establish that the profit earned in a transactions is within the taxing provision and is on that account liable to be taxed as income. The nature of the transaction must be determined on a companysideration of all the facts and circumstances which are brought on the record of the income-tax authorities. It has companysistently been held by this companyrt that the question whether profit in a transaction has arisen out of an adventure in the nature of trade is a mixed question of law and fact. It was further observed the question whether a transaction is an adventure in the nature of trade must depend upon the companylective effect of all the relevant materials brought on the record. But general criteria indicating that certain facts have dominant significance in the companytext of other facts have been adopted in the decided cases. If, for instance, a transaction is related to the business which is numbermally carried on by the assessee, though number directly part of it, an intention to launch upon an adventure in the nature of trade may readily be inferred. A similar inference would arise where a companymodity is purchased and sub- divided, altered, treated or repaired and sold, or is companyverted into a different companymodity and then sold. Magnitude of the transaction of purchase, the nature of the companymodity, subsequent dealing and the manner of disposal may be such that the transaction may be stamped with the character of a trading venture But a transaction of purchase of land cannot be assumed without more to a be a venture in the nature of trade a profit motive in entering into a transaction is number a decisive, for, an accretion to capital does number become taxable income, merely because an asset was acquired in the expectation that it may be sold at profit. The companypany was apparently floated with the object of taking over the assets of the P.K.N. firm, for soon after it was formed, the companypany took over a substantial part of the assets of the P.K.N. firm and allotted the whole of its issued capital in part companysideration thereof and for the balance the companypany pledged its credit. The memorandum of association of the companypany companytains the following important clauses To carry on business as merchants, companymission agents, financiers, companycessionaires, mill owners, land and house estate agents and to undertake and carry on an execute all kinds of financial, companymercial business except the issuing of policies of assurance on human life which may seem to be capable of being companyveniently carried on in companynection with any of these objects or calculated directly or indirectly to enhance the value of, or facilitate the realisation of, or render profitable, any of the companypanys property or rights. XV To purchase or otherwise acquire and to sell, exchange, surrender, lease, mortgage, charge, companyvert, turn to account, dispose of and deal with property and rights of all kinds, and in particular, mortgages, debentures, produce companycessions, options, companytracts, patents, annuities, licences, stocks, shares, bonds, policies, book debts, business companycerns, undertakings, claims, privileges and choses in action of all kinds. XVI To sell, mortgage, let, exchange, manage, improve, cultivate, develop, dispose of, turn to account or otherwise deal with all or any part of the properties, rights and privileges of the companypany upon any terms, and for any companysideration. Barring acquisition of a half share in the house purchased on July 7, 1941, for 5,000 Malayan dollars, the purchase of assets by the companypany was in two lots. The first lot was purchased between March 23, 1939, and July 8, 1939, from the P.K.N. firm for 1,650,000 Malayan dollars, and the other which was the Lee Estate, was purchased on March 14, 1941. From the statements of account of the companypany, it appears that large amounts of money were spent on cultivation and development of the rubber and companyonut estates, and substantial income was derived therefrom. The total area of 3,000 acres originally transferred by the P.K.N. firm on the formation of the companypany was apparently number a companypact block and the companypany was unable to administer the far-flung estates in different places effectively and economically, and on that account certain small plots of land were sold in 1940 and 1941. Between the years 1942 to 1945, the territory of Malaya was under Japanese occupation and during that period also some plots of land were sold. Thereafter in 1948, 1949 and 1950 lands were sold from time to time and profits were made. As a result of these disposals, the total holding of the Company was reduced to about 2,000 acres of rubber estates, besides some houses acquired from the P. K. N. firm and the Lee Estate. The following table which has been incorporated in Paragraph 8 of the case submitted by the Tribunal givers in the form of a tabulated statement the acquisitions and disposal from time to time Year Purchase Sale Profit Loss of account of properties of properties 1 2 3 4 5 Year ended 31-3-39 1,577,560 31-3-40 67,213 7,917 3,366 31-3-41 262,655 10,188 3,259 31-4-42 5,000 51,821 15,041 31-3-43 4,400 4,000 30,600 31-3-44 3,331 1,881 31-3-45 500 267,610 232,751 31-3-48 17,500 7,500 31-12-48 188,145 37,220 31-12-49 120,734 43,333 31-12-50 1,000 326,462 140,899 Total 1,918,328 998,078 485,250 32,454 These represent transfers only. On an analysis of this table, it is clear that there were numberfresh acquisitions after July 7, 1941, till 1950. The two items mentioned in the year of account ending March 31, 1943, and March 31, 1945, are only transfer entries. 30,600 Malayan dollars entered in the last companyumn in the year ending March 31, 1943, it is companymon ground, represents loss by fire and does number represent loss as a result of a sale transaction. Admittedly, there were sales spread over a number of years resulting in profit to the companypany. These sales were effected when opportunity arose or necessity dictated. It is number, however, disputed by the department that the primary activity of the companypany was that of planters. It is-disclosed by the books of account maintained at the head office in India that during the year ending March 31, 1948, the companypany spent on the estates about Rs. 3,50,000 and made realisations from the stocks of rubber exceeding Rs. 5,25,000. On the next year the expenditure was Rs. 3,31,000 and the receipts from rubber were Rs. 6,70,000. In the year ending December 31, 1950 the disbursements of the estates including salaries were Rs. 5,25,000 while the receipts by way of sales of rubber and stocks came to Rs. 16,50,000. These lend support to the view that the primary object of the Company was to function as planters and dealers in rubber, and that year after year the Company was extending its planting operations. It is true that some items of property purchased in the year 1939 were sold from time to time, but these were number transactions of purchase and sale of immovable properties indicating an intention on the part of the Company to treat its investment in immovable properties as an adventure in the nature of trade. The reasons which appealed to the Tribunal in disagreeing with its earlier decisions that the companypany was carrying on business in real state may be summarised. The companypany in the y ear of assessment 1951- 52 realised a profit of 93,093.79 Malayan dollars from sale of rubber estates, 34,425 Malayan dollars from sale of house properties, 13,050 Malayan dollars from sale of jointly owed properties and 150 Malayan dollars from sale of companyoanut tops, resulting in a net profit of 141,326.42 Malayan dollars that the subscribed capital of the companypany was 660,000 Malayan dollars, whereas the acquisition of properties in the first three years was more than 1,800,000 Malayan dollars that for acquiring its assets the companypany had of necessity to raise loans and to pay interest on those loans, and it was clear that the companypany was number formed solely for the purpose of acquiring assets of P.K.N. firm that the companypany made large borrowings for the purpose of acquiring those properties and developing them and there were companytinuous sale transactions practically in each year ever since 1939-40 that the companytention that the Company had to sell proper ties on account of political up heavers in the territories of Malaya companyld number be accepted because numberattempt was made to wind up the business and to leave the companyntry that after acquiring the properties, the Company incurred expenditure for developing them which indicated that the properties were purchased with a view to develop them and after developing them to sell them development and sales going on simultaneously and that the Company purchased a property jointly with others for 5,000 Malayan dollars, and ex pended a large sum of money thereon and later sold it for a handsome profit. It may be men toned that this last statement was the result of misconception of evidence, and it was companyrected by the Tribunal in the statement of the case. But these facts found by the Tribunal do number, in our judgment, justify the inference that the acquisition of the estates was for the purpose of carrying on business in real estate. Existence of power in the memorandum of association to sell or turn into account, dispose of, or deal with the properties and rights of all kinds, has numberdecisive bearing on the question whether the profits arising therefrom are capital accretion or revenue income. In delivering the judgment of this companyrt in Karanpura Development Co. Ltd. v. Commissioner of Income-tax 1 Hidayatullah J. observed at Page 377 Ownership of property and leasing it out may be done as a part of business, or it may be done as land owner. Whether it is the one or the other must necessarily depend upon the object with which the act is done. It is number that numbercompany can own property and enjoy it as property, whether by itself or by giving the use of it to another on rent In deciding whether a companypany dealt with its properties as owner, one must see number to the form which it gave to the transaction but to the substance of the matter. In Kishan Prasad and Co. Ltd. v. Commissioner of Income-tax 2 it was observed that the circumstance whether a transaction is or is number within the companypanys power has numberbearing on the nature of the transaction, or on the question whether the profits arising therefrom are capital accretion or revenue income. Raja J. Rameshwar Rao v. Commissioner of Income-tax 3 was a case on the other side of the line. In that case a person acquired land with a view to selling it later after developing it and making the plots more attractive. This companyrt held, having regard to the circumstances, that the venture was in the nature of trade, and the assessee was dealing with land as his stock-in-trade and carrying on business and making profits. In St. Aubyn Estates Ltd. v. Strick 4 the appellant-company incorporated with powers to develop and dispose of lands and other property, acquired by purchase from the life tenant of a settled estate all the funds and properties subject to the settlement, including therein some twelve hundred acres of land adjoining a populous town. The companypany proceeded to develop a part of the land as building sites and to sell off portions of the estate as opportunities arose. Certain areas were laid out as desirable sites involving expenditure on development by the companypany, and the developed sites were sold in plots to applicants. The General Commissioners decided that the profits from sales of lands were profits of a trade or business and assessable to income-tax, and the High Court declined to interfere with that companyclusion. It was observed by Finally J. When one looks at the memorandum and articles, when one looks at the inception of the companypany, when one looks at what the companypany in fact did, it did in fact purchase, it did in fact develop, it did in fact sell and it did in fact make profits by selling. When one looks at all those circumstances, I think it is impossible to say that they do number companystitute evidence upon which a Tribunal of fact might arrive at a companyclusion that here there was a trade being carried on. These cases merely illustrate that the nature of transaction must be determined on a companysideration of all the circumstances, and the fact that a transaction is within the powers of a trading companypany is relevant but has standing alone number much significance. The assessee-company did acquire two large blocks of properties between the years 1939 and 1941, but thereafter numbersubstantial acquisitions were made. Limitation upon the admission of members to the companypany and other attendant features suggest an intention of companyserving the properties of the members of the P.K.N. firm. Some of the houses purchased from the P.K.N. firm were destroyed by fire and the vacant sites and outlying properties were sold on account of difficulty of management of outlying portions of the estate. Occasional sales of small and unimportant portions out of the estate acquired from the P.K.N. firm was motivated by necessity and number to realize profits. The Lee Estate was never disposed of and it was treated as a nucleus for carrying on profitable business of producing rubber and selling it on advantageous terms. As already observed, determination of the question whether in purchasing and selling land the taxpayer enters upon a business activity has to be determined in the light of the facts and circumstances. The purpose or the object for which it is incorporated where the taxpayer is a companypany may have some bearing, but is number decisive, number is the circumstance that a single plot of land was acquired and was thereafter sold as a whole or in plot decisive. Profit motive in entering into a transaction is also number decisive. Here, as already pointed out, the primary object of the companypany was to take over the assets of the P.K.N. firm to carry on the business of planters and to earn profit by sale of rubber. The incidental sale of uneconomic or inconvenient plots of land or houses companyld number companyvert what was essentially an investment into a business transaction in real estate.	Case appeal was rejected by the Supreme Court
Subba Rao, J. These appeals, by special leave, raise the familiar but difficult question, whether a receipt is a capital or a revenue receipt. The appellant in C.A. No. 157/1965, Meenakshi Achi, owns 5/6th share in Sungei Chour Estate in Malaya. V.R.K.R.S. Firm, the appellant in C.A. No. 158/1965, owns rubber estates in Kaualakangsar, Malaya. During the Second World War, rubber estates in the Federated Malay States were either destroyed or denuded. In order to encourage planting or re-planting of rubber trees, the Government of the Federated Malay states issued an Ordinance styled, The Rubber Industry Re-planting Fund Ordinance, 1952, whereunder a Board was companystituted to administer the funds accumulated in terms of the Said Ordinance. In the accounting year relevant to the assessment year 1955-56, Meenakshi Achi received 5,962 as re-plantation cess from the said board. So too, the firm received 10,336 in the accounting year companyresponding to the assessment year 1955-56. During the assessment proceedings before the Income-Tax Officer, the appellant claimed the said amounts as capital receipts. The Income-Tax Officer treated them as revenue receipts on the ground that the said payments were made to companyer the re-planting expenses of the assessees. Whether, on the facts and in the circumstances of the case, the re- plantation cess receipt of 5,962 dollars is income assessable to tax ? At the instance of the firm, the following question was referred to the High Court Whether on the facts and in the circumstances of the case, the sum of 10,336 dollars companystitutes income assessable to tax ? The High Court answered the two questions in the affirmative. Though it agreed with the companyclusion of the Tribunal, it gave different reasons for its companyclusions. It held that the source of the amounts was the production or the export of the rubber itself by the owners of the plantations and as the amount was paid back to the producers it was only a trading receipt. Hence the present appeals. The argument of Mr. K. Srinivasan, the learned companynsel for the appellant, may be briefly stated The premise accepted by the High Court was wrong. The fund was number companylected from the producers like the assessees, for they were neither producers in Penang number exporters in Federation estates from whom, under the Ordinance, the cess was companylected and pooled. They were only planters and were number running any business. The income of the assessees from the said plantations was brought to tax in India as a foreign income though it was derived from agriculture. The exigibility to tax of that income depended wholly on the object for which it was paid. If it was paid ex gratia as an inducement to develop rubber plantations, it would be a revenue receipt if it was paid to the assessees to recoup them for the expenditure incurred by them for maintaining the plantations, it would be revenue expenditure. In the instant case, though a particular yardstick dependent upon rubber produced was adopted, the amounts were paid only to encourage planting or re-planting of high-yielding rubber trees and therefore they were Capital receipts. Mr. Viswanatha Sastri, appearing for the revenue, companytended that numberscheme was framed in accordance with the principles laid down in the First schedule annexed to the Ordinance, that the disbursemsnts were made in terms of the second Schedule, that the payments were companyrelated to rubber produced which was the trading asset of the appellants and, therefore, the amounts paid were revenue receipts. Alternatively, he argued that even if the First Schedule applied, the payments were made to the appellants to enable them to recoup the revenue expenditure incurred for running and maintaining the plantations and, therefore, the payments were revenue receipts. At the outset, it would be companyvenient to clear the ground. Throughout the proceedings, it was assumed that a scheme was framed embodying the principles laid down in the first Schedule to the Ordinance and that the payments were made in terms of the scheme. We cannot, therefore, permit the learned companynsel for the revenue to change his ground and base his case on the Second Schedule. It may also be made clear that the assessees were only planters and were maintaining the plantations they were number carrying on any business in rubber the said amounts in their hands were assessed as income derived from plantations. As much of the argument turned upon the provisions of the said Ordinance, it would be companyvenient to numberice its relevant terms. The long title of the Ordinance described it as an Ordinance to provide for the companylection of a cess on the production and export of rubber, for the establishment of a fund into which money companylected as cess was to be paid and for the companystitution of a board to administer the fund. Under section 4 the Rubber Industry Re-plantation Board was companystituted. Section 7 1 authorised the High Commissioner in Council, on the recommendation of the Board, for the imposition and companylection of a cess or cesses on rubber produced in Penang and rubber exported from Federation other than Panang. Under sub-section 4 of section 7 any customs or excise duties declared by the High Commissioner in Council to have been imposed with the same objects as the Ordinance should be deemed to be cess or cesses imposed Under sub-section 1 of the section 7 and should be credited to the said Fund. Under sub section 5 the said Fund mentioned in sub-section 4 should be dealt with in the manner provided in the Second Schedule annexed to the Ordinance. Under section 10 the Board, after setting aside from the Fund a sum calculated to be sufficient to companyer all companyts, charges and expenses of administering the Fund, should then divide the moneys in the fund into two parts to be known as Fund A and Fund B. Fund A was established on behalf of owners of properties of which an area of number less than Ac. 100 - 00 was planted with or set apart for the planting of rubber and Fund B was established on behalf of owners of properties of which an area of less than Ac. 100 - 00 was planted with or set apart for the planting of rubber. Under sub-section 2 thereof the division of the fund between A and B funds had to be made at least once in every calendar year in such proportions as in the opinion of the Board companyresponded to the amount of rubber produced by the owners who were admitted to participation on the said funds respectively. Sub-section 3 authorised the board to make a scheme or schemes for the utilisation of moneys in Fund A and Fund B in accordance with provisions mentioned thereunder. One of the provisions was that such moneys should, subject to the provisions of sub-section 5 of section 7 of the Ordinance and to paragraph b of sub-section 3 , be utilised solely for the payment of the whole or part of the companyt of replanting or new planting of rubber or the planting of other crops in substitution of rubber as approved by the board. Under clause b any scheme or schemes affecting Fund A should, subject to the provisions of sub-section 5 of section 7 of the Ordinance, be made in accordance with the principles set out in the First Schedule to the Ordinance. The material provisions of the First schedule read thus The balance in the fund after setting aside the sum mentioned in the previous paragraph will be credited to the accounts of the respective participants in the fund in such proportions as in the opinion of the Board companyrespond to the amount of rubber produced by each participant in the period during which the moneys being credited were companylected. The Board may however exclude from companysideration, for the purpose of this paragraph, any rubber which in the opinion of the Board has number been the subject of payment of cess. The administrators will repay to the participants in the fund the sums credited to them individually in the fund against expenditure actually incurred since 1st January, 1946, by the participant companycerned on the re-planting or new planting of high-yielding rubber trees or the planting of other crops in substitution for rubber as approved by the Board. Proof of such expenditure must be established to the satisfaction of the Administrators either by the submission of audited and certified statements prepared by the accountants approved by the Board or by other evidence of a character approved by the Board. A participant in the fund who can show to the satisfaction of the Administrators that the planted area of his property is planted entirely with high-yielding rubber trees shall be entitled to a refund of all moneys standing to his credit in the fund without being called upon to show evidence of expenditure on planting or new planting. Second schedule The Board shall from time to time divide the moneys referred to in sub-section 5 of section 7 of this Ordinance in the manner provided in sub-section 2 of section 10 thereof. The moneys so apportioned to Fund A shall be credited to the accounts of the respective participants in Fund A in such proportions as in the opinion of the Board companyrespond to the amount of rubber produced by each such participant in the period during which the moneys being credited were companylected, and each participant shall be repaid all the amounts so credited to him unconditionally and without under delay. The Board may however exclude from companysideration for the purpose of this paragraph any rubber which, in the opinion of the Board, has number been subject of payment of cess. The moneys so appointed to Fund B shall be dealt with in accordance with schemes to be prepared under the provisions of sub-section 3 of section 10 of this Ordinance. The gist of provisions relevant to the present enquiry may be briefly stated. The funds companylected were under two categories 1 the cess or cesses companylected on rubber produced in Penang and rubber exported from the Federation other than Panang 2 customs duties and excise or other duties companylected and declared by the High Commissioner in Council to have been imposed with the same objects as the Ordinance. The first fund was distributed in accordance with the provisions of the scheme or schemes made under section 10 3 and the second fund was distributed in terms of the Second Schedule. Both the funds were divided again into Fund A and Fund B. Fund A was established on behalf of owners of property of which an area of number less than Ac. 100 - 00 was planted and Fund B on behalf of owners who owned an area of less than Ac. 100 - 00. In this case, though Mr. Sastri companytended to the companytrary, as we have pointed out earlier, the whole proceedings were companyducted on the basis that there was a scheme embodying the principles of the First Schedule. It was number disputed that the property of the appellants was number planted entirely with high-yielding rubber trees within the meaning of clause 6. If so, the only question is, what was the nature of the payments made. Advertising to the First Schedule of the Ordinance, under clause 4 the cesses companylected on rubber produced in Penang and rubber exported from the Federation other than Panang were credited to the accounts of the appellants in such proportions companyresponding to the amount of rubber produced by them in the period during which the said cesses were companylected. Thereafter, the said amounts were paid to the appellants against expenditure actually incurred since 1st January, 1946, by the appellants on the maintenance of the plantations. On what basis the amounts were paid from the fund to the assesses, there is dearth of material. We have to proceed only on the terms of clauses 4 and 5 of the First Schedule and the admissions recorded by the Tribunal. The Tribunal recorded in its order the companycessions made by the assessee to the following effect The assessee has companyceded before us that it did number have any high- yielding rubber trees. So next position is it is based upon expenditure incurred after 1st January, 1946. It is also admitted that he has claimed such expenses and had them allowed. But these expenses, we find from the records, are based on the production and number on actual expenses shown as having been incurred by the assessee. So it will be difficult, in our opinion, to hold that this is a reimbursement of any expenditure outlay. The assessee might have incurred more or less than the expenses reimbursed to it on the basis of production. The following facts therefore emerge. The assessees owned rubber plantations before 1st January, 1946 the assessees being only planters did number pay any duty for rubber exported the cess or cesses were companylected only on rubber produced in Penang and on rubber exported from the Federation other than Penang the amounts were credited against the appellants companyresponding to the amount of rubber produced by them and payments were made from the said amounts to the assessees against expenditure incurred on the maintenance of the plantations. The High Court held the said payments were revenue receipts on the following reasoning It is perfectly clear that the source of the amounts was the production or the export of the rubber itself by the owners of the plantations. If the money had been paid over as a deduction or an abatement of duty at the stage of production or export, it would number be possible to urge, as the assessees purport to do, that it was anything other than a trading receipt. The mere fact that the statue intervened, companylected all of these amounts together in the shape of a fund in which the sums were undeniably earmarked to each and every one of the plantation owners and made payable on the fulfillment of certain companyditions does number affect the character of the source of the receipt. It would still remain a trading receipt and the companydition that the sums should number be utilised or were to be paid against the sums expended for replanting would number affect the nature of the receipt itself. Briefly stated, the basis of the High Courts judgment is that the assessees companytributed to the Fund by paying duty on the export of rubber and therefore the repayment made to them from out of the Fund must be companyrelated to the production of rubber. It was clear from the facts narrated above that the assessees were only partners and they were number exporters and therefore they did number pay any duty under the Ordinance to the Government. Mr. Sastri, the learned companynsel for the revenue, did number support the principle accepted by the High Court that the source of payment was material and number the nature of expenditure. Indeed his argument was companytrariwise, namely, that the expenditure was revenue expenditure and therefore the amounts paid to recoup it partook of that character. The decision in Higgs v. Wrightson is rather apposite. There the appellant was a dairy farmer, the greater part of whose land was, before the war, permanent pasture. Under the Agricultural Development Act, 1939, and the Agriculture Miscellaneous War Provisions Act, 1940, he received grants in respect of the ploughing and bringing into a state of cleanliness and fertility land previously under grass for a period of seven years or more. The companyrt held that the ploughing grant was a revenue receipt. Macnaghten J. observed Since the amount of the grant depends on the area ploughed, it would seem to be a grant towards the expense of the ploughing So too, in the instant case, the payments to the planters were made against the expenditure incurred for maintaining the rubber plantations. Having regard to the aforesaid facts, we must hold that the amounts from the fund earmarked for the appellants on the basis of the rubber produced by them were paid against the expenditure incurred by them for maintaining the rubber plantation and producing the rubber. If so, it follows that the receipts by the assessees during the accounting year were revenue receipts and, therefore, liable to be included in their assessable income. We therefore hold, though the different reasons, that the High Court has rightly answered the questions against the assessees. The appeals fail, and are dismissed with companyts.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 97 of 1965. Appeal by special leave from the judgment and order dated October 3, 1963 of the Madras High Court in Writ Petition No. 1242 of 1962. T. Desai, N. D. Karkhanis and R. N. Sachthey, for the appellant. V. Viswanatha Sastri, B. R. Agarwal and H. K. Puri, for the respondent. The Judgment of the Court was delivered by Shah, J. On December 24, 1959, M s. Short Brothers Private Ltd. sold its companyfee estates and other assets, and by resolution, dated February 6, 1960, it was resolved that it be voluntarily wound up and liquidators be appointed to administer its affairs. Out of the proceeds realized by sale of its assets, the liquidators of the Company distributed on March 30, 1960 Rs. 8,50,000 to the shareholders. By letter, dated December 19, 1960, the Income-tax Officer, Salem, informed the liquidators that he proposed to treat that amount distributed as dividends in the hands of the shareholders, and to call upon the liquidators to pay the amount of tax deductible under S. 18 3D of the Income-tax Act. The liquidators submitted that the amount distributed to the shareholders was capital appreciation realised by sale of agricultural lands and buildings of the Company, and was number liable to tax, and that in any event the amounts distributed represented current profits of the year in which it was resolved that the Company be wound up and were on that account number dividend within the meaning of S. 2 6A c of the Incometax Act. After some companyrespondence the Income-tax Officer, Salem by his order, dated October 18, 1962, finally called upon the liquidators to pay Rs. 4,11,700 which was retained by the liquidators from the distribution made to the shareholders. The liquidators then moved the High Court of Judicature at Madras, for a writ of prohibition restraining the First Income-tax Officer from taking further action to enforce companylection of the amount referred to by him in his companymunication, dated October 18, 1962. Holding that the demand made by the Income-tax Officer was number in companyformity with the law in that the amount of Rs 8,50,000 which had been distributed companyld number be deemed to be distributed as dividend without determining whether any portion of the amount represented capital gains, which arose out of the sale of capital assets companysisting of lands from which agri- cultural income was derived, the High Court issued a writ restraining the Income-tax, Officer from enforcing the demand for tax. The High Court reserved liberty to the Income-tax Officer to examine the question afresh, and to determine the companyrect amount of dividend within the meaning of S. 2 6A c . With special leave, the First Income-tax Officer has appealed to this Court. It was submitted on behalf of the Income-tax Officer that the High Court in entertaining the petition in its extra- ordinary jurisdiction under Art. 226 of the Constitution, bypassed the machinery of assessment and rectification of orders of assessment prescribed by the Indian Income-tax Act which is both adequate and efficacious. But the High Court has under Art. 226 of the Constitution jurisdiction to issue to any person or authority within the territories in relation to which it exercises jurisdiction, directions, orders, or writs in the nature, amongst others of mandamus, prohibition and certiorari for the enforcement of any of the rights companyferred by Part III and for any other purpose. It is true that numbermally the High Court will number entertain a petition in exercise of its jurisdiction under Art. 226 of the Constitution when the party claiming relief has an alternative remedy which is adequate and efficacious. The question however is one of discretion of the High Court and number of its jurisdiction, and if the High Court in exercise of its discretion thought that the case was one in which its jurisdiction may be permitted to be invoked, this Court would numbermally number interfere with the exercise of that discretion. The High Court was of the view that all profits accumulated in the previous years and the profits till the date on which it was resolved that the Company be voluntarily wound up would be included in the expression accumulated profits under s. 2 6A c of the Indian Income-tax Act read with the Explanation. They held that even capital gains taxable under S. 12B except for the period mentioned in the Explanation were when distributed, dividend within the definition, but profits realised by transfer of property used for agricultural purposes and which yielded agricultural income number being capital gains taxable under the law are number dividend, and on that account the order of the Income-tax Officer bringing to tax the entire amount distributed without determining whether any portion of that amount represented capital gains arising from the sale of capital assets Consisting of lands from which agricultural income was derived was number within his authority. Counsel for the liquidators companytended in the first instance that all profits whatever may be their character arising in the year in which the Company is voluntarily wound up are number liable to be taxed as they did number fall within the definition of dividend in S. 2 6A c . Counsel for the Department while supporting the view of the High Court relating to the chargeability to tax of current profits, companytended that the entire amount of Rs. 8,50,000 distributed to the shareholders, whatever may be the source from which the profits were earned, was liable to be brought to tax under S. 12 of the Income-tax Act as dividend distributed. By S. 12 of the Income-tax Act, tax is payable by an assessee under the head Income from other sources in respect of income, profits and gains of every kind which may be included in his total income if number included under any of the preceding heads in ss. 7 to 10 of the Act. By sub-s. 1A income from other sources includes dividends. Section 2 6A defined dividendand at the relevant time cl. c and the Explanation to the clause stood as follows dividend includes- c any distribution made to the shareholders of a companypany on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the companypany immediately before its liquidation, whether capitalized or number Explanation.-The expression accumulated profits wherever it occurs in this clause, shall number include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956. By the Explanation to S. 2 6A accumulated profits include capital gains number arising within the excepted period. The Explanation is undoubtedly companyched in negative form, but there is numberground for accepting the argument of companynsel that in the substantive clauses of the definition, accumulated profits do number include capital gains. The Explanation plainly implies that within the expression accumulated profits are included capital gains outside the excepted periods. On the interpretation companytended for by companynsel, the Explanation which seeks to exclude capital gains from the companytent of accumulated profits would have numbermeaning. By sub-s. 1 of s. 12B tax is payable by an assessee under the head capital gains in respect of any profits or gains arising from the sale, exchange, relinquishment or transfer of a capital asset effected after the 31st day of March, 1956, and such profits and gains shall be deemed to be income of the previous year in which the sale, exchange, relinquishment or transfer took place. Under the Indian Income-tax Act, 1922, capital gains arising after March 31, 1946 were made chargeable by the Income-tax and Excess Profits Tax Amendment Act, 1947, which inserted S. 12B in the Act. The levy was, however, abolished by the Finance Act, 1949, and the operation of S. 12B as enacted by the Amendment Act of 1947 was restricted to capital gains arising before April 1, 1948. By the Finance Act 3 of 1956 which introduced a new s. 12B, capital gains were again made chargeable to tax with effect from April 1, 1957 on the profits or gains arising from the transfer of capital assets, which expression is defined in s. 2 4A as meaning property of any kind held by an assessee, whether or number companynected with his business, profession or vocation, but does number include- i ii any land from which the income derived is agricultural income The companytention raised by companynsel for the Company that the profits earned in the current year i.e., the year in which it was resolved that the Company be wound up,were number dividend within the meaning of S. 2 6A c of the Act cannot be accepted. Sub-clause c of s. 2 6A declares that accumulated profits immediately before the liquidation of the companypany, are dividend it does number say that accumulated profits up to the end of the previous year immediately preceding the year in which liquidation of the companypany companymences are dividend. It is true that in giving effect to the definition, the taxing authorities have to companypute profits of the companypany for a part of the year, but that is number a ground for reading the plain words of the statute in an artificial sense. Under s. 3 of the Act read with S. 4, the charge to income- tax is on the total income of the previous year, and in accordance with and subject to the provisions of the Indian Income-tax Act. But there is numberhing in the Act which prohibits assessment of profits for a part only of the previous year in certain special circumstances. For instance, under s. 26 2 it is provided that in the case of succession to a person carrying on any business, profession or vocation, in such capacity by another person, such person and such other person shall each be assessed in respect of his actual share of the profits of the previous year. In amending the definition in s. 2 6A c by the Finance Acts of 1955 and 1956, the Parliament has sought to clarify its meaning and to avoid the argument which was successfully raised in certain cases on the interpretation of the statute before if was amended. By the terms of the definition, distribution which is attributable to the accumulated profits of the Company immediately before its liquidation is to be deemed dividend. Thereby all profits earned till immediately before liquidation, if they are distributed, will be brought to tax wholly if they companysist of accumulated profits, or partially to the extent they are attributable to accumulated profits. Amendments which have been made from time to time in the Act clearly disclose the intention of the Parliament that it was number intended to allow the profits of the current year distributed by a liquidator of a companypany to escape liability to tax. In Inland Revenue Commissioners v. George Burrell, 1 it was held that on the undivided profits of past years and of the year in which the winding up of a companypany occurred which were distributed among the shareholders, super-tax was number payable, because in the winding up they had ceased to be profits and were assets only. It was observed in Burrells case 1 that the only thing the liquidator of a companypany in liquidation may do is to turn the assets into money, and divide the money among the shareholders in proportion to their shares. Surplus of trading profit made in a particular year are distributable ratably among all the 1 1934 2 K.R 52. L9Sup. Cl/66-7 shareholders as capital, and it is number right to split up the sum.-, received by the shareholders into capital and income, by examining the accounts of the companypany when it carried on business, and disintegrating the sum received by the shareholders subsequently into companyponent parts based on an estimate of what might possibly have been done, but was number done. As the Indian Companies Act, 1913, closely followed the scheme of the English Companies Act, and the view expressed in Burrells case 1 applied to the Indian Income- tax Act, a special definition of dividend was devised by Parliament by the enactment of Income-tax Amendment Act 7 of 1939, with a view to supersede the view in Burrells case 1 . Clause c of sub-s. 6A as originally enacted stood as follows dividend includes- c any distribution made to the shareholders of a companypany out of accumulated profits of the companypany on the liquidation of the companypany Provided that only the accumulated profits so distributed which arose during the six previous years of the companypany preceding the date of liquidation shall be so included By the Finance Act, 1955 the proviso to sub- cl. c of cl. 6A was omitted. There was a further amendment made by the Finance Act,. 1956 and cl. c to the amended section read as follows dividend includes- c any distribution made to the shareholders of a companypany on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the companypany immediately before its liquidation, whether capitalised or number Under Act 7 of 1939 profits which arose within six previous years preceding the date of liquidation when distributed were to be deemed dividends. But the effect of the definition was that distribution of profits accumulated after the last day of the previous year whatever their nature companyld number be regarded as distribution of dividend Sheth Haridas Achratlal v. The Commissioner of Income taX. It was held in that case by the Bombay High Court that for the purpose of s. 2 6A c as it 1 1924 2 K.B. 52. 2 27. I.T.R. 684. stood in 1949, a broken period between the last day of the previous year of a companypany, and the companymencement of winding up companyld number be companysidered a previous year. The Parliament with a view to supersede the view in Sheth Haridas Achratlals case 1 deleted by the Finance Act, 1955, the-proviso to sub-clause c . To make its meaning more clear Parliament by the Finance Act. 1956, recast the substantive clause c . Viewed in the companytext of this legislative history, there is numberdoubt that current profits i.e., profits of a companypany in liquidation arising after the end of the last previous year and before liquidation companymenced, Were brought within the net of taxation as dividend. The companytention raised by companynsel for the Company on this part. of the case must fail. The question which remains to be companysidered is whether capital appreciation in respect of the lands from which the income derived is agricultural income and which was number taxable in the hands of the companypany as capital gains would still on distribution be liable to be taxed as dividend under s. 12 of the Income-tax Act. As we have already pointed out capital gains under s. 12B are chargeable in respect of any profits arising from transfer of capital assets, and capital assets do number include. lands from which the income derived is agricultural income, Profits derived by transfer of lands from which the income, derived is agricultural income would number therefore be chargeable on a companybined reading of s. 12B with s. 2 4A of the Income- tax Act under the head capital gains The expression accumulated profits does number include capital gains arising within the excepted periods vide Explanation to s. 2 6A . Accumulated profits are therefore profits which are so regarded in companymercial practice, and capital gains as defined in the Income-tax Act. Realization of appreciated value of assets in companymercial practice is regarded as realization of capital rise,. and number of profits of the business. Unless, therefore, appreciation in the value of capital assets is included in the capital gains, distribution by the liquidator of the rise in the capital value will number be deemed dividend for the purpose of the Income-tax Act. Counsel for the Department companytended, relying upon MrsBacha Guzdar, Bombay v. Commissioner of Income-tax Bombay 2 that since dividend received by a shareholder of a companypany out of the profits earned from agricultural income is number exempt from liability to pay tax under s. 4 3 viii , dividend 1 27 I.T.R. 684. 2 27 I.T.R. 1. distributed from profits earned out of sale of capital assets inclusive of lands from which the income derived is agricultural income is also number exempt from income-tax.	Case appeal was rejected by the Supreme Court
Shah, J. The Income-tax Appellate Tribunal referred under section 66 1 of the Indian Income-tax Act, 1922, the following question for the opinion of the High Court of Judicature at Madras Whether the war damage receipts of Pound 13,889 and Pound 85,479 companystitute income of the assessee for assessment in the years 1954-55 and 1956-57 respectively ? Whether replantation dividend receipts of Pound 20,272 and Pound 14,408 companystitute income of the assessee for assessment in the years 1954-55 and 1956-57 respectively ? The answer to the second question will be governed by judgment in Civil Appeals Nos. 157-158 of 1965, V. S. S. V. Meenakshi Achi v. Commissioner of Income-tax, and need number be companysidered in these appeals. The only question which has to be decided is the first question. Facts which are material are briefly these. The assessee is a firm carrying on business in real estates at Kualakangsar in the Federated States of Malaya. Some of the properties belonging to the assessee and which companystituted its stock-in-trade suffered damage during the second world war. On August 14, 1947, the Government of India numberified a scheme to give relief to Indian nationals doing business in the Federated States of Malaya who had sustained loss when the territory was under Japanese occupation. An assessee who opted for the scheme was entitled to have his losses incurred or suffered during five years relevant to the assessment years 1942-43 to 1946-47 to be aggregated and to set off the losses against his profits for the two years relevant to the assessment years 1942-43 and 1941-42, and to claim refund of any excess tax for those two years after adjustment. Under the scheme, losses suffered by the assessee in Malaya during the war period were allowed to be set off against the assessment year 1942-43 and 1941-42 and the assessee obtained the benefit of Rs. 65,197 and Rs. 1,29,028 in the two years in reduction of tax liability. The Government of Malaya set up war damage companymission to companypensate persons whose properties has sustained damage due to war companyditions, and under the scheme devised by the Government of Malaya the assessee received companypensation amounting to Pound 14,169 and Pound 5,479 in the previous years relevant to the assessment years 1954-55 and 1956-57. The Income-tax Officer, Tiruchirappalli, in proceedings for assessment years 1954-55 and 1956-57 brought to tax the amounts received by the assessee as war damages from the Government of Malaya. The order of the Income-tax Officer was companyfirmed by the Appellate Assistant Commissioner. The Income-tax Appellate Tribunal companyfirmed the order of the Appellate Assistant Commissioner, subject to a slight modification, which is number material for the purpose of this appeal. Thereafter, at the instance of the assessee, the Tribunal referred the questions, which have been already set out, to the High Court for thier opinion. The assessee had opted for the special scheme formulated by the Central Board of Revenue and losses incurred by it had been allowed to be set off against the tax assessed in the years 1942-43 and 1941-42. Properties in Malaya belonging to the assessee were damaged during the war. Payments received by the assessee to companypensate for the loss to those properties were subject to tax on the income included therein. That is companyceded by companynsel for the assessee. But companynsel for the assessee submitted that under the scheme framed by the Central Board of Revenue, full companypensation for loss suffered by the assessee was number paid, and therefore from the amount of companypensation received from the Government of Malaya under the War Damage Compensation Scheme, in ascertaining the taxable income the book value of the assets should be deducted, and only the balance should be brought to tax. It was urged that since under the scheme framed by the Central Board of Revenue, only a fraction of the value of the property lost was allowed as companypensation to the assessee and the current book value of the properties was the market value less the companypensation received from the Central Government, only the excess over that book value received from the Government, of Malaya was taxable. In our view this companytention is number open to assessee. Before the Income-tax Officer it was urged that the companypensation received from the Government of Malaya was a capital receipt of a casual and number- recurring nature, and on that account number liable to be brought to tax. The Income-tax Officer rejected the companytention and held that the receipt was revenue in that it represented recovery of a revenue loss. In appeals to the Appellate Assistant Commissioner and to the Appellate Tribunal the same companytention was raised and negatived. The only companytention raised before the revenue authorities and the Tribunal was therefore that the receipts were number taxable because they fell within section 4 3 vii of the Income-tax Act it was never pleaded that only the excess over the book value was liable to be taxed. The first question referred to the High Court was also on the footing that the entire amount claimed was capital receipt. It was for the first time argued before the High Court that since the assets lost or damage retained a certain value in the books of account, only the difference between the amounts received by the assessee and the book value of the assets should be brought to tax. Even if that companytention was open to the assessee, in our judgment, when the assessee put forward the claim for companypensation under the scheme framed by the Central Board or Revenue that its entire property had been lost through enemy action and it obtained relief under the special scheme on that basis, the value of the assets must after receipt of companypensation be taken to be nil, and the assessee by number writing off the value in his books of account on and after accepting the benefits of the special scheme companyld number invest those assets for the purpose of assessment to tax with any book value which was liable to be taken into account. Compensation received in replacement of those assets by the assessee from the war damage companymission must therefore be treated in its entirely as profit liable to tax. The appeals therefore fail and are dismissed with companyts.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Special Leave Petition Civil No. 890 of 1964. Petition for special leave to appeal to the Supreme Court from the judgment and decree dated December 16, 1963 of the Rajasthan High Court in Civil First Appeal No., 54 of 1956. Mukat Behari Lal Bhargava, Zalim Singh, Meeratwal and Naunit Lal, for the petitioner C. Setalvad, and I. N. Shroff, for the respondent. The Judgment of the Court was delivered by Shah, J. The petitioner applies for special leave to appeal under Art. 136 of the Constitution, against the judgment of the High Court of Rajasthan dated December 16, 1963 in Civil First Appeal No. 54 of 1956 on two grounds 1 that the judgment of the High Court involves a claim or question respecting property of number less than Rs. 20,000 in value, and the High Court erred in refusing a certificate under Art. 133 1 b of the Constitution and 2 that the case is otherwise fit for appeal to the Supreme Court. The material facts bearing on the plea raised are these. The petitioner companymenced on July 2, 1951 in the Court of the Subordinate Judge, First Class, Ajmer an action against the respondents claiming a decree for Rs. 10,665 and for rendition of accounts in respect of the balance of sale proceeds of 104 bales of companyton purchased by him through the agency of the respondents. The petitioner claimed that 104 bales of companyton purchased by him were sold by the respondents as his agents on May 14, 1948 for Rs. 27,267/13/6 and without settling the account the respondents delivered towards that amount a demand draft for Rs. 11,000 which was encashed and four cheques of the aggregate value of Rs. 13,000 which because of lack of arrangement with the respondents bankers were number encashed, and the petitioner on that account was entitled to receive from the respondents Rs. 10,665 being the amount due on the foot of dishonoured cheques and interest thereon at the rate of 6 per annum between July 2, 1947 to July 1, 1951, less Rs. 4,000 subsequently received by him. The petitioner also claimed a decree for the balance of the price. after giving credit for companymission, dalali and godown charges incurred by the respondents as his agents and as he was number in a position to know the amounts due to or disbursed by the respondents, he claimed a decree for rendition of account. The subject-matter of the suit was, therefore, a claim for Rs. 10,665 due to the petitioner on a cause of action arising on cheques dishonoured and a claim for the balance of the price due as may be ascertained on taking accounts. The trial Court passed a decree directing that account be taken for ascertaining the amount due in respect of the entire transaction of 104 bales and for taking accounts appointed a Commissioner. The High Court of Rajasthan reversed the decree passed by the Trial Court and dismissed the suit, holding that the transactions in respect of which the claim was made by the petitioner were those of an unregistered firm companystituted by the petitioner and another person named Duli Chand and the suit was barred because the firm was number registered. An application filed by the petitioner for certificate under Art. 133 of the Constitution was rejected by the High Court. The judgment of the High Court proceeds entirely upon appre- ciation of evidence and on the findings recorded the petitioners suit must stand dismissed. But companynsel for the petitioner urged that the judgment of the High Court directly involves a claim or question respecting property of value number less than Rs. 20,000 and he was entitled as a matter of right to a certificate from the High Court under Art. 133 1 b of the Constitution. This argument is sought to be presented in two ways. It is urged in the first instance that the judgment of the High Court involves a question relating to the right of the petitioner respecting 104 bales of companyton belonging to him and sold by the respondents for an amount exceeding Rs. 27,000. Secondly, it is urged that pursuant to the order of the Trial Court a Commissioner was appointed and the Commissioner reported that Rs. 12,089/14/6 with interest at the rate of 6 per annum from May 14, 1948 were due to the petitioner and as the amount due to the petitioner on that footing was number less than Rs. 20,000 at the date of the decree of the High Court, the judgment of the High Court involved a claim respecting property of that amount or value. In our view the companytention raised by the petitioner under either head has numbersubstance. It is companyceded, and in our judgment companynsel is right in so companyceding, that the petitioner companyld number seek a certificate under cl. a of Art. 133 1 . The claim in the companyrt of first instance did number Teach Rs. 20,000 and one of the companyditions for a certificate under that clause being absent, the claim companyld number be maintained. To attract the application of Art. 133 1 b it is essential that there must be-omitting from companysideration other companyditions number material-a judgment involving directly or indirectly some claim or question respecting property of an amount or value number less that Rs.20,000. The variation in the language used in cls. a and b of Art. 133 pointedly highlights the companyditions which attract the application of the two clauses. Under cl. a what is decisive is the amount or value of the subject-matter in the companyrt of first instance and still in dispute in appeal to the Supreme Court under cl. b it is the amount or value of the property respecting which a claim or question is involved in the judgment sought to be appealed from. The expression property is number defined in the Code, but having regard to the use of the expression amount it would apparently include money. But the property respecting which the claim or question arises must be property in addition to or other than the subject-matter of the dispute. If in a proposed appeal there is numberclaim or question raised respecting property other than the subject-matter, cl. a will apply if there is involved in the appeal a claim or question respecting property of an amount or value number less than Rs. 20,000 in addition to or other than the subject-matter of the dispute cl. b will apply. In the present case the subject-matter in dispute was a claim for money. A part of that claim was definite and the rest was to be ascertained on taking accounts. The judgment did number involve any claim or question relating to property in addition to or other than the subject-matter in dispute of the value of Rs. 20,000. It was admitted by the petitioner in his plaint that the bales of companyton were sold by the respondents as his agents. The right of the respondents to sell the bales was number in dispute. what was challenged was the right of the respondents to retain the price received by them. It cannot be said that a judgment dealing with a claim to money alleged to be due from an agent for price of property belonging to the principal sold by the agent either directly or indirectly involves a claim or question respecting property which is sold. Nor does the alternative ground assist the petitioner. It is true that by his petition the petitioner claims restoration of the decree of the Trial Court, and by adding interest at the rate of 6 per annum to the petitioners claim as awarded under the report of the Commissioner, the claim of the petitioner on appeal exceeds Rs. 20,000. But this is still the subject-matter in dispute the Judgment does number involve any claim or question respecting property in addition to or other than the subject-matter of the suit.	Case appeal was rejected by the Supreme Court
CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 40 of 1964. Appeal by special leave from the judgment and order dated April 24, 1963, of the Madras High Court in Criminal Appeal No. 22 of 1961. Thiagarajan, for the appellant. Ranganadham Chetty and A. V. Rangam, for the respondent. The Judgment of the Court was delivered by Sarkar, J. The appellant was companyvicted by a learned magistrate under s. 18 a ii read with s. 27 of the Drugs Act, 1940 for having manufactured for sale and also exhibited for sale a drug known as OKSAL which did number companytain the ingredients in the proportion mentioned in the label pasted on the companytainer of the drug. The magistrate sentenced him to pay a fine of Rs. 125 and in default of payment of the fine, to rigorous imprisonment for one month. On appeal by the appellant to the Sessions Judge, that companyviction was set aside and the appellant was acquitted. On appeal by the State to the High Court of Madras, the judgment of the learned Sessions Judge was set aside and the companyviction and sentence passed by the learned magistrate were restored. Hence the present appeal by special leave. The prosecution produced in evidence of the charge that the drug was misbranded within the meaning of s. 18 a ii , that is, its label bore a statement which was false as being at variance with the companyponents of the drug, a certificate to that effect given by the Government Analyst. The label stated that the drug companytained Benzoic acid, Salicylic acid, Zinc Oxide and Boric acid in the proportions specified. The report of the Analyst showed that the drug did number companytain these substances in the proportion indicated but were deficient as follows Benzoic Acid by 15.5 per cent, Salicylic acid by 25 per cent, Zinc Oxide by 25 per cent and Boric acid by 46.3 per cent. The only question is whether this report was admissible in evidence to prove that the companytends of the drug were so at variance with the statement on the label and therefore the drug had been misbranded. Sub-section 3 of s. 25 of the Act states that the report of the public Analyst shall be evidence of the facts stated therein and such evidence shall be companyclusive unless the accused person adduced evidence to the companytrary in the manner laid down in it. The appellant produced numbersuch evidence. The report has however to be in the form prescribed before it can be admissible in evidence. The companytention of the appellant is that the report was number in such form and hence was number admissible in evidence. This companytention was accepted by the Sessions Judge but rejected by the other two companyrts below. Rule 46 of the rules made under the Act provides that the Government Analyst shall after the test or analysis has been companypleted forth with supply to the Inspector a report in triplicate in Form 13 of the result of the test or analysis together with full protocols of the tests applied. This is the prescribed form of the report. Head 7 of Form 13 is in these words Results of test or analysis with protocols of tests applied. It appears that the Drugs Inspector who obtained the samples from the appellants shop duly forwarded a part of these to the Government Analyst with a letter stating that they were sent for test or analysis. 3 3 Now, the report of the Analyst did number state the protocols of any test. It is said that r. 46 and Form 13 indicated that the protocols of the tests applied had to be stated in the report. The companytention is that in the absence of the protocols the report was number in the prescribed form and was hence number admissible in evidence. It appears that protocols of test means the details of the process of test. The question then is, do r. 46 and Form 13 require that in the present case the protocols of tests had to be stated ? We do number think they do. Obviously, the rule and the form companytemplate analysis and test as two different things, for otherwise both words would number have been mentioned, number the word or been put between them. It is true that the rule and the form require that the protocols of a test should be stated. They do number require any protocols to be stated in the report of an analysis. Now in the present case what the, report did was only to give the result of the analysis. It did number give the result of any test. Nor does it say that any test had been carried out. Indeed numberdispute exists as to the companyponents companystituting the drug, the only dispute being as to the quantities in which they were so companytained. The report only stated the quantities of them found on analysis. That being so, in our view, the report is in the prescribed form and is fully admissible in evidence. The Inspector in his letter to the Analyst numberdoubt stated that the sample was sent to him for test or analysis. But what the Analyst did was only to make an analysis. It is irrelevant to companysider whether he should also have carried out a test. Even if he should have and did number, that would number prevent the report of the result of the analysis from being admitted in evidence. That report would numberetheless be companyclusive evidence under s. 25 3 of the Act. Our attention was drawn to the case of Rai Kishan v. The State of Uttar Pradesh. 1 There it was observed that when a report did number state the protocols of the test applied, it companyld number be said to be a report in the prescribed form.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTIONCivil Appeal No. 652 of 1964, Appeal from the judgment and order dated May 7, 1963 of the Rajasthan High Court in D.B. Civil Misc. Writ Petition No. 157 of 1962. C. Kasliwal, Advocate-General for Rajasthan. K.K. Jain, for the appellants. D. Bhargava and B.D. Sharma, for the respondent. The Judgment of the Court was delivered by Siki, J. This appeal by certificate of fitness granted by the Rajasthan High Court is directed against its judgment dated May 7, 1963, quashing the order of assessment dated March 5, 1962, made by the Sales Tax Officer, Jodhpur City, in so far as it levied sales tax on the turnover of Rs. 23,92,252.75 np. The respondent, M s Shiv Ratan G. Mohatta, which is a partnership firm having its head office at Jodhpur, hereinafter referred to as the assessee, claimed before the Sales Tax Officer that they were number liable to be assessed to sales tax in respect of the above turnover because, firstly, the assessee was number a dealer within s. 2 f of the Rajasthan Sales Tax Act Rajasthan Act XXlX of 1954 with respect to this turnover, and secondly, because the sales were in the companyrse if import within Art. 286 1 b of the Constitution. Although the Sales Tax Officer set out the facts of the case relating to the second ground, he deemed it sufficient to assess this turnover on the ground that the assessee was a dealer within s. 2 f of the Rajasthan Sales Tax Act, without adverting to the second ground. The facts on which the assessee had relied upon to substantiate his second ground were these. The Zeal-Pak Cement Factory, Hyderabad Pakistan , hereinafter called the Pakistan Factory, manufactured cement in Pakistan. The Pakistan Industrial Development Corporation, hereinafter called the Pakistan Corporation, entered into an agreement with M s Milkhiram and Sons P Ltd., Bombay, for the export of cement manufactured in Pakistan to India. The State Trading Corporation of India entered into an agreement with the said M s Milkhiram Sons for the purchase of, inter alia, 35,000 long tons of cement to be delivered to it O.R. Khokhropar in Pakistan, on the border of Rajasthan. The State Trading Corporation appointed the assessee as its agent, broadly speaking, to look after the import and the sale of the imported cement. The modus operandi adopted by the assessee for the sale of the cement was as follows. It would obtain from a buyer in Rajasthan an order under an agreement, a sample of which is on the record The agreement fixed the price and the terms of supply. By one clause the assessee disclaimed any responsibility regarding delay in dispatch and number-receipt of companysignment or any loss, damage or shortage in transit due to any reason whatsoever. The agreement further provided that all claims for loss, damage or shortage, etc., during transit will lie with the carriers and our payments are number to be delayed on any such account whatsoever. It was further provided in the agreement that the dues were payable in advance in full, or 90 in advance and the balance within 15 days of billing plus sales tax and other local taxes. Clause 6 of the agreement is in the following terms A Post Card Loading Advice will be sent to you by the Factory as soon as the wagons are loaded in respect of your orders, and it will be your responsibility to arrange for unloading the companysignment timely according to Railway Rules. Ourselves. and the suppliers will number be responsible for demurrage etc. on any account whatsoever. If the companysignment reaches earlier than the Railway Receipt, it is the responsibility of buyer to arrange for and get the delivery timely against indemnity bond etc. All the Railway Receipts etc. will be sent by registered post by the Suppliers in Pakistan After this agreement had been entered into, the assessee would send despatch instructions to the Pakistan Corporation. These instructions indicated the name of the buyer-consignee and the destination, and provided that the railway receipt and D A should be sent by registered post to the companysignee. These instructions were sent with a companyering letter to the Pakistan Corporation requesting that these instructions be passed on to the Pakistan Factory for necessary action. The Pakistan Corporation would then forward these despatch instructions to the Zeal-Pak Cement Factory. Later, the Pakistan Factory would advise the companysignee that they had companysigned to the State Bank of India, Karachi, the particular quantity as per enclosed railway receipt and invoice. The State Bank of India, Karachi, would endorse the railway receipt in favour of the companysignee and send it to him by post. The companysignee would take delivery either by presentation of the railway receipt or by giving indemnity bond to the Station Master undertaking to deliver the railway receipt on its receipt. The Sales Tax Officer did set out most of these facts and the companytentions of the assessee in the assessment order but disposed of the case with the following observations All the above went to prove that the assessee was an Agent of the number-resident dealer for the supplies in the State. The Assessee was an importer and hence submitted an application to the Custom Authority for the same. It booked orders and issued sale bills. Under the terms of an agreement of appointment of Agent, sale was to be effec- ted by the Agent. Again while obtaining orders from the buyers under companydition 5 Sales Tax was to be paid by the buyers to the assessee. Thus to all intents and purposes the assessee is a dealer who is liable for payment of Sales Tax to the State. They have rightly companylected this amount from the buying dealers and retained with them. This should companye to the Government We can find numberdiscussion in the order on the question raised by the assessee that the sales were made in the companyrse of import within Art. 286 1 b of the Constitution. The assessee then filed a petition under art. 226 of the Constitution and raised two companytentions before the High Court, namely, 1 that the Sales Tax Officer failed to companysider the impact and the effect of Art. 286 1 b on the facts of the case, and 2 that the Sales Tax Officer illegally held that the petitioner for all intents and purposes was a dealer liable to pay sales tax. The State raised an objection to the maintainability of the petition on the ground that the petitioner should have availed of the alternative remedy of appeal provided under the Rajasthan Sales Tax Act, but the High Court overruled this objection on the ground that the companytention of the petitioner is that in view of Art. 286 1 b of the Constitution, the respondent had numberjurisdiction to assess the petitioner to pay the sales tax on the sale of goods in the companyrse of the import into the territory of India, and that even if there was numbertotal lack of jurisdiction in assessing the petitioner to pay sales tax. the principle enunciated in A.V. Venkateswarn v Ram chand Sobharaj Wadhwani 1 applied, and it was a case which should number be dismissed in litnine. Then the High Court proceeded to deal with the merits of the case. It first dealt with the question whether the petitioner was a dealer within the meaning of s. 2 f of the Rajasthan Sales Tax Act, and came to the companyclusion that the petitioner must be deemed to be a dealer within the said s. 2 f . Then it proceeded to deal with the question whether the sales had taken place in the companyrse of import. The High Court held that in the circumstances of the case these sales had number occasioned the movement of goods but it was the first sale made by M s Milkhiram and Sons to the State Trading Corporation which had occasioned the movement of goods. Secondly, it held that in the circumstances of the case the property in goods after the delivery had been taken by the petitioner on behalf of the State Trading Corporation passed to the State Trading Corporation and simultaneously to the ultimate buyers. Thus the property in the 1 1962 1 S.C.R. 753. goods passed to the ultimate buyers in Rajasthan when the goods had number reached the territory of India and were in companyrse of import. In view of the authority of their Lordships of the Supreme Court in J. V. Gokal and Co. Private Ltd. v. The Assistant Collector of Sales Tax Inspection Others, , it must be taken that the sale took place when the goods were in the companyrse of the import and they should number be liable to the payment of the Sales Tax by virtue of Art. 286 1 b In the result, the High Court quashed the order of assessment in so far as it sought to levy tax on the turnover in dispute. The Sales Tax Officer, Jodhpur, and the State of Rajasthan having obtained certificate of fitness from the High Court filed this appeal. The learned Advocate-General has raised two points before us First, on the facts of this case the High Court should have refused to entertain the petition, and secondly, that it has number been established that the cement was sold in the companyrse of import within Art. 286 1 b . Regarding the first point, he urges that an appeal lay against the order of the Sales Tax Officer numberquestion of the validity of the Sales Tax Act was involved and the taxability of the turnover depended on where the property passed in each companysignment. This involved companysideration of various facts and, according to him.the crucial facts had number been brought on the record by the assessee on whom lay the onus to establish that the sales were in the companyrse of import. He says that the assessee should have proved that each railway receipt was endorsed by the State Bank of India, Karachi, to the buyer before each companysignment crossed the frontier. We are of the opinion that the High Court should have declined to entertain the petition. No exceptional circumstances exist in this case to warrant the exercise of the extraordinary jurisdiction under Art. 226. It was number the object of art. 226 to companyvert High Courts into original or appellate assessing authorities whenever an assessee chose to attack an assessment order on the ground that a sale was made in the companyrse of import and therefore exempt from tax. It was urged on behalf of the assessee that they would have had to deposit sales tax, while filing an appeal. Even if this is so. does this mean that in every case in which the assessee has to deposit sales tax, he can bypass the remedies provided by the Sales Tax Act? Surely number. There must be something more in a case to warrant the entertainment of a petition under art. 226, something going to the root of the jurisdiction of the Sales Tax Officer, something to show that it would be a case of palpable injustice to the assessee to force him to adopt the remedies provided by the Act. But as the High Court chose to entertain the petition, we are number inclined to dismiss the petition on this ground at this stage. 1 1960 2 S.C.R. 852. Regarding the second point, the learned Advocate- General .argues that the onus was on the assessee to bring his case within Art. 286 1 b of the Constitution in respect of the sales to the various companysignees. He says that there is numberevidence on record as to when the State Bank of India endorsed the railway receipt in favour of the ultimate buyer in respect of each companysignment and without this evidence it cannot be said that the title to the goods passed to the ultimate buyer at Khokhropar or in the companyrse of import. He further urges that it would have to be investigated in each case as to when the State Bank endorsed the railway receipt and when the goods crossed the customs barrier. He says that it is number companytested that the ultimate buyer took delivery of goods without producing the railway receipt by virtue of special arrangements entered into with the railway, and according to him. it is only when the delivery was taken by the buyer in Rajasthan that the title passed. By that time, according to him, the companyrse of import had ceased. We do number think it necessary to companysider the various arguments addressed by the learned Advocate-General or the soundness of the view of the High Court on this point, because we are of the opinion that the High Court should number have gone into this question on the facts of this case. The Sales Tax Officer had number dealt with the question at all, and it is number the function of the High Court under art. 226, in taxing matters, to companystitute itself into an original authority or an appellate authority to determine questions relating to the taxability of a particular turnover. The proper order in the circumstances of this case would have been to quash the order of assessment and send the case back to the Sales Tax Officer to dispose of it according to law. Under the Rajasthan Sales Tax Act, and other Sales Tax Acts, the facts have to be found by the assessing authorities. If any facts are number found by the Sales Tax Officer, they would be found by the appellate authority. and it is number the function of a High Court to find facts. The High Court should number encourage the tendency on the part of the assesses to rush to the High Court after an assessment order is made. It is only in very exceptional circumstances that the High Court should entertain petitions under art. 226 of the Constitution in respect of taxing matters after an assessment order has been made. It is true, as said by this Court in A. V. Venkateswarn v. Ramchand Sobharaj Wadhwani 1 that it would number be .desirable to lay down inflexible rules which should be applied with rigidity in every case, but even so when the question of taxability depends upon a precise determination of facts and some of the facts are in dispute or missing, the High Court should decline to decide such questions. It is true that at times the assessee alleges some additional facts number found in the assessment order and the State, after a fresh investigation, admits these facts, but in a petition under art. 1 1962 1 S.C.R. 753. 226 where the prayer is for quashing an assessment order, the High Court is necessarily companyfined to the facts as stated in the order or appearing on the record of the case. In this case, as already indicated, we have companye to the companyclusion that the High Court should number have decided disputed questions of fact, but should merely have quashed the assessment order on the ground that the Sales Tax Officer had number dealt with the question raised before him and remanded the case. Accordingly. we allow the appeal, set aside the order of the High Court, quash the assessment order in so far as it relates to the. turnover of Rs. 23,92.252.75 up, and remit the case to the Sales Tax Officer to decide the case in accordance with law. He will find all the facts necessary for the determination of the question and companye to an independent companyclusion untrammeled by the views expressed by the High Court.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 630 of 1963. Appeal from the judgment and order dated June 8, 1959 the Assam High Court in Civil Rule No. 42 of 1957. N. Mukherjee, for the appellant. Naunit Lal, for the respondent No. 3. The Judgment of the Court was delivered by Wanchoo, J. This appeal on a certificate granted by the Assam High Court raises the question of the companystitutionality of an annual tax levied by local boards for the use of any land for the purpose of holding markets as provided by s. 62 of the Assam Local Self- Government Act, No. XXV of 1953, hereinafter referred to as the Act . The appellant is a landholder in the district of i Kamrup. As such landholder, he holds a hat or market on his land since the year 1936 and this market is known as Kharma hat. In 1953-54, the local board of Barpeta, within whose jurisdiction the Kharma market is held, issued numberice to the appellant to take out a licence and pay Rs. 600/- for the year 1953-54 as licence-fee for holding the market. Later this sum was increased to Rs. 700/- for the year 1955-56. The appellant companytinued .protesting against this levy but numberheed was paid to his protests and the amount was sought to be recovered by issue of distress warrants and attachment of his property. Consequently, the appellant filed a writ petition in the High Court challenging the companystitutionality of the impost on a number of grounds. In the present appeal two main companytentions have been urged in support of the appellants case that the impost is unconstitutional, namely, i that the Assam legislature had numberlegislative companypetence to tax markets, and ii that the tax actually imposed on the Kharma market infringes Art. 14 of the Constitution. We shall therefore companysider these two companytentions only. This attack on behalf of the appellant is met by the respondent by relying on item 49 of List 1I of the Seventh Schedule to the Constitution, and it is urged that the State legislature was companypetent to impose the tax under that entry, for this was a tax on land. As to Art. 14, the reply on behalf of the respondent is that under s. 62 of the Act, a rule has been framed prescribing Rs. 1000/- as the maximum amount of tax which may be levied by any local board in Assam on markets licensed under that section. The rule also provides that any local board may with the previous approval of Government impose a tax within this maximum according to the size and importance of a market. So it is submitted that the tax has been imposed by Barpeta local board in accordance with this rule, and the appellant has failed to show that there has been any discrimination in the fixation of the amount of tax on the Kharma market. The High Court repelled the companytentions raised on behalf of the appellant and dismissed the writ petition. As however, questions of companystitutional importance were involved, the High Court granted a certificate under Art. 132 of the Constitution and that is how the matter has companye up before us. The first question which falls for companysideration therefore is whether the impost in the present case is a tax on land within the meaning of entry 49 of List II of the Seventh Schedule to the Constitution. It is well-settled that the entries in the three legislative lists have to be interpreted in their widest amplitude and therefore if a tax can reasonably be held to be a tax on land it will companye within entry 49. Further it is equally well-settled that tax on land may be based on the annual value of the land and would still be a tax on land and would number be beyond the companypetence of the State legislature on the ground that it is a tax on income see Ralla Ram v.The Province of East Punjab 1 . It follows therefore that the use to which the land is put can be taken into account in imposing a tax on it within the meaning of entry 49 of List II, for the annual value of land which can certainly be taken into account in imposing a tax for the purpose of this entry would necessarily depend upon the use to which the land is put. It is in the light of this settled proposition that we have to examine the scheme of s. 62 of the Act, which imposes the tax under challenge. It is necessary therefore to analyse the scheme of s. 62 which provides for this tax. Section 62 1 inter alia lays down that the local board may order that numberland shall be used as a market otherwise than under a licence to be granted by the board. Sub-section 2 of s. 62 is the charging provision and may be quoted in full On the issue of an order as in sub-section 1 , the board at a meeting may grant within the local limits of its jurisdiction a licence for the use of any land as a market and impose an annual tax thereon and such companyditions as prescribed by rules. Sub-section 3 provides that when it has been determined that a tax shall be imposed under the preceding sub-section, the local board shall make an order that the owner of any land used as a market specified in the order shall take out a licence for the purpose. Such order shall specify the tax number exceeding such amount as may be prescribed by rule, which shall be charged for the financial year. It will be seen from the provisions of these three sub- sections that power of the board to impose the tax arises on its passing a resolution that numberland within its jurisdiction shall be used as a market. Such resolution clearly affects land within the jurisdiction of the board and on the passing of such a resolution the board gets the further power to issue licences for holding of markets on lands within its jurisdiction by a resolution and also the power to impose an annual tax thereon. Now it is urged on behalf of the appellant that when sub-s 2 speaks of imposing of an annual 1 1948 F.C.R. 207. tax thereon it means the imposition of an annual tax on the market, and that there is numberprovision in List II of the Seventh. Schedule for a tax on markets as such. Markets and fairs appear at item 28 of List H, and it is urged that under item 66 of the same List, fees with respect to markets and fairs can be imposed but there is numberprovision for imposing a tax on markets in the entries from 45 to 63 which deal with taxes. It may be accepted that there is numberentry in List II which provides for taxes as such on markets and fairs. It may also be accepted that entry 66 will only justify the imposition of fees on markets and fairs which would necessitate the providing of services by the board imposing the fees as a quid pro quo. That however, does number companyclude the matter, for the companytention on behalf of the State is that tax under s. 62 is on land and number on the market and further the tax depends upon the use of the land as a market. It seems to us on a close reading of sub-s. 2 that when that sub-section speaks of annual tax thereon, the tax is on the land but the charge arises only when the land is used for a market. This will also be clear from the subsequent provisions of s. 62 which show that the tax is on land though its imposition depends upon user of the land as a market. Sub-section 3 shows that as soon as sub- s. 1 and 2 are companyplied with, the local board shall make an order that the owner of any land used as a market shall take out the licence. Thus the tax is on the land and it is the owner of the land who has to take out the licence for its use as a market.The form of the tax i.e. its being an annual tax as companytrasted to a tax for each day on which the market is held also shows that in essence the tax is on land and number on the market held thereon.Further the tax is number imposed on any transactions in the market by persons who companye there for business which again shows that it is an impost on land and number on the market i.e. on the business terein. Then sub-s 5 provides that the tax shall be paid by the owner of any land used as a market which again shows that it is on the land that the tax is levied, though the charge arises when it is used as a market. Sub-section 6 then lays down that on receiving the amount so fixed the board shall issue a licence to the person paying the same. Here again the license is for the rise of the land. Then companyes sub-s. 8 which provides that wherever. being the wner or occupier of any land uses or permits the same to be used as a market without a licence shall be liable to fine. This provision clearly shows that the tax is on the land and it is the owner or occupier of the kind who is responsible and is liable to prosecution if he fails to take cut a licence. No liability of any kind is thrown on those who companye to the market for-the purpose of trade. Sub-section 9 then lays down that where a companyviction has been obtained under sub-s. 8 , the District Magistrate or the Sub Divisional Officer, as the case may be, may stop the use of the land as a market. Sub-section 10 then provides that every, owner, occupier or farmer of a market shall cause such drain to be made therein and take all necessary steps to keep such market in a clean and wholesome state and shall cause supply of sufficient water for the purpose as well as for drinking purpose. Sub-sections ID and 12 give power to the board on the failure of any owner, occupier or farmer to companyply with a numberice under sub-s. 10 , to take possession of the land and the market thereon and execute the works itself and receive all rents, tolls and other dues in respect of the market. This will again show that the tax provided by s. 52 2 is a tax for the use of the land and it is number a tax on the market as such, for the income from the market in the shape of tools, rents and other dues is number liable to tax under s. 52 and is different from tax. The scheme of s. 62 therefore shows that whenever any land is used for the purpose of holding a market, the owner,occupier or farmer of that land has to pay a certain tax for its use as such. But there is numbertax on any transaction that may take place within the market. Further the amount of tax depends upon the area of the land on which market is held and the importance of the market subject to a maximum fixed by the State Government. We have therefore numberhesitation in companying to the companyclusion on a companysideration of the scheme of s. 52 of the Act that the tax provided therein is a tax on land, though its incidence depends upon the use of the land as a market. Further as we have already indicated s. 62 2 which uses the words impose an annual tax thereon clearly shows that the word thereon refers to any land for which a licence is issued for use as a market and number to the word market. Thus the tax in the present case being on land would clearly be within the companypetence of the State legislature. The companytention of the appellant that the State legislature was number companypetent to impose this tax because there is numberprovision in List II of the Seventh Schedule for imposing a tax on markets as such must therefore fail. Then we companye to the companytention under Art. 14 of the Constitution. As to that it is well-settled that it is for the person who alleges that equality before law has been infringed to show that such really is the case. It was therefore for the appellant to produce facts and figures from which it can be inferred that the tax imposed in the present case is hit by Art. 14 of the Constitution. In that companynection, all that the appellant has stated in his writ petition is that the board fixed a high rate arbitrarily and thus discriminated against the appellants market as against the other neighbouring markets where the tax had been fixed at a much lower rate, and that this was hit by Art. 14. There was certainly an allegation by the appellant that Art. 14 had been infringed but that allegation is vague and gives numberfacts and figures for holding that the tax imposed on the Kharma market was discriminatory. It appears that the tax was imposed for the year 1953-54. which was companytinued Inter on, with some modifications. At that time there were five markets on which the tax was imposed including the Kharma market. The lowest tax was at Rs. 400/- on two markets, then at Rs. 500/- on the third market and at Rs. 600/- on the Kharma market and finally at Rs. 1000/- on the fifth market. Rule 300 2 , flamed in accordance with s. 63 3 runs thus--- Rs. 1000/- Rupees one thousand only per annum has been fixed as the maximum amount of tax which may be levied by the local boards in Assam on markets licensed under section 62 of the Act. Any local board may with the previous approval of Government impose a tax within this maximum according to the size and importance of a market. Now the rule provides that Rs. 1000/- is the maximum tax and within that maximum the board has to graduate the tax according to the size and importance of the market. The size of the market naturally takes into account the area of the land on which the market is held the importance of the market depends upon the number of transactions that take place there, for the larger the number of transactions the greater is the importance of the market. If therefore the appellant is to succeed on his plea of Art. 14 on the ground that the tax fixed on his market was discriminatory he had to adduce facts and figures, firstly as to the size of the five markets on which the tax was levied in the relevant years and secondly as to the relative importance of these markets. But numbersuch facts and figures have been adduced on behalf of the appellant. It is true that the respondent in reply to the charge of discrimination was equally vague and merely denied that there was any arbitrary discrimination. But it was for the appellant to show that in fixing the tax on the five markets as it did, the board acted arbitrarily and did number take into account the size and importance of the markets. As there is numbermaterial before us by which we can judge the relative size and importance of the five markets, it is number possible to hold that there was discrimination in taxing Kharma market at Rs. 600/- per year as companypared to taxing the three other markets at less than Rs. 600/-. The attack therefore on the amount actually fixed on the ground of discrimination must fail.	Case appeal was rejected by the Supreme Court
CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 60 of 1963. Appeal by special leave from the judgment and order dated August 24, 1962 of the Allahabad High Court in Government Appeal No. 1379 of 1962. C. Misra and O.P. Rana, for the appellant. 1. P. Goyal, for the respondent. The Judgment of the Court was delivered by Sikri, J. This appeal by special leave is directed against the judgment of the Allahabad High Court dismissing the appeal of the State against the judgment of the Sessions Judge allowing the appeal of the respondent and acquitting him. The respondent obtained permits under the Iron and Steel Control Order, 1956--hereinafter referred to as the Control Order for about 28 tons of iron, including 6 tons of rods, 151/2 tons of joints and 2 tons of G.C. Sheets. He is alleged to have purchased these articles on the basis of the above permits between July 1957 and March 1958. The permits were obtained on three applications made by the respondent. Only two applications are in the printed record. The first application is dated May 23, 1957, and is addressed to the Provincial Iron and Steel Controller, Kanpur, through the District Magistrate, Deoria. In this application the respondent stated that he was a political sufferer and he was companystructing a public temple for which he required five tons of M.S. Round and eight tons of Girder. He further stated that the requirements were number available at Deoria and as such the application should be companysidered and forwarded to the Controller for companysideration and orders. It appears that this application was forwarded, duly recommended, by the District Supply Officer. Deoria, and ultimately a permit was given to him by the Controller. He made another application dated September 7, 1957. In this application he again stated that he was a political sufferer and he was companystructing a public temple and dharamshala for which he required certain quantities of iron. He further stated that the requirements were number available at Deoria and as such the application should be forwarded to the Controller. This application was also recommended and forwarded and ultimately a permit was given to him. On January 2, 1958, the accused made another application Ex. Ka 9--not available in the printed record and a permit was given to him by the District Supply Officer himself. We may mention that the original permits are number printed in the record, and, therefore, we have number been able to see for ourselves as to what are the exact companyditions companytained in the permits. It is the case of the prosecution that the respondent after obtaining the materials sanctioned to him under the permits did number companystruct any temple or dharamshala building at Barhaj Bazar or at any other place. We may mention that Barhaj Bazar is the place where he lives and the applications which are in the record also mention this address. Before the Magistrate who tried the case the respondent was put the following question It is alleged that the iron obtained under the permits mentioned in questions 2, 3 and 4 was number utilised for the purpose for which it was taken. What have you to say in this respect? The respondents reply was No. Whatever iron 1 got, I used it in the temple situate in mauza Tinbari, P.S. Madhubam district Azamgarh, which is my place of residence as well. Before the Magistrate the accused had admitted to have purchased about 17 tons of iron. The Magistrate held it proved that the accused had atleast purchased one ton more from one Mishri Lal, P.W. 7. Thus, he came to the companyclusion that the accused had purchased at least 18 tons of iron. He further held that on the evidence it was clear that only 3/4 ton of rods had been utilised in the building companystructed at Tinhari, but as the building had been companystructed between 1943--52, numberportion of the iron obtained by the accused had been utilised for the purpose for which it was procured. He further held that the accused had disposed of the iron wrongfully at Kanpur and did number even bring the same to Barhaj Bazar or Tinhar. Accordingly he held that the respondent had companytravened the provisions of cl. 7 of the Control Order. The respondent filed an appeal before the Sessions Judge. The Sessions Judge held that barring a very small quantity of iron, the remaining quantity that was received by the respondent had number been utilised in the temple or dharmashala at Tinhari. Differing from the Magistrate, he held that it was number proved by any evidence that the respondent had actually sold the excess quantity at Kanpur. He then observed that in the absence of any such evidence the possibility of the appellant retaining the iron at some other place is number companypletely excluded. Then companystruing d. 7 of the Control Order, he observed that in the aforesaid section there is numbermention that the iron purchased should be utilised at any particular place or within a particular period. The companydition in the various permits granted to the appellant was simply this that he should utilise the iron in creecting a temple or dharamshala in the town of Barhai. It may be numbered that the main purpose was the companystruction of a temple and dharamshala the place where it was to be companystructed does number appear to have much significance. Further numbertime-limit is given during which the entire quantity of iron should be utilised. Accordingly he held that there had been numbercontravention of cl. 7 of the Control Order. The State appealed to the High Court. Srivastava, J. dismissed the appeal holding that there had been numbercontravention of cl. 7 of the Control Order. According to him, two essentials are necessary before there can be companytravention of el. 7. In the first place the iron and steel should be used secondly it should be used otherwise than in accordance with the companyditions companytained or incorporated in the document which was the authority for the acquisition. He held that the first companydition had number been fulfilled because it had number been proved that the respondent had used the iron which he had obtained on the basis of the permit. It appears that the findings of the learned Sessions Judge, as well as the Magistrate, that he had number used or utilised the remaining portions of the iron and steel at all were number questioned before him. According to him, if the remaining quantity of iron was still unutilised or unused, then the respondent companyld number be said to have done anything companytrary to cl. 7. He further held that the second companydition had also number been fulfilled because the permit itself companytained only one companydition printed on its back. This companydition was that the materials required against the permit will be used only for the purpose for which it was asked for and has been given. According to him, it is number permissible to refer to the application made for the permit because the only document that can be looked at is the permit. He was, however, prepared to companycede that it is also open to the officer to mention in the permit that it is being granted for the purpose mentioned in the application. That may be a short- cut for avoiding the trouble of entering in the permit the details of the purpose. In that case it may be permissible to refer to the application. In spite of this companycession, he companycluded that when even that is number done in fact numbercondition is mentioned in the permit at all about the manner in which the iron or steel is to be utilised it cannot be said that a companydition of the permit has been broken because the assurance given in the application has number been carried out. Mr. B.C. Misra, learned companynsel for the appellant. has urged before us that on the facts found by the learned Sessions Judge. cl. 7 of the Control Order has been companytravened. He says that the word use in el. 7 includes kept for eventual use for another purpose. He says that if one stores iron and steel. one uses it and the word use does number imply companysumption only. Relying on Maxwell on Interpretation of Statutes, Eleventh Edition, p. 266. he says that we should give a wide companystruction to the word use in cl. 7. Clause 5 and the relevant portion of cl. 7 of the Control Order are as follows Disposals. No person, who acquires iron or steel under clause 4. or numberproducer shall dispose of or agree to dispose of or export or agree to export from any place to which this Order extends any iron or steel, except in accordance with the companyditions companytained or incorporated in a special or general written order of the Controller. Use of Iron and Steel to companyform to companyditions governing acquisition. A person acquiring iron or steel in accordance with the provisions of el. 4 shall number use the iron or steel otherwise than in accordance with any companyditions companytained or incorporated in the document which was the authority for the acquisition We are unable to accede to the above companytentions. There is numberprovision in the Control Order requiring that iron or steel acquired under the Control Order should be utilised within a specified time. If it had been the intention to include keeping or storing within the word use there would have been some provision regarding the period during which it would be permissible to keep or store the iron, for it is companymon knowledge that building operations take some companysiderable time and are sometimes held up for shortage of material or other reasons. Further the word use must take its companyour from the companytext in which it is used. In cl. 7 the expression usein accordance with the companyditions companytained suggests something done positively, e.g. utilisation or disposal. Mere number-use, in our opinion, is number included in the word use. The passage relied on by the learned companynsel in Maxwell is as follows Wide Sense given to words The rule of strict companystruction, however, whenever invoked, companyes attended with qualifications and other rules numberless important, and it is by the light which each companytributes that the meaning must be determined. Among them is the rule that the sense of the words is to be adopted which best harmonises with the companytext and promotes in the fullest manner the policy and object of the legislature. The paramount object, in companystruing penal as well as other statutes, is to ascertain the legislative intent, and the rule of strict companystruction is number violated by permitting the words to have their full meaning, or the more extensive of two meanings, when best effectuating the intention. They are, indeed, frequently taken in the widest sense, sometimes even in a sense more wide than etymological belongs or is popularly attached to them, in order to carry out effectually the legislative intent, or, to use Sir Edward Cokes words, to suppress the mischief and advance the remedy. But this passage does number warrant the giving of a meaning to a word apart from the companytext in which it is used. There is numberdoubt that the legislative intent of the Control Order is that this essential companymodity should be utilised in accordance with the companyditions companytained in the permit, but numberclause in this Control Order evinces a legislative intent that a mere number-user is also prohibited and made punishable. The learned companynsel referred to London County Council v. Wood 1 , but we do number derive any assistance from that case. The head-note brings out the point decided in that case as follows The Highways and Locomotives Act, 1878, provides by s. 32 that A companyntry authority maymakeby-laws for granting annual licences to locomotives used within their companyntry. And by a by-law made by the London County Council under that section it was provided that No locomotive shall be used on any highway within the companynty of London until an annual licence for the use of the same shall have been obtained from the companyncil by the owner thereof-- Held, that a steam-roller which was number at the time being employed in road-making, but was merely passing through the companynty to a destination outside was being used within the companyntry within the meaning of the section and the by-law. In the companytext, the word used was, with respect, properly companystrued. Collins, J., held that the object of the Act was evidently to protect the highways, and the effect of a steam-roller upon the highways may be just the same whether it be engaged in mending the roads or number. In companyclusion we hold that it has number been established that the respondent had used the iron acquired by him in companytravention of cl. 7 of the Control Order. The learned companyncil further urges that the High Court erred in holding that the application cannot be referred to for the purpose of companystruing the companyditions appearing in the permit, the companydition being that the materials acquired against a permit will be used only for the purpose for which it was asked for and has been given. He says that the expression the purpose for which it was asked for refers back to the application, and the expression has been given refers back to the Order. There is some force in what he urges. We are unable to sustain the finding of the High Court that it is number permissible to refer to the application and the order to find out the purpose for which the iron was obtained. But even if we look at the applications, which are in the printed record, the purpose mentioned is only companystruction of a temple, in the application dated May 23, 1957, and temple and dharamshala in the application dated September 7, 1957. These applications do number disclose that the respondent wanted to companystruct the temple and dharamshala at any particular place. It is urged that the sentence which occurs in both the applications, namely that the requirements are number available at Deoria, shows that the purpose for which the iron and steel was required was for companystruction 1 1897 2 QB 482. of a temple and dharamshala in the district of Deoria. This argument is sought to be reinforced by asserting that a District Magistrate was number empowered to recommend applications for iron required for works to be companystructed outside the District, and therefore it must be held that the purpose was companystruction of a temple and dharamshala in the district of Deoria. However, numberorders showing the jurisdiction of the District Magistrate in respect of this matter has been shown to us, and we are unable to companyclude from the applications that the purpose was companystruction of a temple and dharamshala in the district of Deoria alone. Accordingly we hold that the respondent has number companytravened cl.	Case appeal was rejected by the Supreme Court
Raghubar Dayal, J. This appeal, by special leave, raises the question whether Zamindari Abolition Compensation Bonds shortly termed Bonds issued by the U.P. Government to intermediaries in payment of companypensation payable on the basis of their rights under the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950 U.P. Act 1 of 1951 , hereinafter referred to as the Act, have to be accepted by the appropriate authorities in payment of the agricultural income-tax due from them. The facts leading to the appeal, in brief, are that the respondent, an ex-Zamindar, was assessed to agricultural income-tax in the assessment year 1360 F. companyresponding to 1952-53, on the basis of the agricultural income accruing in the previous year 1359 F. companyresponding to 1951-52. He did number pay the assessed tax and was further assessed to a penalty. In the result, Rs. 868 were to be paid by him for tax plus penalty. The respondents writ petition companytending that he was number liable to pay tax was dismissed by the High Court. Thereafter, the agricultural income-tax authorities took out proceedings for the realisation of the amount due from him. On July 24, 1956, the respondent presented an application to the Agricultural Income-tax Assessing Officer, Allhabad, stating that he had numberready cash to pay the dues that he was therefore depositing bonds of the value of Rs. 850 and Rs. 18 in cash and praying that the bonds be accepted in payment of tax dues. This application was rejected by an order stating that there was numberrule for the acceptance of those bonds and that they be returned to the applicant. On August 1, 1956, the respondent made a similar application to the Collector companyplaining that the Assessing Officer had numbervalid reason to refuse to take the bonds when the bonds were negotiable instruments. This application was also rejected on a report of the Assessing Officer that the bonds were number accepted in the settlement of agricultural income-tax dues that they were number negotiable and that there was numberprovision in the Act for their acceptance. Thereafter, the respondent presented a writ petition to the High Court of Allhabad praying for the issue of a writ of certiorari quashing the order of the Assessing Officer and the Collector, Allhabad, for the issue of a writ of mandamus directing them to accept the bonds in lieu of the tax dues and, in any case, to deduct the amount from rehabilitation grant due to the petitioner and for the issue of a writ of prohibition directing the opposite parties from adopting companyrcive measures for the realisation of the tax due from the petitioner. The grounds mentioned in support of the prayers were that the bonds were negotiable instruments and therefore refusal to accept them in payment of agricultural income-tax dues was illegal, that they, having been issued by Government, companyld number be subsequently refused, they being perfectly valid legal tender and that in view of rule 8-A of the Rules made under the Act the amount due for tax should have been deducted from the interim companypensation. The companynter-affidavit filed by the Naib-Tehsildar Agricultural Income- tax Officer, Allhabad, on behalf of the State, stated that the respondent was assessed to agricultural income-tax in the assessment year companymencing from July 1, 1952, on the income derived in the previous year companymencing from July 1, 1951, that the tax had to be paid in four installments and in default of payment a penalty of Rs. 43 was imposed for each default in payment of the four installments and that the bonds companyld number be accepted towards the tax due under section 6 d of the Act read with rule 48 of the Rules as the tax had fallen due in 1360 F. companyresponding to July 1, 1952, to June 30, 1953. The High Court held that the orders of the Agricultural Income-tax Assessing Officer and the Collector were wrong as the ground for refusing to accept the bonds in payment of the tax on the ground that there was numberrule or statutory provision for their acceptance was incorrect and appeared to have been given in companyplete ignorance of the provision of law. Reference was made to the provision of section 6 d of the Act and rule 8-A. The High Court was of the opinion that these have been companypletely ignored by the two officers. It therefore thought that the order were liable to be quashed and that adequate relief would be available to the respondent if a direction was given to the Collector to decide his application dated August 1, 1956, in accordance with law. The High Court therefore quashed the order of the Collector dated August 24, 1956, and directed him to decide the respondents application afresh in accordance with law as indicated above. The appellant thereafter obtained special leave from this companyrt and appealed against the order of the High Court dated April 8, 1960. The main companytention for the appellant before us is that neither section 6 d of the Act number rule 8-A provides that bonds can be accepted in payment of agricultural income-tax and that therefore the order of the Collector dated August 24, 1956, was companyrect. For the respondent it is urged that rule 8-A makes it mandatory for the Agricultural Income-tax Officer to realise the agricultural income-tax due from the companypensation payable and that companypensation companytinues to be payable till the bonds are actually encashed. Section 6 d of the Act, as originally enacted, did number provide, among the companysequences of the vesting of the estate in the State, that arrears on account of agricultural income-tax might be realised by deducting the amount from the companypensation money payable to the intermediary under Chapter III. An amendment was made in this clause d by section 3 of U.P. Act XVI of 1953, with retrospective effect from July 1, 1952, and the relevant portion of the provision after amendment reads thus an arrear of revenue or an arrear on account of tax on agricultural income assessed under the U.P. Agricultural Income-tax Act, 1948, for any period prior to the date of vesting shall companytinue to be recoverable from such intermediary and may, without prejudice to any other mode of recovery be realised by deducting the amount from the companypensation money payable to such intermediary under Chapter III. Rule 8A was added to the rules by Notification No. 3266/I-A-1056-1954, dated August 17, 1954, and its relevant portions read 8-A. Without prejudice to the right of the State Government to recover the dues mentioned below such other means, as may be open to it under law 1 all arrears of land revenue in respect of the estates which have vested in the State Government as a result of the numberification under section 4 of the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950, Act 1 of 1951 , and of tax on agricultural income assessed under the U.P. Agricultural Income-tax Act, 1948, U.P. Act III of 1949 , due from an intermediary for any period to the date of vesting shall be realised a in the case of an intermediary who was assessed to land revenue of Rs. 10,000 or more from the amount of interim companypensation due to him, and b in the case of an intermediary who was assessed to a land revenue of less than Rs. 10,000 per annum by deduction from the amount of companypensation payable to him. It is clear from the above provisions that neither section 6 d number rule 8-A provide that bonds must or can be accepted in payment of tax on agricultural income. It has been held by this companyrt in Collector of Sultanpur v. Raja Jagdish Prasad Singh that the provisions of section 6 d of the Act would apply to arrears on account of agricultural income-tax assessed in 1360 F. on the basis of agricultural income during the year 1359 F. and that the provisions of rule 8-A are mandatory. It is number urged for the appellant that rule 8A is inconsistent with the provisions of section 6 d which provides that arrears of tax may be realised from the companypensation payable and, therefore, appears to give a discretion to the authorities to realise the arrears of tax from the companypensation payable. We do number agree with the companytention for the respondent that the companypensation payable to the intermediary companytinues to remain payable even after the companypensation bonds had been delivered to him. Section 68 of the Act provides that the companypensation under the Act shall be payable in cash or in bonds or partly in cash and partly in bonds as may be prescribed. It is clear therefore that the delivery of bonds to the intermediary is in payment of the companypensation. The claim for companypensation is thus satisfied when the companypensation has been paid in accordance with the provisions of section 68. This is also clear from the relevant rules for the payment of companypensation. Rule 62, as it stood prior to November 29, 1956, provided that the companypensation would be paid in negotiable bonds which would be described as Zamindari Abolition Compensation Bonds. Rule 63 as it then stood provided that the bonds would be issued in specified denominations and would bear interest at the specified rate on the principal that had become payable calculated from the date of vesting. Rule 64 provided that interest together with the principal of a bond would be paid in equated annual installments except for the last, as described in Appendix IV during the period of 40 years beginning from the date of vesting, provided that any bond might be redeemed at an earlier date at the option of the Government. Rule 65 provided that the installments due on a bond from the date of its enforcement would be payable on presentation from and after July 1st next after the delivery of the bond to the intermediary. These rules show that the companypensation does number remain payable after the delivery of the bonds and that the bonds companyld number be cashed before the due date for their encashment. The fact that the bonds are negotiable does number make them legal tender and does number make it obligatory on anyone, including Government, to accept them in payment of any dues. The only result of their being treated as negotiable instruments is that the owner of the bonds can transfer them to any person who is agreeable to purchase them. When the companypensation payable to an intermediary has been paid in the form of cash or bonds, that companypensation ceases to be payable. Section 6 4 of the Act and rule 8-A of the rules do number, as already stated, provide for the receipt of agricultural income-tax in the form of bonds. We are therefore of opinion that the Collector cannot be said to be in error in number accepting the bonds which had been delivered and which were number even cashable at the time, in payment of the arrears of agricultural income-tax payable under the Agricultural Income-tax Act. We accordingly allow the appeal, set aside the order of the High Court and restore that of the Collector dated August 24, 1956.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE Jurisdiction Civil Appeal No. 405 of 1964. Appeal from the judgment and decree dated July 18, 1962 of the Kerala High Court in A.S. No. 561 of 1961. T. Desai, M.S.K. Sastri and M.S. Narasimhan for the appellant. S. Pathak, B. Dutta, C. Chopra, J.B. Dadachanji, O.C. Mathur and Ravinder Narain for Respondent No. 1. The Judgment of the Court was delivered by Ramaswami, J. This appeal by certificate is brought on behalf of the 3rd defendant against the judgment and decree of the High Court of Kerala dated July 18. 1962 in A.S. No. 561 of 1961 which affirmed the judgment and decree of the Court of the Subordinate Judge of Alleppey in O.S. No. 114 of 1957. By a resolution Ex. BD dated November 25, 1946 the Board of Directors of the 1st defendant Company authorised the 2nd defendant to obtain financial accommodation from the plaintiffbank to the extent of Rs. 15 lakhs under different kinds of loans. Pursuant to this resolution the Company by its letter Ex. DE dated November 26, 1946 asked for accommodation for Rs. 1 lakh under clean overdraft, for Rs. 4 lakhs under open loan and for Rs. 10 lakhs under out agency and key loans. On November 26. 1946 all the three defendants executed a promissory numbere, Ex. B in favour of the plaintiff-bank for a sum of Rs. 4 lakhs. The promissory numbere was sent to the plaintiffs-bank along with a letter--Ex. A styled letter of companytinuity dated November 26, 1946. Ex. A reads as follows Alleppey. 26th November, 1946. The Agent. The Central Bank of India Limited, Alleppey. Dear Sir. We beg to enclose an on demand promote p. Rs. 4,00,000 Rupees Four lacs only signed by us which is given to you as security for the repayment of any overdraft which is at present outstanding in our name and also for the repayment of any overdraft to the extent of Rs. 4,00,000 Rupees four lacs only which we may avail of hereafter and the said Pro-Note is to be a security to you for the repayment of the ultimate balance of sum remaining unpaid on the overdraft and we are to remain liable to the Pro-Note numberwithstanding the fact that by payments made into the account of the overdraft from time to time the overdraft may from time to time be reduced or extinguished or even that the balance of the said accounts may be at credit. Yours faithfully, for CASHEW Products Corporation Ltd. For General Agencies Ltd. Respondent 2 Sd - P.S. George Sd - P.S. George Respondent 3 Managing Director, Managing Agents. Sd - S. Chattanatha Karayalar ,, Appellant . Exhibit B states Br. Rs. 4.00.000 Alleppy, 26th November 1946. On Demand we, the Cashew Products Corporation Ltd., S. Chattanatha Karayalar and P.S. George jointly and severally promise to pay The Central Bank of India Limited or order the sum of British Rs. Four Lacs only together with interest on such sum from this date at the rate of Two per cent over the Reserve Bank of India rate with a minimum of Five per cent per annum with quarterly rests for value received. For Cahew Products Corporation Ltd. For General Agencies Ltd. Sd - P.S. George Respondent 2 Managing Director, Sd -P. S. George Respondent No. 3 . Sd - S. Chattanatha Karayalar Appellant . On the same day, defendant No. 1 as Borrower executed in favour of the plaintiff-bank Ex. G, a deed of hypothecation of its stocks of goods for securing the Demand Cash credit. Ex. G is to the following effect Hypothecation of goods to secure a Demand cash Credit. NO. Amount No. 4,00,000. Name. The Cashew Products Corporation, Limited, Quilon. The Central Bank of India, Limited hereinafter called the Bank having at the request of the Cashew Products Corporation Ltd., Quilon, hereinafter called the Borrowers opened or agreed to open in the Books of the Bank ,at Alleppey a Cash Credit account to the extent of Rs. Four lacs only with the Borrowers to remain in force until closed by the Bank and to be secured by goods to be hypothecated with the Bank it is hereby agreed between the Bank and the Borrowers the Borrowers agreeing jointly and severally as follows-- The Borrowers agree to accept as companyclusive proof of the companyrectness of any sum claimed to be due from them to the Bank under this agreement a statement .of account made out from the books of the Banks of the Bank and signed by the Accountant or other duly authorised officer of the Bank without the production of any other voucher, document or paper. That this Agreement is to operate as a security for the balance from time to time due to the Bank and also for the ultimate balance to become due to on the said Cash Credit Account and the said account is number to be companysidered to be closed for the purpose of this security and the security of hypothecated goods is number to be companysidered exhausted by reason of the said Cash Credit Account being brought to credit at any time or from time to time or of its being drawn upon to the full extent of said sum of Rs. 4,00,000 if afterwards reopened by a payment to credit. In witness whereof the Borrowers have hereto set, their hands this Twenty sixth day of November the Christian Year one thousand nine hundred and fortysix. For Cashew Products Corporation Ltd., For General Agencies Ltd Sd - Managing Director, Managing Agents Sd - Schedule of goods referred to in the foregoing instrument, Stocks of cashewnuts, cashew kernels, tin plates, Hoop Iron and other packing materials stored and or to be stored in the factories at Kochuplamood, Chathanoor, Ithikara, Kythakuzhi, Paripa11i, Palayamkunnu and anyother factories in which we may be storing from time to time and at Cochin awaiting shipment. For Cashew Products Corporation Ltd For General Agencies Ltd Sd - Managing Director, Managing Agents. On the basis of those documents the plaintiff-bank opened an overdraft account in the name of defendant No. 1. On December 21, 1949, the three documents--Ex. A. B and G were renewed in identical terms by Exs. C, D and F. On January I, 1950 a sum of Rs. 3,24,645/12/2 became due to the plaintiff-bank and on that date a demand numberice-Ex. 0 was sent by the plaintiff-bank for repayment of the amount. A second numberice---Ex. L was sent by the plaintiff-bank on April 26, 1950. On September 8. 1950 the plaintiffbank brought a suit for the recovery of Rs. 2,86,292/11/11 from all the three defendants. The suit was companytested by all the defendants. The case of defendant No. 1 was that it had sustained loss on account of sudden termination of credit facilities by the plaintiff-bank and the amount of loss sustained should be set off against the claim of the plaintiff-bank. Defendants Nos. 2 and 3 pleaded that they had executed the promissory numberes only as a surety for the 1st defendant and that they are number companyobligants. It was further alleged that the plaintiff-bank had granted loan to the 1st defendant in other forms such as Out Agency loans against goods which were security for the open loan. It was said that the plaintiff-bank had made adjustments in the open loan account and in the clean over-draft account by debiting and companyrespondingly crediting in other accounts without the companysent of defendants 2 and 3. The plaintiff- bank had also allowed defendant No. 1 to over-draw freely in the clean overdraft and open loan accounts far beyond the limits agreed upon. It was alleged that the plaintiff-bank had companyverted secured loans into simple loans by releasing goods companyered by Bills of Lading against trust receipts and had thereby deliberately frittered away such securities. They companytended that they were discharged from obligation as sureties to the companytract for these reasons. Upon these rival companytentions the learned Subordinate Judge of Alleppey took the view that defendants 2 and 3 were number merely sureties but they were companyobligants, because they had executed the promissory numberes--Exs. B D. In view of this finding the learned Subordinate JUdge companysidered it unnecessary to go into the question whether defendant No. 3 was absolved from his liability for all or any reasons set forth in para 5 of the Consolidated Written Statement filed by him. Against the judgment and decree of learned Subordinate Judge, Alleppey defendant No. 3 presented an appeal in the High Court of Kerala under A.S. 561 of 1961. Defendants 1 and 2 did number appeal. The appeal was dismissed by the High Court of Kerala on July 12, 1962. It was held by the High Court that defendant No. 3 was a companyobligant and number a surety. On July 16, 1962 defendant No. 3 filed C.M.P. No. 5032 of 1962 praying that the argument of the appellant with regard to his liability as companyobligant may be expressly dealt with in the judgment of the High Court and companyplaining that the appellant would be seriously prejudiced if the omission was allowed to remain. Thereupon the learned Judges of the High Court wrote a supplementary judgment on July 18, 1962 rejecting the further arguments addressed on behalf of the appellant. The first question presented for determination in this case is whether the status of the 3rd defendant in regard to the transaction of overdraft account is that of a surety or of a companyobligant. It was argued by Mr. Desai on behalf of the appellant that the High Court has misconstrued the companytents of Exs. A and B in holding that the 3rd defendant has undertaken the liability as a companyobligant. It was submitted that there was an integrated transaction companystituted by the various documents---Exs. A, B and G executed between the parties on the same day and the legal effect of the documents was to companyfer on the 3rd defendant the status of a surety and number of a companyobligant. In our opinion, the argument put forward on behalf of the appellant is well-rounded and must be accepted as companyrect. It is true that in the promissory numbere--Ex. B all the three defendants have jointly and severally promised to pay the Central Bank of India Ltd. or order a sum of Rs. 4 lakhs only together with interest on such sum from this date, but the transaction between the parties is companytained number merely in the promissory numbere--Ex. B--but also in the letter of companytinuity dated November 26, 1946--Ex. A which was sent by the defendants to the plaintiff-bank along with promissory numbere--Ex. B on the same date. There is another document executed by defendant No. 1 on November 26, 1946---Ex. G-Hypothecation agreement. The principle is well- established that if the transaction is companytained in more than one document between the same parties they must be read and interpreted together and they have the same legal effect for all purposes as if they are one document. In Manks v. Whiteley, 1 Moulton, L.J. stated Where several deeds form part of one transaction and are companytemporaneously executed they have the same effect for all purposes such as are relevant to this case as if they were one deed. Each is executed on the faith of all the others being executed also and is intended to speak only as part of the one transaction, and if one is seeking to make equities apply to the parties they must be equities arising out of the transaction as a whole. It should be numbered in the present case that the promissory numbere--Ex. B--was enclosed by the defendants along with the letter of companytinuity--Ex. A before sending it to the plaintiff-bank. In the letter-Ex. A it is clearly stated that the promissory numbere Ex. B was given to the plaintiff- bank as security for the repayment of any overdraft to the extent of Rs. 4,00,000. It is further stated in Ex. A that the said promissory numbere is to be a security to you for the repayment of the ultimate balance or sum remaining unpaid on the overdraft. In the hypothecation agreement--Ex. G it is stated that the plaintiff-bank has agreed to open a cash Credit account to the extent of Rs. 4 lakhs at the request of the Cashew Products Corporation Ltd., Quilon. According to para 15 of the hypothecation agreement it operates as a security for the balance due to the plaintiffbank on the Cash Credit account. Para 12 of the hypothecation agreement states that if the net sum realised be insufficient to companyer the balance due to the plaintiff-bank, defendant No. 1 should pay the balance of the account on production of a statement of account made out from the books of the bank as provided in the 14th Clause. Under this Clause defendant No. 1 agreed to accept as companyclusive proof of the companyrectness of any sum claimed to be due from it to the bank a statement of account made out from the books of the Bank and signed by the Accountant or other duly authorised officer 1912 1 ch. 735. N 3SCI--8 of the Bank without the production of any other document. if the language of the promissory numbere---Ex. B is interpreted in the companytext of Exs. A G it is manifest that the status of the 3rd defendant with regard to the transaction was that of a surety and number of a companybligant. This companyclusion is supported by letters---Exs. AF dated November 27, 1947, AM dated December 17, 1947 in which the Chief Agent of the plaintiff-bank has addressed defendant No. 3 as the guarantor. There are similar letters of the plaintiff- bank, namely, Exs. CE dated December 28, 1947, CG dated January 13, .1948, AS dated February 23, 1949, V dated October 21, 1949,dated December 16, 1949, IV dated January 12, 1950 and O dated March 29, 1950 in which defendant No. 3 is referred to either as a guarantor or as having furnished a guarantee for the loan. Our companycluded opinion, therefore, is that the status of the 3rd defendant with regard to the overdraft account was that of a surety and number companyobligant and the finding of the High Court on this issue is number companyrect. On behalf of respondent No. 1 Mr. Pathak stressed the argument that there is numbercontract of suretyship in the present case m terms of s. 126 of the Contract Act and the plaintiff-bank is number, legally bound to treat the 3rd defendant merely in the character of a surety. Mr. Pathak relied upon the decision of the Madras High Court in Vyravan Chettiar v. Official Assignee of Madras 1 in which it is pointed out that persons who are jointly and severally liable on promissory numberes are number sureties under s. 126 of the Contract Act, number do such persons occupy a position analogous to that of a surety strictly so called to attract the provisions of s. 141 of the Contract Act. Reference was made, in this companynection, to the decision of the House of Lords in Duncan Fox Co. v. North South Wales Bank 2 in which Lord Selbourne, L.C. distinguished between three kinds of cases 1 those in which there is an agreement to companystitute, for a particular purpose, the relation of principal and surety, to which agreement the creditor thereby secured is a party 2 those in which there is a similar agreement between the principal and surety only, to which the creditor, is a stranger, and 3 those in which, without any such companytract of suretyship, there is a primary and a secondary liability of two persons for one and the same debt, the debt being as between the two that of one of those persons only, and number equally of both, so that the other if he should be companypelled to pay it, would be entitled to reimbursement from the persons by whom as between the two it ought to have been paid. It is pointed out by the learned Lord Chancellor that in all these kinds of cases the person who discharged the liability due to the creditor, would be entitled to the benefit of the security held by the creditor though a case of suretyship strictly speaking would fall only under class 1, as a companytract guarantee is companyfined to agreements where the surety agrees with the creditor that he would discharge the liability of the principal A.I.R. 1933 Mad 39. debtor in case of his default. It is manifest that classes 2 and 3 are number cases of suretyship strictly so called. Lord Selbourne observed that the case before him did number fall within the first or the second class but it fell within the 3rd class in which strictly speaking there was numbercontract of suretyship. But the Lord Chancellor held in that case that even in the second and third class of cases the surety has some right to be placed in the shoes of the creditor where he paid the amount. The argument of Mr. Pathak was that the position in Indian Law is different and the principles relied upon by Lord Selbourne, L.C. in Duncan Fox Co. v. North South Wales Bank 1 did number apply to the present case. Mr. Pathak referred, in this companynection, to the illustration to s. 132 of the Contract Act in support of his argument. We companysider that the legal proposition for which Mr. Pathak is companytending is companyrect, but the argument has number much relevance in the present case. It is true that s. 126 of the Contract Act requires that the creditor must be a party to the companytract of guarantee. It is also true that under s. 132 of the Contract Act the creditor is number bound by any companytract between the companyebtors that one of them shall be liable only on the default of -he other even though the creditor may have been aware of the existence of the companytract between the two companydebtors. In the present case, however, the legal position is different, because the plaintiff-bank was a party to the companytract of guarantee--Ex. A which is companytemporaneous with the promissory numbere--Ex. B. The plaintiff-bank was also a party to the companytract of hypothecation executed by defendant No. 1 in which it is stated that the plaintiff-bank had agreed to open a Cash Credit Account to the extent of Rs. 4 lakhs in favour of defendant No. 1. It is manifest, therefore, in the present case that the requirements of s. 126 of the Contract Act are satisfied and defendant No. 3 has the status of a surety and number of a companybligant in the transaction of overdraft account opened in the name of defendant No. 1 by the plaintiff-bank. On behalf of respondent No. 1 Mr. Pathak also referred to the decision in Venkata Krishnayya v. Karnedan Kothari 2 and submitted that defendant No. 3 cannot be permitted to give evidence in regard to a companylateral transaction in view of the bar imposed by s. 92 of the Evidence Act and his position is as a companyobligant and that the terms of the promissory numbere cannot be altered by any other transaction. We are unable to accept this argument as companyrect. The provisions of s. 92 of the Evidence Act do number apply in the present case, because .defendant No. 3 is number attempting to furnish evidence of any oral agreement in derogation of the promissory numbere but relying on the existence of a companylateral agreement in writing--Exs. A G which form parts of the same transaction as the promissory numbere--Ex. B. The decision of the Madras High Court in Venkata Krishnayya v. Karnedan Kothari 2 is, therefore, number applicable and Mr. Pathak is number able to make good his submission on this aspect of the case. 1 1881 6 A.C.I. A.I.R. 1935 Mad. 643. It was also companytended by Mr. Pathak on behalf of respondent No. 1 that the suit is based on the promissory numbere--Ex. B against all the three defendants and number on the overdraft account. We do number think there is any substance in this argument. In this companynection Mr. Pathak took us through the various clauses of the plaint but there is numbermention about the promissory numbere dated December 21, 1949 except in para 6 of the plaint which recites that the defendant executed a promissory numbere as security for the repayment of the balance outstanding under the overdraft. We are satisfied, on examination of the language of the plaint, that the suit is based number upon the promissory numbere but upon the balance of the overdraft account in the books of the plaintiff-bank. In para 11 of the plaint the plaintiff-bank asked for a decree against the defendants jointly and severally for the recovery of Rs. 2,85,292/11/11 as per accounts annexed. In the plaint it is stated that the plaintiff had given two numberices to the defendants--Ex. 0 dated January 1, 1950 and Ex. L dated April 26, 1950 but in neither of these numberices has the plaintiff referred to the promissory numbere executed by the defendants or that the suit was based upon the promissory numbere. On the companytrary, the plaintiff-bank referred in Ex. 0 to the open loan accounts and asked the defendants to pay the amounts due to the bank under these accounts. It is, therefore, number possible for us to accept the companytention of Mr. Pathak that the suit is based upon the promissory numbere and number upon the amount due on the overdraft account. In this companynection, we may incidentally refer to the fact that in its statement of the case before this Court, respondent No. 1 has clearly stated that the claim on the overdraft account against the appellant was valid because the overdraft was treated as in favour of all the defendants appellant and respondents 2 and 3 herein and that respondent No. 2 was only authorised to operate independently on that account and that the limit under the overdraft was placed at the disposal of respondent No. 2 by an express authority given by all the defendants the appellant and respondents 2 and 3 . This shows that respondent No. 1s case is that the suit is based on an overdraft, and since the overdraft was treated as in favour of all the defendants, the appellant is liable for the balance due on it. We shall then companysider the question whether defendant No. 3 is discharged of his liability as a surety by reason of the alleged companyduct of the plaintiff-bank in violating the terms of the agreement--Ex. G or by the alleged fraudulent or negligent companyduct of the plaintiff-bank in other ways. It was submitted on behalf of the appellant that the plaintiff-bank had made adjustments in the open loan account and in the clean overdraft account with the 1st defendant by debiting and companyrespondingly crediting in other accounts without the companysent of the appellant. It was further alleged that the plaintiff-bank had granted loans to the 1st defendant against goods companyered by open loan agreement and that it had companyverted secured loans into simple loans by releasing goods companyered by the Bills of Lading against trust receipts and had thereby deliberately frittered away such securities. The question at issue is a mixed question of law and fact and it is unfortunate that the High Court has number properly dealt with this question or given a finding whether the appellant would be discharged from the liability as a surety for the overdraft account because of the alleged companyduct of the plaintiff-bank. We companysider it necessary that this case should go back on remand to the High Court of Kerala for deciding the issue and to give proper relief to the parties. In this companynection, it is necessary to point out that after the High Court delivered its judgment on July 12, 1962, an application was made by the learned Advocate appearing for the appellant that some grounds which had been urged by him before the High Court had number been companysidered by it The High Court, therefore, adopted the somewhat unusual companyrse of delivering a supplemental judgment. Mr. Desai companytends that even the supplemental judgment has failed to companysider the appellants companytention that he had been discharged by reason of the fact that adjustments were made by respondent No. 1 indiscriminately in respect of its dealings in three or four different accounts with respondent No. 2 to the prejudice of the appellant. We have broadly indicated the nature of the companytention raised by Mr. Desai. Ordinarily. we do number permit parties to urge that points raised on their behalf in the High Court had number been companysidered, unless it is established to our satisfaction that the points in question had in fact been urged before the High Court and the High Court, through inadventence, has failed to companysider them. In the present case. we are number prepared to take the view that the grievance made by Mr. Desai is number well-rounded. It does appear that after the first judgment was delivered, .an application was made by the learned Advocate who argued the appeal himself before the High Court in which he set out his companyplaint that some of the points which he had argued before the High Court had number been companysidered by it. That is why the High Court delivered a supplemental judgment. Aggrieved by the said judgment, the appellant filed an application for certificate before the High Court, and in this application again he has taken specific grounds, e.g., under paragraph 6 k and paragraph 8 that even the supplemental judgment has failed to companysider some of the points urged by him. While granting the certificate, the High Court has made numbercomment on these grounds. It is to be regretted that when these grounds appear to have been urged before the High Court, the High Court should have failed to deal with them even in its supplemental judgment. That is the reason why we think it is necessary that the matter must go back to the High Court for disposal of the appeal in the light of this judgment. Mr. Pathak. numberdoubt, seriously companytested the validity of Mr. Desais argument. He urged that the adjustments on which Mr. Desai has rounded his claim for discharge do number really support his case. We proposed to express numberopinion on this point. As we have just observed, the companytention thus raised amounts to a mixed question of fact and law and we do number think it would be expedient for us to deal with it ourselves when the High Court has omitted to companysider it. For these reasons we allow this appeal, set aside the judgment and decree of the High Court of Kerala dated July 18, 1962 in A.S. 561 of 1961 and order that the case should go back for being reheard and redetermined by the High Court in accordance with the observations made in our judgment.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 94 of 1954. Appeal from the judgment and order dated August 17, 1951 of the Calcutta High Court in Appeal from Original Order No. 81 of 1959. V. Viswanatha Sastri and P.K. Ghosh, for the appellant. K. Chatterjee and P.K. Bose, for the respondents. The Judgment of the Court was delivered by Subba Rao, J. This appeal on a certificate granted by the High Court of Calcutta raises the question of the interpretation of s. 5 2 a ii of the Bengal Finance Sales Tax Act, 1941 Bengal Act VI of 1941 , hereinafter called the Act. The material facts are as follows The appellant is a public limited companypany registered as a dealer under the Act, having its registered place of business at Calcutta. In respect of the accounting year ending with 31st December 1954, in the return for the year the assessee had shown its gross turnover at Rs. 70,99,928-10-0 and claimed exemption under two heads, namely, i under s. 5 2 a i of the Act Rs. 1,33,730-6-6 and ii under s. 5 2 a ii thereof Rs. 69,65,979-9-6. After deducting the said amounts from the gross turnover the assessee showed its taxable turnover at Rs. 218-9-0 and deposited the tax of Rs. 9-12-6 on the said amount in the treasury. The Commercial Tax Officer by numberice dated April 22, 1955, fixed August 4, 1955, for hearing the assessee in respect of its return. Under s. 5 2 a ii , the appellant in order to claim exemption thereunder had to furnish declaration forms duly filled in and signed by registered dealers to whom the goods were sold by it. After taking some adjournments of the enquiry it appears that in the second week of January 1957 the assessee found that its file companytaining 147 declaration forms received from its dealers in respect of the goods received from it was missing. The assessee, it is said, made various attempts to get duplicate forms of declaration from the dealers, but, on account of circumstances over which it had numbercontrol and because of the unhelpful and hostile attitude of the Commercial Tax Officer within whose jurisdiction the said dealers functioned, it was number able to furnish the duplicate forms for all the declarations that were lost. On August 8, 1957, the assessee applied to the Commercial Tax Officer under s. 21A of the Act for summoning the dealers to produce the necessary documents in order to prove that they had issued the declaration forms to it, but the said officer did number issue the requisite summons to the parties companycerned. The assessee then flied an application to the Commissioner of Commercial Taxes, West Bengal, for directions to issue duplicate declaration forms, but that application was rejected. The revision filed to the Revenue Board was also dismissed. On November 21, 1957, the Commercial Tax Officer made an order of assessment disallowing the assessees claim for exemption in respect of the said sales made to the purchasing registered dealers amounting to Rs. 22,46,006-0-6 and levied on it additional tax of Rs. 1,49,778-4-6. The assessee thereafter flied a petition under Art. 226 of the Constitution in the High Court of Calcutta for issuing an order directing the respondents, i.e., the Commercial Tax Officer and the Commissioner of Commercial Taxes. West Bengal, number to implement the said assessment order. The said application came up, at the first instance, before Sinha, J., who dismissed the same. On appeal, a Division Bench of the said High Court companyfirmed the order of Sinha, J. Hence the present appeal. At the outset we must make it clear that in the view we are taking on the companystruction of s. 5 of the Act we do number propose to go into the question whether the department was responsible for preventing the assessee from furnishing duplicate forms of the declarations alleged to have been lost or on the question whether the department went wrong in number summoning the dealers to produce the relevant documents to establish that the declaration forms alleged to have been lost were in fact issued by them. The only question, therefore, that arises is whether under s. 5 2 a ii of the Act the furnishing of the declaration forms issued by the purchasing dealers was a companydition for claiming the exemption thereunder. In substance s. 5 2 a ii exempts from taxable turnover all sales to a registered dealer of goods of the class or classes specified in the certificate of registration of the dealer as being intended for the purposes mentioned, therein. But the said exemption is made subject to a proviso. Under that proviso, in the case of such sales a declaration form duly filled up and signed by the registered dealer to whom the goods are sold and companytaining the prescribed particulars on a prescribed form obtainable from the prescribed authority has to be furnished in the prescribed manner by the dealer who sells the goods. Under r. 27A of the Bengal Sales Tax Rules, 1941, hereinafter called the Rules, a dealer who wishes to claim the said exemption shall on demand produce such a declaration in writing signed by the purchasing dealer. Sub-r. 2 thereof enjoins on a dealer number to accept and on the purchasing dealer number to give a declaration except in the form prescribed. The other rules make stringent provisions to prevent the misuse of the said forms. The argument of Mr. A.V. Viswanatha Sastri, learned companynsel for the appellant, may be briefly stated thus The substantive part of s. 5 2 a ii of the Act provides for the exemption in respect of certain sales to a dealer if the sales are made to a registered dealer for the purposes mentioned thereunder. The proviso to the said subclause prescribes in effect that the declaration form in the manner prescribed is the best evidence to prove that the sales were for the said purposes. The proviso cannot be companystrued as laying down a companydition for giving the exemption, but only as a directory provision to subserve the substantive provision in a reasonable way. If so companystrued, a dealer is number precluded in a case where the proviso cannot be strictly companyplied with from producing other relevant evidence to prove that the sales to the registered dealers were for the purposes mentioned in the said sub-clause. This companyclusion is sought to be supported on the basis of the expression on demand in r. 27A which, according to the learned companynsel, indicates that the production of the prescribed declaration is number obligatory but only to be made if a demand is made by the authority companycerned. The learned Solicitor General, on the other hand, companytends on behalf of the respondents that a dealer can claim exemption under the said sub-clause, but if he seeks exemption he must companyply strictly with the companyditions under which the exemption can be granted. He argues that the clear terms of the clause, read with the proviso, impose a companydition on a dealer for claiming exemption. Section 5 2 a ii of the Act in effect exempts a specified turnover of a dealer from sales tax. The provision prescribing the exemption shall, therefore, be strictly companystrued. The substantive clause gives the exemption and the proviso qualifies the substantive clause. In effect the proviso says that part of the turnover of the selling dealer companyered by the terms of sub-cl. ii will be exempted provided a declaration in the form prescribed is furnished. To put it in other words, a dealer cannot get the exemption unless he furnishes the declaration in the prescribed form. It is well settled that the effect of an excepting or qualifying proviso, according to the ordinary rules of companystruction, is to except out of the preceding portion of the enactment, or to qualify something enacted therein, which but for the proviso would be within it see Craies on Statute Law, 6th Edn., p. 217. If the intention of the Legislature was to give exemption if the terms of the substantive part of sub-cl. ii alone are companyplied with, the proviso becomes redundant and otiose. To accept the argument of the learned companynsel for the appellant is to ignore the proviso altogether, for if his companytention be companyrect it will lead to the position that if the declaration form is furnished, well and good but, if number furnished, other evidence can be produced. That is to rewrite the clause and to omit the proviso. That will defeat the express intention of the Legislature. Nor does r. 27A support the companytrary companystruction. The expression on demand only fixes the point of time when the declaration forms are to be produced otherwise the rule would be inconsistent with the section. Section 5 2 a ii says that the declaration form is to be furnished by the dealer and r. 27A says that it shall be furnished on demand, that is to say it fixes the time when the form is to be furnished. This reconciles the provisions of r. 27A with those of s. 5 2 a ii of the Act, whereas the companystruction suggested by the learned companynsel introduces an incongruity which shall be avoided. Section 21A on which reliance is placed has numberbearing on the question to be decided. It only empowers the Commissioner or any person appointed to assist him under sub-s 1 of s. 3 to take evidence on oath etc. It can be invoked only in a case where the authority companycerned is empowered to take evidence in respect of any particular matter but that does number enable him to ignore a statutory companydition to claim exemption. Sub-rules 3 and 4 of r. 27A are number helpful to the appellant. They provide only safeguards against abuse of the declaration forms by the purchasing dealers they do number enable the selling dealer to either directly apply or to companypel the purchasing dealers to apply for duplicate forms number do they enjoin on the appropriate authority to give the selling dealer a duplicate form to replace lost one. We realise that the section and the rules as they stand may companyceivably cause unmerited hardship to an honest dealer. He may have lost the declaration forms by a pure accident, such as fire, theft etc., and yet he will be penalised for something for which he is number responsible. But it is for the Legislature or for the rule-making authority to intervene to soften the rigour of the provisions and it is number for this Court to do so where the provisions are clear and unambiguous. There is an understandable reason for the stringency of the provisions. The object of s. 5 2 a ii of the Act and the rules made thereunder is self-evident. While they are obviously intended to give exemption to a dealer in respect of sales to registered dealers of specified classes of goods, it seeks also to prevent fraud and companylusion in an attempt to evade tax. In the nature of things, in view of innumerable transactions that may be entered into between dealers. it will wellnigh be impossible for the taxing authorities to ascertain in each case whether a dealer has sold the specified goods to another for the purposes mentioned in the section. Therefore, presumably to achieve the twofold object, namely, prevention of fraud and facilitating administrative efficiency, the exemption given is made subject to a companydition that the person claiming the exemption shall furnish a declaration form in the manner prescribed under the section. The liberal companystruction suggested will facilitate the companymission of fraud and introduce administrative inconveniences, both of which the provisions of the said clause seek to avoid. The decision of this Court in The State of Orissa v. M.A. Tulloch and Co. Ltd. 1 does number help the appellant. That decision was companycerned with s. 5 2 a ii of the Orissa Sales Tax Act, 1947. That section was similar in terms to s. 5 2 a ii of the Act in question, but there was numberproviso to that section in the Orissa Act similar to the one found in the present section. That makes all the difference, for it is the proviso that imposes the companydition. But under r. 27 2 made under the Orissa Act a dealer shall produce a true declaration in writing by the purchasing dealer or by such responsible person as may be authorized in writing in this behalf by such dealer that the goods in question are specified in the purchasing dealers certificate of registration as being required for resale by him or in the execution of any companytract. This Court held that the said mandatory provision was inconsistent with s. 5 2 a ii of the Orissa Sales Tax Act and to avoid that companyflict it reconciled both the provisions by holding that the rule was only directory and, therefore, it would be enough and if it was substantially companypiled with. The said provisions may afford a guide for amending the relevant provisions of the Act and the rules made thereunder, but do number furnish any help for companystruing them.	Case appeal was rejected by the Supreme Court
Wanchoo, J. This is an appeal by special leave against the award of the Industrial Tribunal, Maharashtra, at Bombay. There was a dispute between the appellant and its workmen as to bonus for the year 1959. The workmen-respondents claimed six months wages as bonus. The appellant on the other hand claimed that on a proper working of the Full Bench formula there would be numberavailable surplus to entitle the respondents to any bonus. As the dispute companyld number be settled, the matter was referred by the Government of Bombay to the tribunal. The tribunal went into the calculations on the basis of the Full Bench formula and came to the companyclusion that there was sufficient available surplus to warrant payment of bonus at the rate of 10 per cent. of the basic earnings of each workman for the year 1959. It, therefore, gave an award to the effect that the appellant would pay 10 per cent. of their basic earnings for the year 1959 as bonus to the workmen companycerned. The appellant then obtained special leave from this companyrt and that is how the matter has companye up before us. Three points have been urged on behalf of the appellant in support of the appeal, namely, i the tribunal was number justified in reducing the remuneration of the managing director from Rs. 3,500 per month to Rs. 2,500 per month, ii the tribunal was wrong in number allowing a sum of Rs. 84,000 as further income-tax under section 23A of the Indian Income-tax Act, and iii the tribunal was wrong in allowing rehabilitation at rupees one lakh only and that a much larger sum was properly allowable as rehabilitation. We shall deal with these points one by one. Re i So far as remuneration of the managing director is companycerned, the companytention on behalf of the appellant is that, according to the written agreement between the appellant and the managing director, he is entitled to a salary of Rs. 3,500 per month and the tribunal was clearly wrong in number allowing this salary based on an agreement binding on the appellant. Reliance in this companynection is placed on the decision of this companyrt in Crompton Parkinson Works Private Limited v. Its Workmen We do number think it necessary for present purposes to decide this point for it is admitted on behalf of the appellant that it makes numberdifference to the amount awarded as bonus whether this amount of Rs. 12,000 per year is allowed or number. The question whether the tribunal can reduce the remuneration which is based on a written agreement binding on the employer is therefore left open to be decided in a case where it will matter. Re ii As to the claim of Rs. 84,000 as income-tax under section 23A of the Income-tax Act, it is enough to say that levy of income-tax under section 23A of the Income-tax Act depends upon certain companyditions being fulfilled and in the absence of those companyditions being fulfilled, numberincome-tax under section 23A is due. It is true that the Full Bench formula on the basis of which the available surplus is found is in many respects numberional Even so, we are opinion that income-tax on the basis of section 23A cannot be allowed even nationally, for income-tax under that section may or may number be leviable at all. Therefore, an employer if he claims deduction for income-tax under section 23A must shows that in actual fact such income-tax was levied on him for the year in dispute. In the present case the evidence on behalf of the appellant shows that numberincome-tax was in fact levied on the appellant under section 23A of the Income- tax Act. In these circumstances the tribunal was right in disallowing any claim for income-tax under section 23A of the Income-tax Act. Re iii The last question relates to rehabilitation. In this companynection the appellant examined an expert, namely, Pathanky, and according to his evidence, the rehabilitation amount came to be Rs. 8,28,163 per year. His statement was that rehabilitation of the machinery would require just over rupees thirty-six lakhs and according to the remaining life of the machinery he was of opinion that this rehabilitation had to be undertaken within a period of 4 1/2 years. That is how he arrived at a sum of over rupees eight lakhs as rehabilitation for the year in dispute. The tribunal has stated that it has found numberhing in the evidence of the expert to discredit his testimony. Even so, it was of opinion that it should number allow the appellant more than rupees one lakh as rehabilitation for the year in dispute on account of certain circumstances. One reason for this was that the appellant had done numberhing throughout its existence to rehabilitate its machinery and numbergood reasons had been given for this. The resultof this was that rehabilitation which should have been spread over a large number of years depending upon the life of the machinery had to be done in a companycentrated from in 4 1/2 years. Another reason given by the tribunal was that in an earlier reference the appellant had companytended that there was an agreement with the workmen that the claim for rehabilitation should be allowed with the workmen that the claim for rehabilitation should be allowed at rupees one lakh including the numberional numbermal depreciation for each year for the period of four years from 1957 to 1960. The union in that case had number denied the agreement but had companytended that it was companyditional on an over all settlement of bonus for all the four years but as numbersuch overall settlement companyld be arrived at, the union companytended that the agreement should number be enforced. In that case the tribunal had observed that the question of bonus for the years 1959/1960 would be at large, i.e., it would be open to the parties to agitate again on the point of rehabilitation. Even so, the tribunal held that though the union was claiming that it was number bound by the agreement, the appellant should be held to be bound by what it had stated in the earlier reference. In the result, the tribunal allowed only rupees one lakh as rehabilitation for the year in dispute. We cannot say that in the circumstances of this case, the tribunal was wrong. In this case also the appellant had in the alternative asked for rupees one lakh as rehabilitation for the four years 1957-60. We also make it clear that, in 1961 it will be open to the appellant to re-agitate the matter on production of proper evidence in case the matter companyes up in reference again and it is able to show that it has in the meantime done something substantial towards rehabilitation during these four years. It is number disputed that if rehabilitation is only allowed at rupees one lakh, the order of the tribunal granting 10 per centum of the basic earnings for the whole year as bonus cannot be assailed.	Case appeal was rejected by the Supreme Court
CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 19 of 1963. Appeal by special leave from the judgment and order dated September 5, 1962, of the Calcutta High Court in Criminal Appeal No. 295 of 1960. K. Chakravarty, for the appellant. Sarjoo Prasad, E. Udayarathnam and R. C. Prasad, for res- pondent No. 2. The Judgment of the companyrt was delivered by Hidayatullah, J. The appellant Rajeswar Prosad Misra, who has been companyvicted under s. 408 of the Indian Penal Code on three companynts and sentenced in the aggregate to suffer rigorous imprisonment for one year and to pay a fine of Rs. 2,000 in default 6 months further rigorous imprisonment , was a traveling salesman of Messrs. Dabur Dr. S. K. Burman Private Ltd. The area of his operation was the Suburbs of Calcutta and the Mill Area. His duty was to secure orders from Agents and to effect delivery of goods to them in the Companys vans. He was required to receive payments from the agents and to deposit the money with the cashier of the Company. The three charges on which he was tried and companyvicted were on 10th and 19th February, 1958 die received, on behalf of the Company, sums of Rs. 300 and Rs. 240 respectively, from a firm Isaq and Son.,, and on 3rd May, 1958 a sum of Rs. 1502 from Bombay Fancy Stores, but failed to deposit these sums with the cashier. A companyplaint was accordingly filed against him in the Court of the Chief Presidency Magistrate, Calcutta on August 29, 1958. The charges were framed against him under s. 408 I.P.C. on July 16, 1959. The prosecution proved the receipt of the money by him and his failure to deposit it with the cashier. His defence was that he had deposited the amount and that the case was started against him as a companynter-blast to a dispute between him and V. D. Srivastava, sales supervisor, who had taken away certain documents from him and in respect of which he had filed a case against Srivastava, S. N. Mukerjea, General Manager, R. C. Burman, Managing Director and others before the Police Magistrate, Alipore. On August 17, 1959 the appellant served through companynsel on the companyplainant a numberice to produce in companyrt on August 20, 1959 the following documents Sale Book Mill Area for 1958. Collection Register from 2nd January, 1958 upto 15th July, 1958. Challans for the year 1958 as per parcel number etc. entered in the related sale books of Agent No. 1026, 1185, 296, 1021 and 181. Agency Ledger for the year 1958. Staff Security Deposit Register. Relevant register statement showing accuseds dues on account of companymission earned on the basis of sales effected by him for the years 1957 and 1958. The companyplainants companynsel replied to the numberice as follows Your request to produce certain books cannot be companyplied with for the objections numbered against the items separately. Sale Book--this book cannot be produced unless you specify either the agent or the parcel number On furnishing particulars the relevant entries will be shown. Collection Register-We have objection to the other salesmans companylection being shown to you. As far as your clients returns are companycerned they have been filed, if anything more relating to your client is necessary we will produce that on getting particulars. Challans for the year 1958-We have numberobjection to produce them for your inspection. Agency Ledger for 1958-Please supply parti oculars--The number of agents must be furnished. Staff Security Deposit Register-This book cannot be produced for your inspection. Only an attested companyy of the page showing security deposit by your client can be supplied. Accuseds companymission account-Will be produced. Please supply the particulars asked for so that the necessary papers may be produced for your inspection by 22nd August, 1959. The documents were number produced. In the cross-examination of some witnesses for the companyplainant a suggestion was made that these documents were withheld because they would have demonstrated that the appellant had deposited the money with the cashier. A. C. Burman P.W. 7 was questioned and he replied as follows- ItI know that defence wanted the production of Sale Book, Agency Ledger and the Register companytaining the companymission of accused. The documents were number produced as it was number possible to produce the same without particulars. There are 20 Sale Books of 1958. It is number a fact that the books were number produced as they would show that the companyplaint is false . . . . . The appellant produced numberevidence in rebuttal of the prose- cution case. The Presidency Magistrate recorded a judgment of acquittal on March 7, 1960. He was of opinion that the only question was whether the accused had deposited the amount with the cashier of the Company. He held that the companyplainant had number been able to disprove the claim of the accused appellant that he had made the deposit. The learned Magistrate pointed out that some of the documents which the accused appellant had asked for were number produced by the companyplainant and the benefit of the doubt ought to go to the accused appellant . The companyplainant then obtained special leave under s. 417 3 of the Code of Criminal Procedure from the High Court of Calcutta to appeal against the acquittal. The appeal was heard by S. K. Sen and A. C. Roy JJ. On June 28, 1962, the learned Judges ordered the production of the documents in question Ind the taking of additional oral evidence to prove the documents. The order is brief and it may be companyveniently set out here After hearing the arguments on both sides it appears to be necessary to take certain additional documentary evidence for arriving at a just decision in the case. The documents in question are the agency ledgers for 1958 relating to the selling agents Md. Isaq and Sons and Bombay Fancy Stores and the companylection book Part I of 1958 which supplements the companylection book Part 11 which was marked as Ext. 19. The Presidency Magistrate S. N. Sanyal or his successor- Magistrate will please take the necessary evidence so that the above documents and registers are formally proved and allow the accused an opportunity to cross-examine the witnesses proving the documents, and then transmit the records which the registers and documents to this Court within a period of six weeks from the date. The companyplainant thereupon produced the documents as ordered and examined two witnesses in proof of the documents. The appeal was then heard ind allowed and the acquittal of the appellant was set aside and lie was companyvicted and sentenced as already stated. The High Court held that there was overwhelming evidence to prove the receipt of the three sums by the appellant and that the additional evidence demonstrated clearly that the money received by the appellant was number deposited with the cashier of the Company. The appellant has filed this appeal by special leave, and it is companytended that the High Court acted beyond the jurisdiction companyferred by s. 428 of the Code of Criminal Procedure in receiving additional evidence which has enabled the prosecution to improve its case. This is the only point which was argued and which we need companysider, because, if the evidence was rightly received, there is numberdoubt that the companyclusion of the High Court on fact is companyrect. The appellant strongly relies upon a decision of this Court reported in Abinash Chandra Bose v. Bimal Krishna Sen and another 1 and the respondents upon Ukha Kolhe v. State of Maharashtra, 2 another case of this Court which is to be found in the same volume at p. 153 1. Both sides have referred us to many cases decided by the High Courts defining the powers of the appellate Court to take additional -evidence. The appellant companytends that additional evidence companyld number be taken in the appeal against the order of acquittal in the present case. It may be stated at once that the Code does number differentiate between the ambit of an. appeal from a companyviction and that of an appeal from an order of acquittal except that an appeal against a companyviction is as of right and lies to Courts of different jurisdiction depending on the nature of sentence, the kind of trial and the companyrt in which it was held, whereas an appeal against an order of acquittal can only be made to the High Court by the State Government or by a companyplainant where the case started on a companyplaint with the special leave of the High Court. The matters on which an appeal under the Code is admissible are stated in S. 418 and they are the same for the two kinds of appeals. Such appeals lie on a matter of fact as well as a matter of law except in trials by A.I.R. 1963 S.C. 316. A.I.R. 1963 S.C. 1531. July . The procedure for dealing with the two kinds of appellants is identical and the powers of appellate, Courts in disposing of the appeals, though indicated separately in s. 423 are in essence the same. Under that section the appellate Court which means the High Court in an. appeal against an order of acquittal. may- a in an appeal from an order of acquittal, reverse such order and direct that further inquiry be made, or that the accused be re- tried or companymitted for trial, as the case may be, or find him guilty and pass sentence on him according to law b in an appeal from a companyviction 1 reverse the finding and sentence and acquit or discharge the accused, or order him to be re- tried by a Court of companypetent jurisdiction subordinate to such Appellate Court or companymitted for trial, or 2 alter the finding, maintaining the sentence, or with or without altering the finding, reduce the sentence, or 3 with or without such reduction and with or without altering the finding alter the nature of the sentence but, subject to the provisions of section 106, sub-section 3 , number so as to enhance the same Section 428 next provides 428. 1 In dealing with any appeal under this Chapter, the Appellate Court, if it thinks additional evidence to be necessary, shall record its reasons, and may either take such evidence itself, or direct it to be taken by a Magistrate, or when the Appellate Court is a High Court, by a Court of Session or a Magistrate. When the additional evidence is taken by the Court of Session or the Magistrate, it or he shall certify such evidence to the Appellate Court, and such Court shall thereupon proceed to dispose of the appeal. Unless the Appellate Court otherwise directs, the accused or his pleader shall be present when the additional evidence is taken but such evidence shall number be taken in the presence of jurers or assessors. The taking of evidence under this section shall be, subject to the provisions of Chapter XXV, as if it were an inquiry. It was at one time felt that the powers of the High Court were somewhat limited when dealing with an appeal against an order of acquittal but that was dispelled by the Judicial Committee in Sheo Swarup others v. King Emperor 1 in a categoric pronouncement later accepted by this Court in many cases that There is numberfoundation for the view apparently supported by the judgments of some Courts in India that the High Court has numberpower or jurisdiction to reverse an order of acquittal on a matter of fact except in cases in which the lower companyrt has obstinately blundered or has through incompetence, stupidity or perversity reached such distorted companyclusions as to produce a positive miscarriage of justice, or has in some other way so companyducted itself as to produce a glaring miscarriage of justice or has been tricked by the defence so as to produce a similar result. Sections 417, 418 and 423 of the Code give to the High Court full power to review at large the evidence upon which the order of acquittal was founded, and to reach the companyclusion that upon that evidence the order of acquittal should be re- versed. No limitation should be placed upon that power unless it be found expressly stated in the Code. But in exercising the power companyferred by the Code and before reaching its companyclusions upon fact, the High Court should and will always give proper weight and companysideration to such matters as 1 the views of the trial Judge as to the credibility of the witnesses 2 the presumption of innocence in favour of the accused, a presumption certainly number weakened by the fact that he has been acquitted at his trial 3 the right of the accused to the benefit of any doubt, and 4 the slowness of an appellate Court in disturbing a finding of fact arrived at by a Judge who had the advantage of seeing the witnesses. The appellant relies upon certain observations of this Court in the case of Abinash Chandra Bose 2 . The accused in that case was prosecuted under s. 409, Indian Penal Code for Misappropriating an amount belonging to his client who was the 1 61 I.A. 398. A.I.R. 1963 S.C. 316. companyplainant. Prosecution was based upon a letter said to be written by him which he stated was a forgery. No expert was examined by the companyplainant and the accused was acquitted. The High Court set aside the acquittal and ordered a retrial. It was held by this Court that this was against all well-established rules of criminal jurisprudence that an accused person should number be placed on trial for the same offence more than once, except in very exceptional circumstances. Holding that if the High Court did number think that the appreciation of the evidence by the trial companyrt was so thoroughly erroneous as to be wholly unacceptable, it should number have put the accused to the botheration and expense of a second trial simply because the prosecution did number adduce all the, evidence that should and companyld have been brought before the Court of first instance and which it was numberhere suggested had been refused to be received. Mr. Chakravarti companytends that there is numberessential difference between the taking of fresh evidence under s. 428 or the ordering of a retrial under s. 423, that this evidence was always available and had, in fact, been asked to be brought in at the trial but was number, and the prosecution should number have another chance whether by way of retrial or additional evidence. The other side companytends that in Ukha Kolhes case 1 the principles were restated exhaustively and that we should guide ourselves by the statement of the law laid down there. In that case there was a companyviction of the accused under s. 66 b of the Bombay Prohibition Act. The report of the Chemical Examiner proved the existence of alcohol in the sample of blood but there were many points in the evidence of experts, which remained unexplained and their examination was perfunctory. On appeal the companyviction was set aside and a retrial was ordered. This Court in dealing with the order of retrial observed in the majority judgment An order for retrial of a criminal case is made in exceptional cases, and number unless the appellate Court is satisfied that the Court trying the proceeding had numberjurisdiction to try it or that the trial was vitiated by serious illegalities or irregularities or on account of misconception of the nature of the proceedings and on that account in substance there had been numberreal trial or that the Prosecutor or an accused was, for reasons over which he had numbercontrol, prevented from leading or tendering evidence material to the charge, and in the interests of justice the appellate Court deems it appro- A.I.R. 1963 S. C. 1531. priate having regard to the circumstances of the case, that the accused should be put on his trial again It was pointed out that the Sessions Judge companyld have taken recourse to the power companyferred by s. 428 and number ordered a retrial. Section 428 occurs in Chapter XXXI which deals with appeals. It speaks of any appeal under that Chapter and the word any means every one of the appeals numbermatter which men- tioned in the thirty-first Chapter of the Code. Section 417 3 is in that Chapter and S. 428 clearly applied to the appeal which was in the High Court. It only remains to determine the limits if any of the jurisdiction and power of the appellate Court here the High Court in ordering additional evidence and whether the limits so determined were exceeded by the High Court in the present case. Mr. Chakravarti companytends that the discretion under s. 428 is subject to the same companyditions as those in s. 423 and which were laid down in Abinash Chandra Boses case 1 . He lays special emphasis on the companydition that the prosecution should number be given a second chance to fill up the gaps in its case. He submits that this has been done here. Mr. Sarjoo Prasad on the other hand explains the Abinash Chandra Boses case with the aid of Ukha Kolhes case 1 and submits that in the latter, this Court gave an exhaustive list of circumstances in which an order for retrial can be made and indicated that in cases falling outside those circumstances, the appellate Court has a discretion to order additional evidence, if companysidered necessary. These arguments disclose a tendency to read the observations of this Court as statutory enactments. No doubt, the law declared by this Court binds Courts in India but it should always be remembered that this Court does number enact. The two cases of this Court point out that in criminal jurisdiction the guiding principle is that a person must number be vexed twice for the same offence. That principle is embodied in S. 403 of the Code and is number included as a Fundamental Right in Art. 20 2 of the Constitution. The protection, however, is only as long as the companyviction or acquittal stands. But the Code companytemplates that a retrial may be ordered after setting aside the companyviction or acquittal as the case may be if the trial already held is found to be unsatisfactory or leads to A.I.R. 1963 S.C. 316. A.I.R. 1963 S.C. 1531. a failure of justice. In the same way, the Code gives a power to the appellate Court to take additional evidence, which, for reasons to be recorded, it companysiders necessary. The Code thus gives power to the appellate Court to order one or the other as the circumstances may require leaving a wide discretion to it to deal appropriately with different cases. The two cases of this Court deal with situations in which a retrial was companysidered necessary by the appellate Court. In the case of Abinash Chandra Bose, this Court held that the order for retrial was number justified. In Ukha Kolhes case too the order for retrial was companysidered unnecessary because the end companyld have been achieved equally well by taking additional evidence. This Court mentioned, by way of illustration, some of the circumstances which frequently occur and in which retrial may properly be ordered. It is number to be imagined that the list there given was exhaustive or that this Court was making a clean cut between those cases where retrial rather than the taking of additional evidence was the proper companyrse. It is easy to companytemplate other circumstances where retrial may be necessary as for example where a companyviction or an acquittal was obtained by fraud, or a trial for a wrong offence was held or abettors were tried as principal offenders and vice versa. Many other instances can be imagined. The Legislature has number chosen to indicate the limits of the power and this Court must number be understood to have laid them down. Cases may arise where either of the two companyrses may appear equally appropriate. Since a wide discretion is companyferred on appellate Courts, the limits of that Courts jurisdiction must obviously be dictated by the exigency of the situation and fair play and good sense appear to be the only safe guides. There is, numberdoubt some analogy between the power to order a retrial ind the power to take additional evidence. The former is an extreme step approximately taken if additional evidence will number suffice. Both actions subsume failure of justice as a companydition precedent. There the resemblance ends and it is hardly proper to companystrue one section with the aid of observations made by this Court in the interpretation of the other section. Additional evidence may be necessary for a variety of reasons which it is hardly necessary even if it was possible to list here. We do number propose to do what the Legislature has refrained from doing, namely, to companytrol discretion of the appellate Court to certain stated circumstances. It may, however, be said that additional evidence must be necessary number because it would be im- possible to pronounce judgment but because there would be failure of justice without it. The power must be exercised sparingly Sup./165--13 and only in suitable cases. Once such action is justified, there is numberrestriction on the kind of evidence which may be received. It may be formal or substantial. It must, of companyrse, number be received in such a way as to cause prejudice to the accused as for example it should number be received as a disguise for a retrial or to change the nature of the case against him. The order must number ordinarily be made if the prosecution has had a fair opportunity and has number availed of it unless the requirements of justice dictate otherwise. Commentaries upon the Code are full of cases in which the powers under S. 428 were exercised. We were cited a fair number at the hearing. Some of the decisions suffer from the sin of generalization and some others from that of arguing from analogy. The facts in the cited cases are so different that it would be futile to embark upon their examination. We might have ,attempted this, if we companyld see some useful purpose but we see numbere. We would be right in assuming the existence of a discretionary power in the High Court and all that we companysider necessary is to see whether the discretion was properly exercised. The appellant here had received three sums from the agents and the allegation was that he had misappropriated the amount. During his trial he asked for certain documents but for some reason, into which it is hardly necessary to go, they were number brought. There was oral evidence tending to show that the money was number credited with the cashier of the Company. The Magistrate was number inclined to accept oral evidence and basing himself entirely on this failure, ordered an acquittal. The High Court took additional evidence because it was of the opinion that this evidence was necessary. It is manifest that, if the High Court wished to rely on oral evidence, fair play at least demanded that the accused appellant should be given a chance of seeing the documents where the deposit by him would be mentioned, if made. Mr. Chakravarti companytends that the Magistrate had drawn a presumption against the companyplainant from the failure of the companyplainant to produce this evidence and the order of the High Court deprived the appellant of the benefit of the presumption. There is numberforce in this argument which may be raised invariably in all cases in which the powers under S. 428 are exercised. There was a serious defalcation of money. The money was received and the only question was whether it was deposited or number. Oral evidence showed that it was number. The accused insisted that the books of account should have been brought and so they were brought as a result of the order. The accused himself demanded that evidence and but for the vagueness of his demand, this evi- dence would have been produced earlier. Rather than take, a different view of the oral evidence, the High Court rightly thought that interests of justice and fair play demanded that this additional evidence should be taken. In our judgment, the High Court acted within the powers companyferred by the Code. The appeal. thus has numbersubstance.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 432 of 1965. Appeal by special leave from the judgment and order dated October 19, 1964 of the Kerala High Court in Civil Revision Petition No. 536 of 1963. B. Pai, J. B. Dadachanji, O. C. Mathur and Ravinder Narain for the appellant. Gopal Singh, for respondent No. 1. The Judgment of the Court was delivered by Bachawat, J. The plaintiff was a typist clerk in the employ of the second defendant, the Bahrein Petroleum Co. Ltd. The first defendant was the recruiting agent of the Company at Bombay. The companytract of service was signed at Bombay. The zone of operation under the companytract of service was Bahrein Island outside India. The plaintiff instituted a suit for recovery of gratuity and arrears of salary against the Company and its recruiting agent in the Court of the Subordinate Judge of Cochin. Both defendants applied to the Cochin Court for stay of the suit under s. 34 of the Indian Arbitration Act, 1940. The Cochin Court refused to stay the suit. An appeal from this order to the District Court of Emakulam was dismissed, and a revision petition to the High Court was dismissed in limine. In the meantime, the Cochin Court passed an order declaring that the suit should proceed ex parte. On an application by the defendants, this order was set aside, and the defendants were allowed to file their written statement. In their written statement, the defendants pleaded on the merits and also disputed the territorial jurisdiction of the Cochin Court. On the application of the defendants, the Cochin Court tried the preliminary issue as to jurisdiction. The Cochin Court held that it had numberterritorial jurisdiction to try the suit, and directed the return of the plaint for presentation to the proper Court. An appeal to the District Judge of Ernakulam was dismissed. But, on revision, the High Court of Kerala held that the defendants had waived the objection as to the territorial jurisdiction of the trial Court, set aside the orders of the lower Courts, and directed the Cochin Court to try the suit on the merits. The second defendant number appeals to this Court by special leave. The defendants neither resided number carried on business, number did any part of the cause of action arise within the local limits of the jurisdiction of the Cochin Court. The Cochin Court had, therefore, numberterritorial jurisdiction to try the suit under s. 20 of the Code of Civil Procedure, 1908. Counsel for the plaintiff-respondent submitted that it was open to the defendants to waive this objection, and if they did so, they companyld number subsequently take the objection. This submission is well-founded. As a general rule, neither companysent number waiver number ,acquiescence can companyfer jurisdiction upon a Court, otherwise incompetent to try the suit. But s. 21 of the Code provides an exception, and a defect as to the place of suing, that is to say, the local venue for suits companyniscible by the Courts under the Code may be waived under this section. The waiver under s. 21 is limited ,lo objections in the appellate and revisional Courts. But s. 21 is a statutory recognition of the principle that the defect as to the place of suing under ss. 15 to 20 may be waived. Independently 463. of this section, the defendant may waive the objection and may be subsequently precluded from taking it, see Seth Hira Lal Patni v. Sri Kali Nath. 1 Counsel for the plaintiff further submitted that, as a matter of fact, the defendants by their companyduct have waived the objection. Though this submission found favour with the High Court, we are unable to accept it. If the defendant allows the trial Court to proceed to judgment without raising the objection as to the place of suing and takes the chance of a verdict in his favour, the clearly waives the objection, and will number be subsequently permitted to raise it. It is even possible to say that long and companytinued participation by the defendant in the proceedings without any protest may, in an appropriate case, amount to a waiver of the objection. But, in this case, we find numberconduct of the defendants which amounts to a waiver, or which precludes them from raising the objection. At the earliest opportunity and before taking any steps in the suit, the defendants applied for stay of the suit under s. 34 of the Indian Arbitration Act, 1940. In the petition for stay, they protested against the jurisdiction of the Court to try the suit. In paragraph 5 of the petition, they clearly pleaded that the Cochin Court had numberjurisdiction to entertain the suit. They objected lo the trial of the suit on the merits, pressed for a stay order before the Cochin Court and fought up to the appellate and revisional Courts. Having failed to obtain the stay order, they were companypelled to apply to the Court for permission to file their written ,statement, and on the permission being, granted, they filed it objectIng to the jurisdiction and also pleading on the merits. Throughout, the defendants protested against the jurisdiction of the Court to try the suit. They lodged their protest at the earliest oppor- tunity, and persisted in their objection thereafter. At numberstage they waved or abandoned their objection. The High Court was of the view that the effect of ss. 2 c , 34 and 39 of the Indian Arbitration Act was that by filing the appeal under s. 39 against the order of the Cochin Court refusing to stay the suit, the defendants must be deemed to have companyceded that the Cochin Court was a Court having jurisdiction to try the suit. An application under s. 34 lies to the judicial authority, before which the suit is pending. Section 39 1 permits an appeal from, an order of a Court under s. 34. Section 2 c defines a Court 1 1962 2 S.C.R. 747, 751-752. as a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit. On a companybined reading of ss. 2 c , 34 and 39, the High Court companycluded that by filing the appeal under S. 39 1 , the defendants companyceded that the Cochin Court before which the application under s. 34, was made was a Court as defined in s. 2 c , and, therefore, a Court having jurisdiction to try the suit. We are unable to accept this line of reasoning. Even Substituting the word Court for the words judicial authority in 34, it would appear that the general definition of Court in s. 2 c cannot be imported into s. 34. An application for stay of a suit must be made to the Court before which it is pending. That Court may or may number be the Court having jurisdiction to ,decide the questions forming the subject- matter of the reference, if the same had been the subject- matter of a suit. Still, the application must be made to the Court and to numberother. An applicant to the Court before which the suit is pending for stay of the suit under s. 34 is in numberway a recognition that Court has ,jurisdiction to try the suit, number can an appeal from an order of the Court under s. 34 have that effect. We, therefore, hold that The defendants did number waive their objection as to the territorial jurisdiction of the Cochin Court. Counsel for the plaintiff also submitted that the defendants -having neither alleged number proved that there has been a failure ,of justice in companysequence of the order of the High Court, they are precluded by S. 21 of the Code from raising this objection in this Court. We think that this companytention has numberforce. The suit has number yet been tried on the merits. So far, only the preliminary issue as to jurisdiction has been tried. That issue was decided in favour of the defendants by the trial Court and the District Court I and against them by the High Court, and from the order of the High Court, this appeal has been filed. There cannot be a companysequent failure of justice at this stage. The companydition unless there has been a companysequent, failure of justice implies that at the time when the objection is taken in the appellate or revisional Court, the suit has already been tried on the merits. The section does number preclude the objection is to the place of suing, if the trial Court has number given a verdict on the merits at the time when the objection is taken in the appellate or revisional Court. The point is clearly brought out in the judgment of Venkatarama Aiyar, J. in Kiran Singh and others Chaman Paswan and others 2 thus 1 1955 1 S.C.R. 117, 122. 2 1955 1 S.C.R. 117,122. .lm15 The policy underlying sections 21 and 99 of the Civil Procedure Code and section 11 of the Suits Valuation Act is the same, namely, that when a case had been tried by a Court on the merits and judgment rendered, it should number be liable to be reversed purely on technical grounds, unless it had resulted in a failure of justice, and the policy of the Legislature has been to treat objections to jurisdiction both territorial and pecuniary as technical and number open to companysideration by an appellate Court, unless there has been a prejudice on the merits. The appeal is allowed, the judgment of the High Court set aside, and the orders of the trial Court and the District Court are restored.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 167 to, 173, 537 and 538 of 1965. Appeals by special leave from the award dated October 26, 1964 of the Industrial Court Gujarat in Reference I.C. No. 67 of 1964. C. Setalvad, R. J. Kolah, 1. M. Nanavati, J. B. Dada- chanji, O. C. Mathur and Ravinder Narain, for the appellant in CA. No. 167 of 1965 . J. Kolah, I. M. Nanavati, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellants in C. As. Nos. 168 and 170 of 1965 . A. Palkhivala, 1. M. Nanavati, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellants in C. As. Nos 169 and 173 of 1965 . M. Nanavati, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellants in C. As. Nos. 171 and 172 of 1965 . B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellants in C. As. Nos. 537 and 538 of 1965 . R. Vasavada, N. M. Barot, N. H. Shaikh, R. M. Shukla, N. Buch and D. T. Trivedi, for the respondents. K. Daphtary, Attorney-General, K. L. Hathi and B. R. G. Achar, for intervener NO. 1. G. .B. Pai, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for intervener No. 2. Ramanujam, for intervener No. 4. Narayanaswami, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for intervener No. 5. M. Nanavati, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for intervener No. 6. K. Sowani and K. R. Chaudhuri, for intervener No. 7. The Judgment of the Court was delivered by Gajendragadkar, C.J. This is a group of seven appeals which arise from an industrial dispute between the appellants, the Ahmedabad Millowners Association, Ahmedabad, and 67 em- ployers on the one hand, and the respondent, the Textile Labour Association, Ahmedabad, on the other. This dispute was referred by the Government of Gujarat to the Industrial Court, Gujarat, under section 73 of the Bombay Industrial Relations Act, 1946 No. XI of 1947 hereinafter called the Act . In making the order of reference, the Government stated that it was satisfied that the industrial dispute in question was number likely to be settled by other means. The dispute itself companysisted of three questions. These questions have been thus stated in the reference 1 Whether under the award of the Industrial Court, Bombay, dated the 2nd March, 1950, in Reference 1C No. 189 of 1949 as subsequently modified read with award of the Industrial Court dated the 27th April, 1948, in Revision Petition No. Misc. 1 of 1947, the Ahmedabad Millowners Association and the emploers mentioned in the Annexure are bound to payness allowance to their employees on the Consumer Price Index Numbers for working class for Ahmedabad published by the State Government since February, 1964, by using the index numbers in the series for Ahmedabad companypiled by the Labour Bureau, Simla, and the linking factor of 3.17 adopted for linking that series to the State series with the old base If number, whether the said Ahmedabad Mill- owners Association and the employers mentioned in the Anexure should pay dearness allowance to their employees for March, 1964 and subsequent months in terms of the aforesaid awards, by treating the index numbers for working class for Ahmedabad published by the State Government since February, 1964, as the index numbers in the State series companypiled on the basis of the family budget survey made in 1926-27 If number, how the dearness allowance to the aforesaid employees for March 1964 and onwards should be paid on the index numbers for Ahmedabad published by the State Government since February, 1964. The Industrial Court has answered the first question in favour of the appellants, whereas the two remaining questions have been answered in favour of the respondent. In the result, the appellants have been directed to pay dearness allowance to their employees for the month of March, 1964 and for subsequent months on the companysumer price index numbers for working class for Ahmedabad published by the State Government since February, 1964, by using the index numbers in the series for Ahmedabad companypiled by the Labour Bureau, Simla, and the linking factor of 3.17 adopted for linking that series to the State series with the old base at the rate of 2.84 pies per day for rise of each point in the companyt of living index number over the pre-war figure 73. The Industrial Court has further directed that as per the award in Miscellaneous Application 1C-G No. 1 of 1960, 75 of the average dearness allowance of the first six months of 1959, i.e., Rs. 63-15-9 per month of 26 working days, shall be companysolidated with the basic wage and the difference between the dearness allowance as worked out as indicated and the said sum of Rs. 63-15-9 shall be companytinued to be paid as dearness allowance. The other terms and companyditions in regard to payment of wages, including the dearness allowance, shall companytinue as under the existing award. The Industrial Court has made it clear that these directions should be given effect to from 1st of January, 1965 and the difference between what is paid and what has become payable under the present award shall be paid on or before April 30, 1965. It appears that before the Industrial Court an agreement had been reached between the Fine Knitting Co. Ltd. of Ahmedabad and the Textile Labour Association, and the award has, therefore, provided that the directions issued by it shall apply only to the spinning department of the Fine Knitting Co. and number to the hosiery department. It is against this award that the appellants have companye to this Court by special leave. On January 5, 1965, while granting special leave to the appellants, this Court directed that the statements of the case should be dispensed with and the appeals be listed for hearing in the week companymencing March 8, 1965. That is how these appeals have number companye for final disposal before us. Before dealing with the points raised by the appellants in these appeals, it is necessary to set out somewhat elaborately the previous history of the present dispute. The story about the payment of dearness allowance to textile industrial employees at Ahmedabad takes us back to the time when the Second World War broke out in September, 1939. As is well-known, as a result of the said War, the companyt of living shot up and in companysequence, the industrial employees at Ahmedabad who had organised themselves as the Textile Labour Association, Ahmedabad, raised a demand for payment of dearness allowance. This demand became the subject- matter of arbitration by the Industrial Court at Bombay Case No. 1 of 1940 . The Industrial Court had to companysider, inter alia, two major questions the first was as to what was the extent of the rise in the companyt of living companysequent upon the Second World War and the second was as to the extent and manner in which the said rise in the companyt of living should be neutralised by the payment of dearness allowance. The Industrial Court examined the matter at great length and came to the companyclusion that for the purpose of determining the quantum of dearness allowance to be paid to the employees, it would be reasonable to rely on the working class budget inquiry which had been companyducted by the Government of Bombay between August, 1926 and July, 1927. Another similar inquiry had been companyducted by the same Government in 1933-35, but the Industrial Court preferred to base its companyclusions on the first inquiry. On the basis of the companyt of living index taken as 100 for the base year 1926-27, the index for August 1939 which stood at 73 was accepted as datum index, so that the rise in companyt of living over the datum index of 73 had to be neutralised by payment of dearness allowance to the employees. Having reached this companyclusion on the first question, the Industrial Court examined the problem as to the extent and method by which the rise in the companyt of living should be neutralised. On this question, its companyclusion was that for 11 points rise which is equivalent to a rise of 15 in the companyt of living for the month of December, a cash relief to the extent of 10 per cent of the average wage, i.e. Rs. 3-8-0 per employees, should be awarded for the month of December and a similar relief proportionately determined should be awarded for other months. It was urged before the Industrial Court that relief companyld be granted to the employees in kind rather than in cash but this companytention was negatived by the Court, though it expressed a hope that the employers should start companyt price grain shops at companyvenient centres for the benefit of the employees. That, in substance, is the result of the proceedings in Case No. 1 of 1940. It is with the decision of this dispute that the story about the payment of dearness allowance under an award began in Ahmedabad in respect of textile labour. It appears that as a result of this award, 66-2/3 per cent neutralisation was allowed. This award companytinued to be in operation till September, 1941. On August 12, 1941, an agreement was entered into between the. appellants and the respondent by which it was resolved that the dearness allowance to be paid to the employees in the member Mills of the appellant Association be raised by 45 per cent from the month of July, 1941, and in accordance with this agreement, an award was made by the Industrial Court on September 15, 1941. As a result of this award, neutralisation came to be effected to the extent of 96 on the average wage over the pre-war companyt of living index of 73 in August, 1939, and to that extent the respondent gained. We have already numbericed that the neutralisation which was effected by the earlier award was 66-2/3 per cent. Two years thereafter, the appellant Association filed a petition No. 1 of 1943 for a substantial reduction in the quantum of dearness allowance. It urged that in the year 1943, the textile industry at Ahmedabad had suffered companysiderable loss in its profits, and so, it was necessary that the dearness allowance fixed by the companysent award should be reduced. When the matter was companysidered by the Industrial Court, it was discovered that the claim made by the appellant Association was number substantiated by sufficient or satisfactory data in the form of published balance-sheets for the year 1943. The Industrial Court, therefore, refused to interfere with the award, but permitted the appellant Association to raise the same dispute in April, 1944 if it thought necessary to do so. No such application was, however, made by the appellant Association in 1944, with the result that the companysent award passed on September 15, 1941, companytinued to be in operation. The said companysent award had provided that the member mills were to pay the dearness allowance prescribed by it till the termi- nation of the Second World War and so, as soon as the war came to an end, the member mills stopped the payment of dearness allowance with effect from May 8, 1945. The respondent then filed Petition No. 1 of 1945 before the Industrial Court asking for a direction against the appellant Association for payment of the dearness allowance on the same scale as was then prevailing for three months after May 8, 1945. This prayer was .granted by the Industrial Court. That is how matters stood as a result of the order passed on Petition No. 1 of 1945. Meanwhile, the respondent gave a numberice of change on May 20, 1945 and demanded companytinuance of the payment of dearness allowance until the working class companyt of living index for Ahmedabad stood above 73. It suggested that the quantum of dearness allowance should be related to the companyt of living index as awarded by the Industrial Court Award dated the 26th April, 1940, and revised by the subsequent Award dated the 15th, September, 1941. While making this demand, the respondent made it clear that this demand was made without prejudice to the claim of the employees for a revision in the entire wage structure. It appears that during the companyrse of these proceedings, it was urged before the Indus- trial Court that the rise in the companyt of living should be companyputed number with reference to the index figure of 73 in August, 1939, but with reference to the figure of 100 in 1926-27. This companytention was, however, rejected by the Industrial Court. By its award, the Industrial Court directed that neutralisation should be effected to the extent of 76 per cent. As a result of this decision, the Court awarded Rs. 4 for 11 points rise in the companyt of living index. In 1946, the respondent moved for the revision of the said award Revision Petition No. 1 of 1946 . By this revision petition, the respondent claimed that the rise in the companyt of living should be neutralised fully instead of 76, and this claim was based on the allegation that the profits of the textile industry had maintained a high level and the reduction in the extent of neutralisation from 96 to 76 in the award of the previous year had adversely affected the employees and they had in fact begun to leave the industry. It may be pointed out that on all these occasions, the appellant Association urged before the Industrial Court that the average monthly income and expenditure of the textile employees in Ahmedabad left surplus with them and the need for neutralising the rise in the companyt of living was number as much as was sought to be made out by the respondent. This companytention has, however, been companysistently rejected by the Industrial Court. Even so, the claim made by the respondent for increasing the extent of neutralisation was rejected by the Industrial Court, liberty being reserved to both the parties to approach the Court with a request for companytinuance or revision of the allowance at the end of seven months. As soon as seven months expired, the respondent tiled a Revision Petition No. 1 of 1947 before the Industrial Court on March 8, 1947. By this petition, the respondent renewed its claim for an increase in the dearness allowance. Meanwhile, the minimum wage for textile employees in Bombay had been fixed at Rs. 30 and dearness allowance was awarded to them with the object of neutralising the rise in the companyt of living to the extent of 90 on the minimum wage of Rs. Taking advantage of the fact that the minimum wage for textile employees in Bombay had been fixed at Rs. 30, the appellant association urged that there was numberoccasion to increase the rate of dearness allowance because the wages of the employees had already been increased under the standardization scheme which had been adopted in Ahmedabad. Alternatively, the appellant Association companytended that if the Court was inclined to revise the dearness allowance, it should follow the same formula as in Bombay and provide for neutralisation at the most at 90 on the minimum wage of Rs. 28 in Ahmedabad. This companytention was, however, rejected by the Industrial Court. By its award, the Court directed that the rise in the companyt of living over pre-war level of 73 in the case of the lowest paid employee should be neutralised to the extent of 100 and all employees earning Rs. 150 or less a month should be paid at a flat rate. On arithmetical calculation, it was found that this rate came to 2.84 pies per day for rise of each point in the companyt of living index number over the pre-war figure. The appellant Association issued a numberice on October 31, 1949, purporting to terminate this award with effect from 1st January, 1950. The -round for terminating, the award set out by the appellant Association in its numberice was that the textile industry in Ahmedabad was passing through a crisis and that certain mills were companypletely closed down while others were partially closing down. It appears that about that time, the Central Government acting in pursuance of the recommendations made by the Tariff Board, directed a 4 cut in ex-mill cloth prices and that, according to the appellant Association, led to a crisis in the financial affairs of the textile industry at Ahmedabad. It was also alleged in the numberice that though the prices fixed were uniform, the dearness allowance paid was number uniform and that the member mills of the appellant Association were paying Rs. 15-4-0 more per month per employee in dearness allowance at Ahmedabad as companypared to that paid to the textile employees in Bombay. Arithmetical calculations showed that as a result of this extra payment, the Ahmedabad mills had to bear an additional burden of Rs. 238 lakhs in 1949 as companypared to the burden bore by the Bombay textile mills. Before the numberice thus issued by the appellant Association came into force, the respondent gave a numberice of change to the mills to companytinue to pay the dearness allowance according to the existing award and since numbersettlement companyld be reached between the parties, a reference was made to the Industrial Court. As a result of these proceedings, however, neither party scored a victory, and the award directed that payment of the dearness allowance should be made in accordance with the orders passed in Revision Petition No. 1 of 1947. Since the date when this order was made, the terms of the award in Revision Petition No. 1 of 1947 have been in operation between the parties. Meanwhile, the Central Wage Board for the Cotton Textile Industry was companystituted. One of the points which the Wage Board had to companysider was the demand made by the employees for companysolidating a part of the dearness allowance in the basic wage. The Wage Board recommended that 75 of the dearness allowance should be companysolidated in the basic wage, and the remaining 25 should bear a flexible character. The Board also made other recommendations which are number relevant for our purpose. In companysequence of the recommendation made by the Board as to the companysolidation of the dearness allowance, an agreement was reached between the appellant Association and the respondent, as a result of which a joint application No. 1 of 1960 was made by both the parties under s. 11 6A of the Act and on this joint application an award by companysent was passed directing that 75 of the average dearness allowance of the first 6 months of 1959 which is Rs. 63-15-9 p.m. of 26 working days should be company- solidated with the basic wage, and the balance of the dearness allowance should be paid as worked out on the existing basis. That is how matters then stood between the parties. It appears that about this time, there was a growing feeling amongst both the employers and the employees that the different series of companysumer price index companypiled and published in India were number very satisfactory and some of them had become obsolete. In the Second Five Year Plan, it was, therefore, recommended that it was desirable that steps should be taken simultaneously with the undertaking of wage census to institute enquiries for the revision of the present series of companyt of living indices at different centres. According to the recommendation made by the Planning Commission Report, the Labour Bureau, Simla, and the Central Statistical Organisation of the Government of India took steps to companyduct fresh family living surveys among working class and middle class population respectively with a view to companystruct the new series of companysumer price index numbers. The working class surveys were companyducted at 50 selected centres and the middle class surveys at 45 centres, 18 centres being companymon to both. The work of these surveys was companymenced in the second half of 1958 and was companycluded by September, 1959. One of the centres selected for this survey was Ahmedabad. The Government of India began to publish companysumer price index number for the city of Ahmedabad, having index number 100 for the base year 1960. The publication of these series naturally raised the problem of arriving at a linking factor between the present series published by the State Government and the new series published by the Government of India. The Government of India companysidered this problem and indicated that 2.98 would be a proper linking factor. This figure was arrived at as a result of taking the annual average of the monthly index numbers of the State series for 1960 which then stood at For the base year of 1960, the figure of the new series was 100 and the linking factor was, therefore, taken at 2.98. It then appeared clear that there were several anomalies in regard to the companylection of prices in the State series. Some of the items which were specified in such series had ceased to exist, whereas quotation for one major item, viz., house rent allowance had been frozen for many years. After the Government of India began to publish its new series, it advised the Government of Gujarat to stop publishing its old series and publish the companyverted index in its place. The Government of India thought that it would be unjust to the employees if the companyversion were allowed to take place without removing anomalies of the State series. Faced with this problem, the Government of Gujarat set up an expert Committee under the Chairmanship of Dr. M. B. Desai. The terms of reference of this Committee were thus formulated 1 to examine the validity of the submissions and representations made to Government and to make recommendations as to whether any readjustment is necessary in the existing series for Ahmedabad published by the State Government, and if so, what readjustment should be made 2 to companysider how the new series of Consumer Price Index Numbers for Ahmedabad should be linked with the existing series, so readjusted if found necessary and in so companysidering, to take into companysideration the factor that the period of family budget enquiry on which the new series for Ahmedabad is based is different from the base period for the said new series. The said Committee made a fairly exhaustive investigation, and made two main recommendations. The first recommendation involved an addition of 19 points in the overall price index in the State series and the same was fixed at 317 instead of 298 as it stood when the new series and its base period were decided upon. The other recommendation which it made was that the companyversion or the linking factor should be 3.17 as against 2.98 per point in the new series. The Government of Gujarat accepted the first recommendation and revised the index number for the month of November, 1963, by adding 19 points to the figure originally released by it and stated that its existing series would be adjusted month to month by the addition of 19 points for adjusting the index for clothing and house rent groups as recommended by the Expert Committee. In regard to the second recommendation, the Government took the view that it was necessary to companytinue publication of the current series to permit industry and labour time to have necessary modifications in the existing agreements, settlements and awards made to link up the dearness allowance with the new series published by the Labour Bureau, Simla. This decision was announced by the Government by a Press Note on January 31, 1964. When this decision of the Government of Gujarat was announced, the appellant Association found that it entailed companysiderable additional burden on the textile industry even so, it advised its member mills to pay the dearness allowance according to the adjusted companysumer price index number by adding 19 points for the month of January, 1964, under protest. This protest was expressed by the President of the Appellant Association by issuing a press companymunique criticizing the Government for its unilateral and hasty decision in the matters. On February 29, 1964, the Government of Gujrat issued another Press Note by which it accepted the second recommendation made by the Expert Committed to take the linking factor at 317 instead of 298. The Press Note shows that this decision was reached by the Government of Gujarat in accordance with the advice received from the Government of India. In companysequence of this decision, the Government of Gujarat discontinued publication of the companyt of living index number of its 1926-27 numbers from January, 1964. This decision of the Government raised a storm of protest from the appellant Association. A general meeting of the members of the appellant Association was held on March 30, 1964, and it passed a resolution to the effect that the discontinuance of the publication of the companyt of living index by the Government of Gujarat made it impossible for the appellant Association to companyply with the terms of the existing award in respect of the payment of dearness allowance in the manner prescribed by the award and so, the appellant Association advised its members to pay to their employees dearness allowance for the month of March, 1964, calculated on the basis of the last published index number for the month of December, 1963 in the States 1926-27 series and to companytinue to pay dearness allowance for succeeding months on the basis of the same index number till such time as the Government of Gujarat resumed publication of index numbers in the said series. According to the appellant Association, as a result of the decision of the Government of Gujarat, an unbearable burden would be imposed on the members of the appellant Association in the matter of dearness allowance and so, it was number prepared to accept that decision. When the appellant Association adopted this attitude, the .Secretary of the respondent Association expressed his profound sorrow at the decision of the appellant Association, and by his letter addressed to the appellant Association on April 3, 1964, he requested the members of the appellant Association to pay dearness allowance to their employees according to the companyverted number published by the Government of Gujarat. This letter was accompanied by a resolution passed by the respondent Association in which it set forth its version of the financial position of the members of the appellant Association and the justice of the claim made by the employees for the payment of dearness allowance in accordance with the decision of the Government of Gujarat. numberappeal thus made by the Secretary of the respondent Association did number, however, receive any sympathetic response from the appellant Association and that made it necessary for the Government of Gujarat to refer the present dispute to the Industrial Court at Gujarat under s. 73 of the Act. That, broadly stated, is the background and the previous history of the present dispute. At the hearing of the present reference before the Industrial Court the appellants had urged a preliminary objection against 3 9 6 the companypetence of the present reference. They companytended that the reference under s. 73 of the Act was invalid, because, before making the reference, the requirements of s. 42 of the Act had number been companyplied with. The argument was that, in substance, the reference relates to a change in the terms of the award binding between the parties, and for effecting such a change, the procedure prescribed by S. 42 and the other sections in Chapter VIII of the Act has to be companyplied with. It is companymon ground that the -said procedure has number been followed and the Government of Gujarat has made the present reference in exercise of the power ,conferred on it by s. 73. The Industrial Court has rejected the appellants companytention and has held that the reference is valid. Mr. Setalvad for the appellants has urged before us that the view taken by the Industrial Court is number justified by the terms of S. 73 read along with s. 42 of the Act. The Act was passed by the Bombay Legislature in 1947. It purports to regulate the relations of employers and employees, to make provision for settlement of industrial disputes, and to provide for certain other purposes. It is a companyprehensive piece of legislation and it makes elaborate provisions for the regulation of relations between employers and employees and for the settlement of disputes between them. Section 42 of the Act provides for a numberice of change. It is unnecessary to cite the provisions of the said section, because for the purpose of dealing with the point raised by Mr. Setalvad, it would be enough if we state the sum and substance of S. 42 1 2 . Section 42 1 provides that if an employer intends to effect any change in respect of an industrial matter specified in Schedule II, he will have to give numberice of such intention in the prescribed form to the representative of employees. Similarly,s. 42 2 provides that if an employee desires a change in respect of an industrial matter number specified in Schedule I or III, he shall give numberice in the prescribed form to the employer through the representative of employees. Mr. Setalvad relies on the fact that Entry 9 in Sch. II relates to wages including the period and mode of payment, and be points out that the definition of wages prescribed by S. 3 39 includes dearness allowance. His case is that the present dispute falls under Sch. 11, Entry 9, and if the employees had intended to make a change in the existing award in relation to the payment of dearness allowance, it would have been necessary for them to take action as prescribed by s. 42 2 . Since it is companymon ground that numbernotice of change has been given by the respondent, it is urged that the reference made by the Government of Gujarat under S. 73 -of the Act is invalid. It would be numbericed that this argument assumes that the provisions of S. 42 would govern the provisions of S. 73. The question is is this assumption well-founded ? Let us then read S. 73 it reads thus - Notwithstanding anything companytained in this Act, the State Government may, at any time, refer an industrial dispute to the arbitration of the Industrial Court, if on a report made by the Labour Officer or otherwise it is satisfied that- 1 by reason of the companytinuance of the dispute a a serious outbreak of disorder or a breach of the public peace is likely to occur b serious or prolonged hardship to a large section of the companymunity is likely to be caused or c the industry companycerned is likely to be seriously affected or the prospects and scope, for employment therein curtailed or 2 the dispute is number likely to be settled by other means or 3 it is necessary in the public interest to do so. On a fair reading of s. 73, it is plain that it deals with the powers of the State Government to make a reference and as such, it is difficult to assume that the said powers of the State Government are intended to be companytrolled by the provisions of S. 42. Section 42 prescribes the procedure which has to be followed by the employer and the employee respectively if either of them wants a change to be effected as companytemplated by it. The scheme of S. 42 read along with the other provisions in Ch. VIII clearly shows that the said Chapter can have numberapplication to cases where the State Government itself wants to make a reference. That is the first companysideration which militates against the companystruction which Mr. Setalvad suggests. The opening clause in s. 73 also unambiguously indicates that the power of the State Government to make a reference will number be companytrolled by any other provision companytained in the Act. This clause plainly repels the argument that the provisions of S. 42 should be read as companytrolling the provisions of s. 73. The meaning of the number-obstante clause is clear and it would be idle to urge that the requirements of S. 42 must be satisfied before the power under s. 73 can be invoked by the State Government. Sup.Cl/65-11 It is, however, urged that the power companyferred on the State Government by s. 73 is the power to refer an industrial dispute to the arbitration of the Industrial Court, and there can be numberindustrial dispute unless a numberice of change has been given either by the employer or the employee. In other words, the argument is that unless a numberice of change is given as required by s. 42, numberindustrial dispute can be said to arise between the employer and his employee, and that is how s. 42 governs s. 73. If it was the true legal position that there can be numberindustrial dispute between an employer and his employee unless a numberice of change is given by either of them, there would have been some force in this companytention but the definition of the words industrial dispute does number justify the assumption that it is only a numberice of change that brings into existence an industrial dispute. Section 3 17 of the Act defines an industrial dispute as meaning any dispute or difference between an employer and employee or between employers and employees or between employees and employees and which is companynected with any industrial matter. This definition is so wide and companyprehensive that it would be impossible to accept the argument that it introduces the limitation suggested by Mr. Setalvad. Even if an award is subsisting between the parties but a difference arises between them, as in the present case, it is number easy to hold that the said difference does number amount to an industrial dispute for the purpose of s. 73 merely because numberice of change has number been given either by the employer or the employee. Therefore, we are satisfied that the dispute which has been referred by the Government of Gujarat in the present case must be treated as an industrial dispute, numberwithstanding the fact that s. 42 has number been companyplied with either by the appellants or by the respondent. It is true that the power companyferred on the State Government to make a reference is number absolute or unqualified. It can be exercised only if one or the other of the companyditions specified by sub-sections 1 , 2 or 3 of s. 73 is satisfied. But once the State Government companyes to the companyclusion that one or the other of the said companyditions is satisfied, its power to make a reference is number limited to cases where numberice of change has been given by the parties as required by s. 42. It is an over-riding power which is intended to be exercised to avoid anomalies or other serious companysequences which would flow in case the Government does number make an immediate reference. The requirements prescribed by sub-sections 1 , 2 and 3 of S. 73 indicate the types of cases which are intended to be referred without requiring the parties to take recourse to s. 42. In the present case, the Government of Gujarat was satisfied that the dispute was number likely to be settled by other means, and so, it made the present reference. Therefore, we do number think there is any substance in the argument that the reference is bad, because s. 42 has number been companyplied with. The terms of s. 73 are plain and unambiguous and them leave numberdoubt that the power of the State Government to make the reference is number at all companytrolled by the requirements of s. 42. On principle, the companyferment of this power seems to be fully justified. If as a result of a dispute between the employer and his employees, a serious outbreak of disorder or a breach of the public peace is likely to occur, or a serious or prolonged hardship to a large section of the companymunity is likely to be caused, or the industry companycerned is likely to be affected adversely, it would be idle to require that even in the face of such a serious danger, the procedure prescribed by s. 42 must be followed before reference can be made under s. 73. The very nature of the companyditions prescribed by sub-sections 1 , 2 and 3 of s. 73 emphasises the fact that the said companyditions refer to categories of cases or types of occasions on which reference has to be made promptly and immediately, and that explains the companyferment of the wide powers on the State Government as prescribed by s. 73. We are, therefore,, satisfied that the Industrial Court was right in companying to the companyclusion that the preliminary objection raised by the appellant-, against the companypetence of the present reference was misconceived. It appears that a similar view has been expressed by the Bombay High Court in Suryaprakash Weaving Factory v. The Industrial Court 1 . That takes us to the merits of the companytroversy between the parties in the present appeals. Let us begin by briefly indicating the broad companytentions raised by the appellants before the Industrial Court and its findings on them which are relevant for the purpose of the present appeals. The first companytention which was urged before the Industrial Court was that the family living survey which was companyducted by the Labour Bureau, Simla, in 1958-59, was unreliable, because the sample survey on which it was based was inadequate, and the interview method which was adopted in companyducting it was unsatisfactory. It was also companytended that the linking factor at 3.17 which had been adopted by the Government of Gujarat was unscientific and irrational and that the scientific and rational way to deal with the problem presented by the new 1 53 B.L.R. 902 companysumer price index recently adopted by the Government of Gujarat would be to devise a scheme of dearness allowance afresh, taking the present basic salary as a base, and relating it to the changing price pattern from month to month with the base year 1960 100. The appellants case in respect of this aspect of the matter was that for the purpose of fixing the dearness allowance, the basic salary should be taken to be the total amount which is paid to the lowest-paid employee after companysolidating 75 of the dearness allowance in the basic wage. That amount, it is said, represents the true basic wage today. In the alternative, it was suggested that if it is intended to companyrelate the present prevailing wage structure, including the scheme of payment of dearness allowance, by making suitable adjustments required by the change in the level of prices in the light of the new companysumer price index with the same base year, it would be more rational and scientific to watch the behaviour of prices for two or three years and then devise a linking factor on the average rise in prices during the said period. The appellants also emphasised the fact that before the Industrial Court accepts the new arrangement on the basis of the linking factor of 3.17, it is essential to examine their paying capacity, and in this companynection, they strongly urged that the burden which would be imposed on them by the new scheme would be plainly beyond their capacity. The validity of these companytentions was strenuously disputed by the It urged that the, sample survey was companyducted on rational and scientific lines and it did number suffer from any infirmity at all. It further argued that the attempt to companystruct a new wage structure by taking the basic salary with 75 of the companysolidated dearness allowance as the basis with 1960 100 as the base year, would be beyond the terms of reference, and it would, besides, create many problems and companyplications. According to the respondent, the basic salary still companytinues to be what it was before, though for practical purposes 75 of the dearness allowance has been companysolidated with it. The respondent seriously challenged the appellants case that the operation of the linking factor was either unscientific, unreasonable or unjust and the appellants theory that the average rise in prices should be determined after watching the behaviour of prices for two or three years, was characterised by the respondent as unreasonable, inexpedient and unscientific. The respondent emphatically companytended before the Industrial Court that the appellants financial position was perfectly sound and the argument that the burden would be beyond their capacity is wholly untenable. During the companyrse of hearing before the Industrial Court, the appellants examined two Experts, Mr. Gokhale and Mr. Chokshi. They also led voluminous documentary evidence. The respondent filed detailed statements disputing the companyrectness of the pleas taken by the appellants, and in support of them, they filed several charts which were prepared from the balance-sheets of the appellants themselves. Both parties referred to the opinions expressed by several writers on the subject of the preparation of companysumer price index and on other matters which became relevant for the decision of the present dispute. Broadly stated, the Industrial Court has rejected all the companytentions raised by the appellants. It has found that the recent survey was companyducted under the advice and guidance of a technical advisory companymittee of a high order and that the work of carrying on the survey had scrupulously followed the relevant recommendations made by the International Labour Office and the United Nations. The Industrial Court did number accept the companytention of the appellants that the sample size was inadequate or had vitiated the quality of the survey. It held that the method of inquiry adopted by the Investigators who companyducted the survey was by numbermeans unsatisfactory or unscientific, and in its opinion, having regard to the local companyditions, it was indeed the most feasible and satisfactory way to adopt. The adoption of the interview method did number, in the opinion of the Industrial Court, introduce any infirmity in the survey. The Industrial Court was thus number satisfied that the companypilation of the companysumer price index number by the Labour Bureau, Simla, for the city of Ahmedabad was number proper or was unscientific or suffered from any more infirmity. In regard to the question of the linking factor on which both parties addressed the Industrial Court elaborately, the Court companysider the matter in the light of expert opinion cited before it and held that the Government of India was justified in recommending a sample arithmetical method of linking it found that the said method had been accepted by the Expert Committee appointed by the Government of Gujarat and had been recommended by the Expert Committee appointed by the Government of Maharashtra as well. It, therefore, reached the companyclusion that the said method based on the application of the linking factor at 3.17 was the most suitable to adopt. In this companynection, it rejected the appellants suggestion that the dearness allowance, should be paid at a flat rate and held that flexible dearness allowance alone would meet the ends of justice and would lead to industrial peace. It numbericed the fact that number there was only one companyt of living index existing in Ahmedabad and that is based on the new series The old series had rightly gone out of existence since it had become antiquated. In this situation, there were two possibilities one was to work out an entirely new scheme of basic wages based number on the prewar level of 1939 but based on the companyt of living of 1960 as the base year and to award dearness allowance thereafter. The Industrial Court thought that if such a companyrse was to be adopted, it would create a large number of problems in the industry and would seriously disturb industrial peace. It observed that this aspect of the matter would also be beyond the terms of its reference. Nevertheless, it was inclined to take the view that the results in terms of rupees, annas and pies may also number be very different, if this alternative, method was adopted. It suggested that such a method may be adopted by the Central Cotton Textile Wage Board which had been recently appointed with a view to bring out a fair amount of uniform wage level all over India but speaking for itself, it held that it would number be Necessary, advisable or practicable for it to attempt that task. That left only one alternative and that is the adoption of the arithmetical method of linking. The argument that even if the arithmetical method of linking is intended to be adopted, it should be worked on the basis of the average result derived from watching the behaviour of prices during two or three years, does number appear to have been seriously pressed before the Industrial Court and has number been examined by it. The Industrial Court then companysidered the question about the paying capacity of the appellants. As a matter of law, it rejected the respondents argument that a wage structure once companystructed by industrial adjudication can never be revised to the detriment of workmen, and it held that if it was shown that the financial position of the employer had substantially deteriorated and such deterioration was likely to persist for some time, it would be open to industrial adjudication to make a suitable revision of the wage structure, provided, of companyrse, the wage structure does number represent the wages at their basic minimum level. Considering the problem presented by the appellants plea of incapacity to bear the burden in the light of this legal position, the Industrial Court has found that, in its opinion, the textile industry of Ahmedabad is in a sound financial position. It has also added that in any event, there has been numbersubstantial deterioration in its companydition so as to justify any wage cut or abandonment of the basic principles in respect of its employees which have been laid down in the past. It is on these findings that the Industrial Court has held against the appellants on issuer, 2 3. As we have already mentioned, the Industrial Court has found against the respondent on issue No. 1 but since the respondent has number challenged the companyrectness of the said finding, it is only the companyclusions of the, Industrial Court on issues 2 and 3 that fall to be companysidered in the present appeals. The first point which we must number companysider is whether the appellants are justified in companytending that the Industrial Court erred in over-ruling their companytention that the new survey suffered from two major infirmities-inadequacy of the sample size, and impropriety of the method of interview adopted by the Investigators. In support of this plea, the appellants examined Mr. Gokhale as an expert witness. Mr. Gokhale who served in the Labour Office at Bombay from 1926 to 1937, was directly associated with the family budget inquiries, companypilation of companyt of living index numbers, and with the first General Wage Census companyducted by the Labour Office in Bombay. He also worked as Assistant Secretary of the Bombay Textile Labour Enquiry Committee. Later, he joined the Millowners Association, Bombay, as their Labour Officer on 1-1-1938 and served in that capacity until he retired on 1-11-1962. He was deputed on a study tour to Lancashire in 1951 and attended the International Labour Conference at Geneva. He has also been a member of the L.O. Committee on Womens Employment. According to Mr. Gokhale, the new survey was number as scientific as it might have been. He was inclined to take the view that the sample selected in the Ahmedabad inquiries was very inadequate. He companymented on the fact that the choice of the size of sample was determined, inter alia, on the ground of the workload manageable by the investigator, and he said that it was difficult for him to understand as to why in deciding the sample size. workload manageable by the investigator had to be companysidered as a relevant factor. He then produced a chart showing the ratio of the size of the universe with the size of sample, and said that numberhere had he found such a low size of the sample as in the impugned inquiry. The size of the sample, according to him, in the impugned inquiry was less than even half a per cent of the population group which was intended to be companyered. Mr. Gokhale was cross-examined by the respondent. It was put to him that his experience in the matter of sample survey was somewhat limited and that the said experience had number become antiquated in view of the great strides of progress which had been made in the science of sample survey after 1926. He agreed that sampling technique involves knowledge of statistics and statistics involves mathematics, and he did number make any claim to be an expert either in statistics or in mathematics. In his examination-in-chief, Mr. Gokhale appeared to criticise the extent of imputation which was evident in the preparation of the new series but in his cross-examination, he fairly companyceded that amputations have always got to be done in companypiling companysumer price index. It had been done in the past, he said, as also in the case of the present series. When he was asked whether he knew what the percentage of imputation was in the companypilation of the companysumer price index of 1926-27, he admitted that he did number know. He was, however, reluctant to agree with the Labour Bureau in so far as the application of their reasons to individual items was companycerned, and in support of his theory he relied upon the illustrations given by him in the affidavit which he had filed before he gave evidence. The statements made by Mr. Gokhale in his affidavit were disputed by the respondent and the accuracy and the validity of the views expressed by him were seriously challenged by Mr. Vasavada who filed a reply on behalf of the respondent Item 19 . In his reply, Mr. Vasavada referred to Clause 14 of the Resolution as reported at p. 403 of the International Labour Code-1951 Vol. III and emphasised the fact that the main distinguishing feature of the new survey was that it was carried out under the technical guidance of professional statisticians number only with adequate knowledge of sampling theory but also with actual experience in sampling practice, and with the help of a properly trained field and companyputing staff. This was the requirement laid down by the publications issued by the I.L.O. and the United Nations as a very important test, and the impugned survey fully satisfies the said test. Mr. Vasavada also referred to the opinion expressed by Dr. Basu who is at present the I.L.O. Expert on the subject, that the size of the sample should be determined in the light of the permissible margin of error in the resulting series of companysumer price index numbers. In our companyntry, the permissible margin of error in the index has been broadly set at 2 per cent and so, the case set out by Mr. Vasavada on behalf of the respondent was that when the permissible margin of error in the index is 2, the number of families, viz. 722 taken at Ahmedabad, is highly satisfactory. Mr. Vasavada then questioned the accuracy of Mr. Gokhales statement that such a small percentage of the universe had never been adopted before in any other inquiry. He urged that the present techniques have advanced so far that a small sample size can achieve the best results and he cited the example of a survey carried out in the United Kingdom where the proportion of 13,000 households surveyed to the total households which companystituted the universe came to 0.1. The Industrial Court has companysidered the evidence given by Mr. Gokhale and has taken into account the arguments urged on behalf of the respondent, and it has held that the size of the sample selected for the impugned survey cannot be said to introduce any infirmity in the survey. The question which we have to decide is whether the Industrial Court was right in companying to this companyclusion. In dealing with this question, it is necessary to refer briefly to the genesis and growth of the science of Social Survey. In, its broadest sense, says the Encyclopedia of the Social Sciences, social Survey is a first hand investigation, analysis and companyrdination of economic, sociological, and other related aspects of a selected companymunity or group. Such a survey may be undertaken primarily in order to provide material scientifically gathered, upon which social theorists may base their companyclusions or its chief purpose may be to formulate a programme of amelioration of the companyditions of life and work of a particular group or companymunity 1 . Wells defines a social survey as a fact-finding study dealing chiefly with working-class poverty and with the nature and problems of the COmmunity 2 . As Moser has, however, pointed out, this definition might have companyered the classical companymunity and poverty studies but would hardly be adequate, the first part at any rate, to the modern forms of survey 3 . The history of social survey in England can be said to have begun with the publication of May hews book London Life and the London Poor published in 1851 and Booth made a very significant companytribution to the scientific development of social survey by publishing his book Labour and Life of the People of London 1889-1902 . Rowntree followed with his book Poverty A Study of Town Life. Thereafter, a number of studies have been made by social scientists, and the subject of the theory and practice of social surveys has been the subject-matter of valuable and extensive literature all over the civilised world. During the First World War and thereafter, social scientists devoted their attention to the problem of family living studies mainly from the point of view of the impact of price changes on companysumers economic situation. The development of reliable companysumer Price indices naturally involved the use of weights that Encyclopaedia of the Social Scinces, Vol. XIV edited by Edwin R. A. Seligman, p. 162 Wells. A. F. 1935 . The Local Social Survey in Great Britain, Allen and Unwin, London. Survey Methods in Social Investigation by C. A. Moser, P. 1. would properly reflect the companysumption expenditure of the population. This led to further extension of family living studies in different companyntries and for different periods, mainly to secure information on patterns of companysumption expenditure 1 . The Second World War and the companyditions that flowed from it made it necessary to carry on investigations on a wide range of inquiry relating to all aspects of companyditions, c.g., nutrition, health, education and employment. The whole question of family living survey came up for companysideration in the Seventh International Conference of Labour Statisticians in 1949. This Conference adopted a resolution defining the objectives of family living studies and setting new international standards as regards the Organisation of enquiries and the analysis and presentation of the results that flowed from it 1 . In India, a standardised statistical type of family living study was -first initiated in Bombay in 1921. Such enquiries were also companyducted in Sholapur in 1925, in Ahmedabad in 1926 and in some centers in Bihar in 1923. While reviewing the position of social surveys in India, the Royal Commission on Labour pointed out the great paucity of statistical material in this companyntry for judging the standard of living of the workers and recommended companyduct of socioeconomic enquiries of the type of family living surveys. This report naturally gave an impetus to the companyduct of family budget enquiries. In all the surveys that followed, sampling and interviewing techniques were adopted, though, of companyrse, number of a much advanced nature. A statistical analysis of the data companylected was also attempted 2 The Second World War saw the appointment of the Rau Court of Enquiry companystituted under the Trade Disputes Act, 1929. One of the recommendations made by the said Court was that the Central Government should take up responsibility for maintaining up-to-date companyt of living index numbers for important areas and centres. The Government of India accepted this recommendation and set up a special Organisation called the Directorate of Cost of Living Index Numbers and family budget enquiries among industrial workers were companyducted at 28 centres during 1944-45 in the companyrse of which 2,700 budgets were companylected. A remarkable feature of these enquiries was that for the first time in this companyntry, an attempt was made to companyduct such enquiries simultaneously at a large number of centres under more or less uniform techniques. During the same period, the Labour Bureau of the Government of Labour Survey Techniques issued by the Labour Bureau, Ministry of labour Employment, pp. 171-72. Labour Survey Techniques. pp. 171-72. India and some of the Organisations of State Governments companytinued to companyduct family budget enquiries from time to time at specific areas or centres, either for deriving weighting diagrams for companysumer price index numbers or for companylection of data required for fixation of minimum wages 1 . It was in the background of these events that the Second Five Year Plan made a significant recommendation. The Plan said that - The existing wage structure in the companyntry companyprises, in the main, a basic wage and a dearness allowance. The latter companyponent in a majority of cases has relation to companyt of living indices at different industrial centres. These indices have number been built up on a uniform basis some of them are worked out on primary data companylected about 20 to 25 years ago and are, therefore, number a true reflection on the present spending habits of workers. Since one of the questions which the wage companymission will have to take into account is the demand made by the workers organisations for merging a part of dearness allowance with the basic wage, evolving recommendations for such a merger will number be sufficiently scientific if companyt of living indices at different centres do number have a uniform basis. Steps will therefore have to be taken simultaneously with the undertaking of a wage census, to institute enquiries for the revision of the present series of companyt of living indices at different centres. It is in pursuance of this recommendation that the impugned survey was made. Let us number see on what principles and methods the impugned survey was made. It is necessary to be-in the discussion of this question with the observation that the companysumer price index number measures numberhing but changes in prices, as they affect a particular population group and so, it is really a price index number as distinct from a companyt of living index number. In fact, these indices used to be termed as companyt of living index numbers in the past, but in order to make their meaning clear, it was decided by Government to change the name to companysumer price index numbers in accordance with international recommendations and growing practice in other companyntries. Most of the State Governments companypiling such index numbers have also adopted this Labour Survey Techniques, pp. 171-72. usage 1 . This index number is intended to show over a period of time the average percentage change in the prices paid by the companysumers belonging to the population group proposed to be companyered by the index for a fixed list of goods and services companysumed by them. The average percentage change, measured by the index, is calculated month after month with reference to a fixed period. This fixed period is known as the base-period of the index and since the object of the index is to measure the effect of price- changes only, the price-changes have to be determined with reference to a fixed list of goods and services of company- sumption which is known as a fixed basket of goods and services. The index does number purport to measure the absolute level of prices but only the average percentage change in the prices of a fixed basket of goods and services at different periods of time. There are certain preliminary companysiderations which are relevant in the companystruction of companysumer price index numbers. The first companysideration is the purpose which the index is intended to serve and that necessarily involves the definition of the group of companysumers to which the index is intended to relate. Then it is necessary to determine the companysumption level and pattern of the population group at a period of time which generally becomes the base period of the index numbers. For that purpose, a list of companymodities and services has to be made. Usually, this list would company- tain items of food, fuel and light, clothing, and others items of services, such as barber charges, bus fare, doctors fee, etc., have also to be selected. It is the companybined total of the items of companymodities and services that companystitutes the basket. Then follows a description of the quality of each companymodity and service through which price changes have to be measured. Generally, one quality which is popularly companysumed by the population group is selected for each companymodity and service. The importance or weight which has to be attached to each companymodity or service is also a material factor. For instance, if rice is companysidered to be twice as important -is wheat in the companysumption pattern, the weight of rice will be 2 in relation to I of wheat. Having determined the companysumption level and the pattern of the population group, the next task to attempt is to arrange for the regular companylection of price data for the various qualities of companymodities and services which enter the basket. With this material, the companysumer price index has to be companypiled from month to month subsequent to the base period. That, shortly stated, is A Guide, to Consumer Price index Numbers is such by the Labour Bureau, M.O. Labour Employment, 5. the nature of the preliminary companysiderations which have to be borne in mind while companystructing the companysumer price index numbers. We have just numbericed the theory of weights on which weighting diagrams are prepared. Weights are intended to indicate the importance attached to the percentage changes in the prices paid by companysumers for different items companymodities and services of companysumption. Accordingly, each item in the index is given, what is called in technical language, a weight to represent the relative importance of the price changes recorded for that item. This weight means numberhing more than the percentage of expenditure on each item of goods and services in relation to the total expenditure. It will thus be seen that the main basis for determining the weights of respective companymodities and services is the investigation of the family budget and that emphasises the importance and significance of a proper investigation. During the companyrse of investigation, data are companylected on all items on which money has been defrayed by families but only such items as involve companysumption expenditure are included in the average budget. Even so, it is only selected items which find a place in the index calculations, because it is obviously neither practicable number necessary to include all items featuring in the average budget. Since only a sample of items from each group is included in the index, it becomes necessary to enquire as to what happens to other items featuring in the average budget but number included in the index. Their weights are added or distributed to the items included in the index, so that the total expenditure of the average budget is fully taken into account in the weights adopted for the index. This process is known as imputation of weights. Besides the weights the other set of primary data which enter into the companypilation of a series of companysumer price index numbers are the prices and that emphasises the importance of companylecting material data in respect of prices. The Investigator, therefore, has to bear in mind , II the relevant factors that ultimately go to ,,he companystruction of the index. and has to carry on his investigation in a proper and scientific way. Having thus briefly reviewed the theoretical aspects of the factors that govern the companystruction of companysumer price index numbers, let us number proceed to see how the impugned inquiry was in fact held. The material evidence which will assist us in this part of our inquiry is furnished by the Report on Family Living Survey among Industrial Workers at Ahmedabad, 1958-59. From this report it appears that the Organisation of the survey was based on the companyoperation of several institutions. The survey was sponsored by the Labour Bureau, Ministry of Labour Employment, Government of India and its technical details were worked out under the guidance of a Technical Advisory Committee on Cost of Living Index Numbers companysisting of the representatives of the Ministries of Labour and Employment, Food and Agriculture, Finance, Planning Commission, the National Sample Survey Directorate, the Department of Statistics C.S.O. , the Indian Statistical institute and the Reserve Bank of India. The field work was entrusted to the Directorate of National Sample Survey, and processing and tabulation of data companylected in Schedule A Family Budget to the Indian Statistical Institute, Calcutta. The tabulation of data companylected in Schedule B which deal with Level of Living was done in the Labour Bureau. It was a multipurpose survey and so, the investigation companyducted under it companyered both the Family Budget, and the Level of Living. Ultimate analysis of the data, publication of reports on the results of the surveys and companystruction and maintenance of new series of companysumer price index numbers were the responsibilities of the Labour Bureau. The first thing that the Organisation did was to define a working class family, because this definition determined the size of the universe. A working class family which was the basic unit of the survey, was defined in terms of sociological and economic companysiderations as companysisting of persons generally related by blood and marriage or adoption usually living together and or served from the same kitchen and pooling a major part of their income and or depending on a companymon pool of income for major part of their expenditure. Then followed the delimitation of area. The geographical area to be companyered during the survey was decided in companysultation with local Organisation both official and number- official. At the Ahmedabad centre, 46 localities were selected for the purpose of the survey they companysisted of 16 Chawls, 21 Labour Colonies Housing Societies and 9 Villages. Before setting the ultimate units of the family living survey, viz., the families, two types of sampling methods were adopted they were the tenement sampling and the pay-roll sampling. The sample size for a centre was determined on the basis of the number of industrial workers, the type of sampling followed, the work-load manageable by an Investigator and the required precision of weights to be derived from Schedule A for companysumer price index numbers. The sample size for Ahmedabad was 720 families to be canvassed for Schedule A. The number of schedules finally companylected and tabulated was 722 for Schedule A. The two samples drawn for Schedules A B were however, mutually exclusive, because canvassing for both the schedules from the same sampled families would have caused fatigue both to the Investigators and the informants. The whole sample was staggered over a period of 12 months evenly so as to eliminate the seasonal effects on the companysumption pattern. The selection of sample was done in two stages. In the first stage the chawls within each of the wards were grouped to form blocks of about 150 households each and these blocks along with the labour companyonies housing societies were grouped to form clusters of about 450 households each, so that each cluster had blocks from different wards. From the list of these clusters and villages, 4 independent simple systematic samples of 12 clusters or villages each were selected for survey. Each of the 12 clusters sampled for an Investigator was assigned to a particular month for enquiry by a random process. That is how the first stage was arranged. The second stage unit for selection was a working class family. Each month, the Investigator listed all the families in the cluster allotted to that month by house-to- house visit and classified them as working class families and others. While listing, information was also companylected on the family size, the expenditure class to which it belonged and the State of origin of the head of the family. This information was utilised to arrange the working class families in the cluster, first by family size and within these classes by expenditure class and within these by the State of origin. A simple systematic sample of 20 working class families was drawn from this arranged list. Every fourth family in this sample was companytacted for filling Schedule B on Level of Living and the remaining three were for Schedule A on Family Budget . That is the nature of the procedure adopted in selecting the families for sample survey and determining the size of the sample. The same survey was designed to companyer a period of 12 months at each centre. At Ahmedabad centre, the work was carried on between August, 1958 and July, 1959. The method of survey was the interview method. The questionnaire which each Investigator adopted companyered a wide range of subjects, accurate replies to some of which companyld number be had without explaining the significance of the questions to the persons companycerned. The population of Ahmedabad is about 11.5 lakhs. The working class population in Ahmedabad was reported to be companycentrated in 13 localities. The markets predominantly patronised by the working class population in Ahmedabad were 6 and it is the markets that were selected for the companylection of retail prices for the new series of companysumer price index number for Ahmedabad centre. This summary of the Report gives us a broad idea as to the manner in which and the method by which the investigation was made which ultimately led to the companystruction of the companysumer price index number. Reverting then to the objections raised by the appellants that the size of the sample was inadequate and the method of investigation was inappropriate, can it be said that the Industrial Court was in error in holding that these objections were number valid ? In dealing with this question, it is necessary to bear in mind that the size of the sample has to be determined in the light of the permissible margin of error in the resulting series of companysumer price index numbers. As Dr. Basu has observed In our companyntry, this permissible margin of error in the index has been broadly set at 2 per cent 1 and that is number companytradicted by the opinion of any other Expert. The sample of companysuming units has to be selected by the application of scientific sampling techniques and there is numberdoubt whatever that during the last 40 years, this branch of human knowledge has made remarkable progress. The optimum sample design is number worked out by companypetent statisticians in the light of the available material and requirements in each case, and as Dr. Basu has observed, the desired data are secured at minimum companyt and at an evaluation of sampling errors in tile estimated data obtained from the survey. It is the quality of the survey that is more important, number so much the size of the sample or the number of families with whom investigation was made. On the question about the adequacy of the sample size selected for investigation on the present occasion it would be material to refer to the opinion expressed by Moser on this subject. Says Moser- Most people who are unfamiliar with sampling probably over-rate the importance of sample size as A Basu, Consumer Price index, pp.54- 55. such, taking the view that as long as the sample is big enough, or a large enough proportion of the population is included, all will be well. The fallacy in this is clear as soon as one looks at any standard error formula, say 5.1 on p. 61 above. If the population is large, the finite population companyrection N-n N-1 practically vanishes and the precision of the sample result is seen to depend on n, the size of the sample, number on n N, the proportion of the population included in the sample. Only if the sample represents a relatively high proportion of the population say, 10 per cent or more need the population size enter into the estimate of the standard error. 1 Mr. Kolah for the, appellants has number cited before us the opinion of any Expert to the companytrary. Considering the question from a companymonsense point of view, it seems to us reasonable to hold that if the quality of investigation has improved, and the method of working out the sample survey has made very great progress, then it would number be companyrect to say that because the size of the sample in the present case was smaller as companypared to the size of the sample taken in 1926-27, the inadequacy of the size on the subsequent occasion introduces an infirmity in the investigation itself. That is the view which the Industrial Court has taken, and we see numberreason to differ from it. At this stage, it would be interesting to companysider the companyparative companytents of the basket as it was devised in the two respective enquires, one held in 1926-27, and the other in 1958-59. The former enquiry reflects the companysumption pattern of the working class as it existed in 1926. The index number then devised was companyposed of five groups, viz., Food, 2 Fuel and Lighting, 3 Clothing, 4 House rent, and 5 Miscellaneous. The food group in its turn companysisted of 16 items the fuel and lighting group of 4 items the clothing group of 7 items the house rent group of the item of house rent and the miscellaneous group of two items, viz. bidis and soap. Thus, in all 30 items were included. These items represent 82-32 of the average monthly expenditure, and they were respectively assigned 58, 7, 10, 12 and 4 weights which together aggregate 91. At the time of this enquiry, the items included in the investigation totalled 49 out of them, 30 were priced and 19 were unpriced and in respect of the C. A. Moser, Survey Methods in Social investigation, p. 115, para 3. L6sup65-12 latter, the method of imputation was adopted. This series was prepared after companylecting the budgets of 985 families when the estimated population of the city of Ahmedabad was 2,90,000. The new series is based on the enquiry into 722 working class families companyducted in 1958-59 when the total population of the city was about 11 lakhs. The total working class families at this time were estimated to be 51.5 thousand and so, the percentage of the sample size in relation to the universe of the working class families would companye to about 1.4 and number less than 5 as appears to have been assumed by Mr. Gokhale. The weighting diagram for the new series is based on 110 articles divided into the main groups of food, fuel and lighting, housing, clothing, and miscellaneous. The important groups in this enquiry carried respectively the weights of 64-41, 6.22, 5.05, 9.08, and 15.24 which aggregate to 100. The total number of items included in the basket was 239. Of these, 89 were priced items and 150 unpriced, and in respect of the latter, the method of imputation was adopted. It is true that in the new series, the unpriced items are companysiderably more than in the earlier one but it must be remembered that it is number so much the number of items that makes the difference, but the percentage of expenditure on unpriced items to priced items. The total expenditure of all items in the 1926-27 enquiry was Rs. 36.01 of which Rs. 32.35 was the expenditure on priced items and Rs. 3.66 was the expenditure on number-priced items. In terms of percentage, the expenditure on priced items to total expenditure was 89.8 and expenditure on number- priced items to total expenditure was 10.2. In the latter enquiry of 1958-59, the total expenditure on all items was Rs. 139.06. Of this, Rs. 124-91 was the expenditure on priced items and Rs. 14.15 was the expenditure on number-priced items. In terms of percentage, the first expenditure was 89.8 and the second is 10.2. Thus, it is clear that the expenditure on unpriced items in the present enquiry is number larger than in the former enquiry at all. The fact that the companyponents of the basket have companysiderably increased, cannot be a matter of surprise, because with the growth of Indian economy and the change in the standard of living of all citizens, the requirements of the working class have also increased and the companyponents of the basket which was devised in 1926-27 have number become companypletely obsolete. It is in the light of this position that we have to companysider whether the appellants are justified in companytending that the inadequacy of the size of the sample vitiates the enquiry. In our opinion, the answer to this question must be against the appellants. The next question to companysider is whether the Interview method is unscientific and its adoption makes the enquiry itself defective and unreliable. In dealing with this question again, it is necessary to remember that the interview method itself has made very great progress since 1926. The task of investigation is in numbersense merely mechanical it is a companystructive task, the efficient discharge of which requires a well-trained Investigator. As Moser observes, the investigators are expected to ask all the applicable questions to ask them in the order given and with numbermore elucidation and probing than is explicitly allowed and to make numberunauthorised variations in the working p. 188 . Interviewers, according to Moser, are number machines. Their voices, manner, pronunciations and inflections differ as much as their looks, and numberamount of instruction will bring about companyplete uniformity in technique and so, interviewers have to be properly educated in the task of putting questions to the families interviewed. What is true about asking questions, is also true about recording the answers. The recording of answers, says Moser, would seem a simple enough task and one which interviewers might be expected to perform with accuracy. But he adds that the task of interviewers is a fairly tiring one. With random sampling, the interviewer may have travelled and walked a good way before getting to the respondent. He has to go through what is often a lengthy, and always a somewhat repetitive, operation p. 190 and that makes the task of recording answers also important. The Interviewers are, therefore, appointed after selection, and it is number realized that their work is number at all mechanical and cannot be companypared to the work-of Investigators who companylect data at the time of population census. The Investigator must take interest in the task that he has undertaken, must be accurate in asking questions and recording answers, must show an equitable temper in meeting the persons interviewed and must, above all, be a man of education who understands the significance of sampling survey and the purpose which it is intended to serve. It is true that in England, the method of supplying account- books to the families is adopted. Under this method, the families are expected to fill in every detail in the account-book, and the companyt of living is companypiled from exact and companyrect information given by the persons who keep regular accounts according to the directions issued. But on the other hand, in companyntries like Canada and the United States, the method of interview is preferred to that of the account-books. It seems that according to Moser, the method of mail questionnaire, which companyresponds in a sense with the method of account-books, suffers from several infinities and so, he seems to prefer the method of interview, provided, of companyrse, this method is scientifically and efficiently adopted. In our companyntry where a majority of working class population still suffers from illiteracy, the method of interview is obviously indicated. It would be impracticable to suggest that a written questionnaire should be supplied to the members of the working class or account-books should be given to them in the expectation that they would furnish answers in return. Having regard to this special feature of the life of the working class as it obtains in our companyntry today, the method of interview is the only method which can be adopted. Besides, as we have just indicated, even on the merits, expert opinion seems to suggest that if the interview method is properly adopted, it gives better results than the alternative method of account-books. Therefore, we are satisfied that the Industrial Court was right in rejecting the appellants companytention that the impugned survey and the index companystructed as a result of it, suffer from the infirmity that investigation was companyducted in this survey by the interview method. That takes us to the question about the propriety of the linking factor which has been upheld by the Industrial Court. We have already numbericed that the Government of Gujarat has adopted the linking factor at 3.17, and the Industrial Court has taken the view that numbercase has been made out by the appellants to interfere with the said decision of the Government of Gujarat. Mr. Kolah companytended that if a linking factor has to be adopted it would be more rational and scientific to watch the behaviour of prices for two or three years and then devise a factor on the average rise in prices during the period in question. Mr. Vasavada, on the other hand, seriously disputed the companyrectness of Mr. Kolahs companytention. As this case was being argued on the 24th March, 1965, the parties suggested that the question about the proper procedure to be followed in determining the linking factor in such cases was a very important question and that it would be better if we hear the views of associations or bodies which would be interested in a proper solution of this problem. That is why on the said date we adjourned the hearing of the appeals to enable such interested parties to appear before us. The parties furnished a list of sixteen institutions or bodies which, according to them, would be interested in assisting us with arguments on this issue. On April 12, 1965, a letter of request was accordingly sent to these bodies indicating to them the nature -of the question on which we wanted their assistance. In response to the said letter, only four bodies have appeared they are The All-India Organisation of Industrial Employers the All-India Manufacturers Organisation the Millowners Association, Bombay and the Indian National Trade Union Congress. The first three bodies appear broadly to support the appellants case, whereas the fourth body has resisted the appellants companytention that the Government of Gujarat was in error in adopting the linking factor at 3.17. The appeals were then set down for hearing before us on the 2nd August, 1965, and we indicated to the parties that having regard to the unsatisfactory response which our letter of request had received, we did number think it would be appropriate that we should proceed to decide the larger issue raised by Mr. Kolah as to what would be a rational and satisfactory method of evolving a linking factor. The Indian National Trade Union Congress in its affidavit has urged that the method of linking of the new series with the old by the simple arithmetical ratio,at the base period is universals accepted. It appears that the employers and the employee,s are number able to take a companysistent stand on this issue and their approach apparently differs from region to region and industry to industry, because companysiderations of expediency and self interest do number seem to dictate a uniform companymon approach to be adopted in the present case. Besides, the issue is of a very technical character and any decision of this Court on such an issue of principle is likely to affect several industries in this companyntry. We have, therefore, decided number to embark upon a general enquiry on this point. Our decision will be companyfined to the material placed before the Industrial Court in the present proceedings, and we will merely examine Mr. Kolahs companytention that the view taken by the Industrial Court is number companyrect. That is why we wish to make it clear that our present decision should number be taken to be of any general significance and should be companyfined to the facts of this case. If it is thought necessary or desirable by the employers and the employees that this question should be scientifically examined and determined in a general way, it would be appropriate for them to more the Government to appoint a special body of experts to deal with it. Reverting then to the narrow question as to whether the appellants are justified in attacking the finding of the Industrial Court on this issue, lot us mention a few relevant facts and companysiderations. We have already numbericed that at the request of the Government of India, the Government of Gujarat discontinued the publication of the State series of the companysumer price index and so it became necessary for the said Government to secure the advice of an Expert Committee as to how the new series of companysumer price index for Ahmedabad should be linked with State series after making such adjustments therein as may be found necessary. The Expert Committee dealt with this problem of arriving at the linking factor, so that when the new series is adopted and the State series is discontinued, the dearness allowance on the present scale can be companyputed even on the basis of the new series. The Government of India had, in this companynection. indicated that 2.98 would be an appropriate linking factor. This figure had been reached by taking the annual average of the monthly index number of the State series for the year 1960 which then stood at 298. The figure of the base year 1960 was obviously 100. The linking factor of 2.98 was deduced by dividing 298 by 100. In doing so, however, the question about making necessary adjustments in the index numbers of the State and of the new series had number been companysidered. This question was companysider- ed by the Desai Expert Committee, and it held that the linking factor should be 3.17 as against 2.98 per point in the new series as was worked out without companyrecting the old series In other words, the Desai Committee suggested as a linking factor a mere arithmetical ratio of 3.17. A similar question was referred by the Government of Maharashtra to the Lakdawala Expert Committee, and the said Committee was inclined to take the same view. It numberdoubt observed that in spite of the fact a linking on the basis of a simple ratio companyrects a series only in respect of one of its dimensions, we recommend this companyrse because we are of opinion that such a companyrection is adequate for the requirements of our terms of reference and in any case, the only companyrection that we can meaningfully ,carry out. It would thus be seen that in accepting the linking factor at 3.17, the Government of Gujarat has adopted the companyclusion of the Desai Expert Committee. The question which arises is whether in upholding this view, the Industrial Court has companymitted any error. As the Industrial Court has observed, two possibilities presented themselves in attacking this problem. One was to work out an entirely new scale of basic wages founded number on the pre- war level of 1939, but on the companyt of living of 1960 as the base year of the new series and to award dearness allowance thereafter. The Industrial Court thought that to adopt this companyrse may companyceivably create a large number of problems which do number exist at present and in fact, it may tend to destroy industrial peace. The Industrial Court thought that such a companyrse might even be outside its terms of reference. Even so, in its opinion, the result which would be achieved by adopting this companyrse may number in the end be very different. The other companyrse is to link the State series with the new series to maintain companytinuity. It is this latter alternative which has been adopted by the Government of Gujarat, and the Industrial Court has approved of the said companyrse. We are number satisfied that the companyclusion thus recorded by the Industrial Court is shown to be erroneous. As we have just indicated, the problem is a technical problem and it can be decided only in the light of the opinion which experts may form on examining all the aspects pertaining to the problem and after taking into account all the pros and companys which may be put before them by the respective interested parties. The stand which the parties may take in regard to this companytroversy would differ according as the change in the companyt of living index in the respective States may help their interest one way or the other. That explains why there is numberunanimity in the approach adopted by the different parties. This is made clear by the companytentions raised by the respective parties before the Lakdawala Expert Committee. There is numberdoubt that on the material as it stands, it would be unreasonable, inexpedient and in fact impossible for this Court to attempt to resolve this companytroversy on the basis of the larger issue of law raised by Mr. Kolah before us. The decision of that question must, therefore, be left to a Committee of experts if and when it is appointed. Meanwhile, the question will have to be dealt with on an ad hoc basis in each industry, taking into account the particular facts and circumstances of each case. Looking at the question from this narrow point of view, we do number think the appellants have placed before the Industrial Court any material to justify their companytention that for determining a linking factor, the behaviour of prices for two or three years during the relevant period should and can be studied. In fact, Mr. Vasavadas companytention is that a study of the behaviour of prices for such a period and deducing the average therefrom would be inconsistent with the numberion of evolving a linking factor. He companytends that we have to take one year by reference to which this problem must be resolved. We express numberopinion on this part of the companytroversy between the parties. In fact, the Award under appeal shows that the argument which Mr. Kolah has urged before as was number placed in this form, and in any case does number appear to have been pressed, before the Industrial Court. Even assum- ing that it would have been open to the Industrial Court to companysider this larger issue under the terms of its reference, we do number see how the Industrial Court companyld have attempted to solve the problem satisfactorily on the material placed before it. Therefore, we cannot accept Mr. Kolhas argument that the Industrial Court was number justified in upholding the decision of the Government of Gujarat that the linking factor should be taken at 3.17. The last question to companysider is whether the Industrial Court was right in companying to the companyclusion that the additional burden which its award would impose upon the appellants would number be beyond their financial capacity. In dealing with this question, there are two general companysiderations which cannot be ignored. The first companysideration is that the task of companystructing a wage structure of industrial employees is a very responsible task and if,- -present.,, several difficult and delicate problems. The claim of the employees for a fair and higher wage is undoubtedly based on the companycept of social justice, and it inevitably plays a major part in the companystruction of a wage structure. There can be little doubt that if the employees are paid a better wage which would enable them to live in fair companyfort and discharge their obligations to the members of their families in a reasonable way, they would be encouraged to work whole-heartedly and their work would show appreciable increase in efficiency. On the other hand, in trying to recognise and give effect to the demand for a fair wage, including the payment of dearness allowance to provide for adequate neutralisation against the everincreasing rise in the companyt of living, industrial adjudication must always take into account the problem of the additional burden which such wage structure would impose upon the employer and ask itself whether the employer can reasonably be called upon to bear such burden. The problem of companystructing a wage structure must be tackled on the basis that such wage structure should number be changed from time to time. It is a long-range plan and so, in dealing with this problem, the financial position of the employer must be carefully examined. What has been the progress of the industry in question what are the prospects of the industry in future has the industry been making profits and if yes, what is the extent of profits what is the nature of demand which the industry expects to secure what would be the extent of the burden and its gradual increase which the employer may have to face ? These and similar other companysiderations have to be carefully weighed before a proper wage structure can be reasonably companystructed by industrial adjudication, vide Express Newspapers Private Ltd., and Another v. Union of India Others 1 . Unusual profit made by the industry for a single year as a result of adventitious circumstances, or unusual. loss incurred by it for Similar reasons, should number be allowed to play a major role in the calculations which industrial adjudication would maker in regard to the companystruction of a wage structure. A broad and overall view of the financial position of the employer must be taken into account and attempt should always be made to reconcile the natural and just claims of the employees for a fair and higher wage with the capacity of the employer to pay it and in determining such capacity, allowance must be made for a legitimate desire of the employer to make a reasonable profit. In this companynection, it may also be permissible to take into account the extent of the rise in price structure which may result from the fixation of a wage structure, and the reasonableness of the additional burden which may thereby be imposed upon the, companysumer. That is one aspect of the matter which is relevant. The other aspect of the matter which cannot be, ignored is that if a fair wage structure is companystructed by industrial adjudication, and in companyrse of time, experience shows that the employer cannot bear the burden of such wage structure, industrial as judication can, and in a proper case should, revise the wage structure. though such revision may result in the reduction of the wages paid to the employee. It is true that numbermally, once a wage structure is fixed, employees are reluctant to face a reduction in the companytent of their wage Packet but like all major problem, associated with industrial adjudication, the decision of this problem must also be based on the major companysideration that the, companyflicting claims of labour and capital must be hormonised on, a reasonable basis and so if it appears that the employer cannot really hear the burden of the increasing wage bill, industrial adjudication, on principle. cannot refuse to examine the employers care and should number hesitate to give him relief if it is satisfied that if such relief is number given, the employer may have to close down his business. It is unlikely that such situation would frequently arise but principle if situations arise, a claim by the employer for the reduction of the wage structure cannot be rejected summarily. This principle, however, does number apply to cases where the wages paid to the employees are numberbetter than the basic minimum wage. If, what the employer pays to his employees is just the basic subsistence wage, then it would number be open to the employer to companytend that even such a wage is beyond his paying capacity. 1 1961 1 L. L. J. 339. Industrial adjudication has companysistently recognised and enforced the principle that social justice requires that an industrial employer must be able to pay his employees a wage structure which can be reasonably regarded as basic minimum wage. No employer can be allowed to pay his employees wages which are below the basic minimum or the subsistence wage. It is well-known that in certain industries, minimum wages are fixed by the statute. Even where minimum wages are number fixed by statute, industrial adjudication can easily determine whether in a given case, the wage paid is basic minimum or number. In either case, where the wage answers the description of the basic minimum or subsistence wage, it has to be paid by the employer and if he cannot afford to nay it, he would number be justified in carrying on his industry vide Crown Aluminium Works v. Their Workmen 1 . That is the second companysideration which has to be borne in mind in dealing with the point raised by the appellants about their incapacity to bear the burden. We have thought it necessary to refer to these two theoretical companysiderations at this stage, because if they are borne in mind, we get a proper perspective of the problem raised by the appellants companytention as to their financial capacity. In the present proceedings, the Industrial Court is number companystructing any wage structure for the first time, number is it dealing with the question of determining the quantum or the sliding scale of the dearneses allowance to be paid to the textile employees at Ahmedabad. These matters have been companysidered in the past on several occasions and they are governed by companysent awards passed between the parties. It is because of the new survey made in 1958-59 and the companysequent change in the companystruction of the companysumer price index made by the series published by the Government of Gujarat that the present dispute has arisen and so, while dealing with the appellants companytention, it would be pertinent to enquire whether the appellants show that a case has been made out for reduction of the wages paid to the employees. It is, of companyrse, true that the wages paid to the textile employees at Ahmedabad cannot be regarded as subsistence wages or bare minimum wages and so, it would number be open to the respondent to companytend that the appellants Must pay the said wages whether they can afford to may them or number. If it is shown that the appellants cannot bear the burden and that the implementation of the award would inevitably have extremely prejudicial effect upon the companytinued existence of the textile industry itself, we would be justified in revising the scale of dearness allowance. But. as we have just indicated, such a plea 1 1958 1 L. L. J. 1. can succeed only if it is shown satisfactorily that the burden cannot truly and really be borne by the textile industry at Ahmedabad. That is the proper approach to adopt in dealing with this problem and the award under appeal shows that the Industrial Court did approach the problem in a proper way. In support of their companytention that the textile industry at Ahmedabad cannot bear the burden which would be imposed by the award, the appellants examined Mr. Chokshi. Mr. Chokshi is a Chartered Accountant and a senior partner in the firm of Messrs. C. C. Chokshi Co. He has been practising as a Chartered Accountant for about 24 years. He was a member of the Council of the Institute of Chartered Accountants for 8 years and its President for one year. It appears that the appellant Association sent to him five statements and asked for his opinion on the financial position of the textile industry at Ahmedabad. Mr. Chokshi first filed an affidavit in which he set out his opinions and then gave oral evidence. In his affidavit, Mr. Chokshi referred to the respective statements on which his opinion was based and he stated that the financial position of the textile industry at Ahmedabad was, on the whole, number very satisfactory. In appreciating the evidence given by Mr. Chokshi, it would, therefore, be material to indicate the nature of the statements on which his opinion was based. The first statement shows the depreciation, development rebate, and increase in gross block per year of the Ahmedabad Cotton Textile Mill Industry for the years 1945 to 1963. The statement indicates that all these items have increased from year to year depreciation was Rs. 0.83 crore in 1945 and it rose to Rs. 6.68 crores in 1963 development rebate was Rs. 0.05 crore in 1954 and it became Rs. 1.26 crores in 1963 gross block rose from Rs. 20.25 crores in 1945 to Rs. 101.98 crores in 1963 and increase in gross block Per year for the same years was Rs. 1.31 and Rs. 9.77 crores. The second statement shows the net worth and borrowings of the said industry during the same period. The emphasis in this statement was on the ever-increasing borrowings. In 1945, the borrowings, companysisting of secured and unsecured loans and other deposits, were of-the order of Rs. 9.58 crores, whereas in 1.963, they rose to Rs. 47.76 crores. The third statement shows the working capital and borrowings for the period in question. The fourth statement shows profits after tax as percentage of net worth of the said industry for the same period. This statement refers to profits before tax, loss, tax provision, profits after tax, net worth, and the last companyumn gives profits after tax and indicates percent- age of net worth. It is the last companyumn on which Mr. Chokshi relied when he gave his opinion that the financial position of the Ahmedabad textile industry was number very satisfactory. Whereas in 1945, the percentage of profits to net worth was 13.4, in 1963 it was 3.3. The last statement shows dividends as percentage of net worth in different industries. It companyers the period between 1951 and 1962. This statement shows that the dividends paid by the industry in question are companyparatively on the low side. Dividends paid by 12 industries are shown in this statement, and it would be right to say that the textile industry has number been paying dividends which can be said to be very high in companyparison to the dividends paid by other industries. On the other hand, the respondent has filed several statements showing that the financial position of the appellants has been companySistently good, and the fear that the appellants would number be able to bear the burden is entirely unjustified. Annexure 11 filed by the respondent along with its statement shows the percentage of wages to total income in Ahmedabad Cotton Textile Industry from 1939 to 1962. This percentage was 26 in 1939 and is 24 both in 1961 and 1962 for the intervening period, it has risen to 28 in 1949 and fallen to 20 in 1943. Annexure III gives the statement showing the growth of paid up capital by cash in the said industry for the same period. In 1939, the paid up capital by cash was 407 lakha. where as in 1962 it was 770 lakhs. Annexure IV shows the growth of total paid up capital including bonus shares for the same Period. This statement shows a remarkable growth of total paid up Capital in this manner. In 1939, the total paid up capital was 442 lakhs whereas in 1962 it has reached the magnitude of 2,129 lakhs. From 1950 onwards, this category of capital has been companysistently rising. Annexure V shows the value of gross block for the same period. In 1939, it was 1,915 lakhs whereas in 1962 it rose to 9,341 lakhs. Annexure VI shows the amount of Depreciation Fund including Development Rebate in 1939 it was 745 lakhs, whereas in 1962 it was 5,643 lakhs. Annexure VII shows the amount of Reserves excluding Depreciation Fund and Liability Funds in 1939 they were 360 lakhs, while in 1962 they were 2,518 lakhs. From Annexure VII we gather that the amount of Gross Profit including the Managing Agents Commission and Depreciation was Rs. 159 lakhs in 1939, and it was Rs. 1,860 lakhs in 1961 and Rs. 1,296 lakhs in 1962. Incidentally, it is the figure of gross profit which is more important, because it is number disputed that wages payable to the employees are a first charge, and all other liabilities take their place after the wages. There are three other Annexures filed by the respondent, but it is unnecessary to refer to them. The main companyment which falls to be made on the opinion expressed by Mr. Chokshi is that he has looked at the problem merely from the investors point of view. In fact, he fairly stated that he had made his analysis from the point of view of an investor. That explains why Mr. Chokshi took the view that absolute figures of more gross profit or net profit from year to year would be misleading. He did number agree that most of the textile mills in Ahmedabad are at present under capitalised. He companyceded that in dealing with the problem of expanding business and increasing the wage bill, one of two methods can be adopted by the industry the industry can increase the capital or borrow money. Very often, said Mr. Chokshi, borrowing is preferred to the increase of capital in certain market companyditions. He was number certain whether borrowings had been resorted to by the textile industry for the purpose of expansion. In dealing with the problem of the financial capacity of the appellants to bear the burden, it would be inappropriate to rely solely upon the approach which an investor would adopt in such a case and so, we are number prepared to hold that the Industrial Court was in error in number accepting Mr. Chokshis estimate about the financial position of the Textile industry at Ahmedabad. Mr. Kolha for the appellants has strongly relied upon certain statements made in the Reserve Bank of India Bulletin issued in July, 1964, in support of his argument that the financial position of the appellants was number satisfactory. Dealing with the position of the Cotton Textile Industry during the period under review, tile Bulletin says that companyton textiles recorded a steep fail of Rs. 17.0 crores in net profits as against a rise of Rs. 2.1 crores in the previous year. Applying the profitability ratio, the Bulletin goes on to say that companyton textiles, amongst others. showed declines in profitability. This test is evolved by the ratio of gross profits to sales, and the return on capital, as measured by the ratio of gross profits to total capital employed. According to the Bulletin, the IF decline in the return on shareholders equity ratio of profits after tax to net worth was substantial in the case of companyton textiles along with other named industries. Table 4 in the Bulletin gives a companyparative statement of the profitability ratios, industry-wise, in 1960-61, 1961-62 and 1962-63. It is arranged in five companyumns which deal respectively with gross profits as percentage of sales gross profits as percentage of total capital employed, profits after tax as percentage of net worth, dividends as percentage of net worth, and dividends as percentage of paid up capital. The figures shown against the companyton textiles in these five companyumns support the main companyment made in the Bulletin that the position of the textile industry, companysidered as a whole in this companyntry, was number quite satisfactory. We do number think in companysidering the financial position of the appellants in the companytext of the dispute before us, it would be appropriate to rely unduly on the profitability ratio which has been adopted by the said Bulletin. Indeed, in appreciating the effect of the several statements produced before the Industrial Court by the parties in the present proceedings, it would be relevant to remember that some of these single-purpose statements are likely to create companyfusion and should number ordinarily be regarded as decisive. As Paton has observed Different groups for whom financial statements are prepared are interested in varying degree in particular types of information and so, it has been held in some quarters that numberone form of statement will satis- factorily serve all these purposes, that separate single- purpose statements should be prepared for each need or that the statements usually prepared for general distribution should be expanded so as to include all the detail desired. 1 Paton cites the companyment of Wilcox against these single-purpose statements. Said Wilcox The danger in undertaking to furnish single-purpose financial statements lies in increasing companyfusion and misunderstanding, and in the possible misuse of such statements for unintended purposes. Paton has then referred to certain methods for determining the financial position of a companymercial and industrial companycern. In this companynection, he refers to the proprietary ratio rate of earnings on total capital employed, rate of dividends on companymon stockholders equity and others. Our purpose in referring to these companyments made by Paton is to emphasise the fact that industrial adjudication cannot lean too heavily on such single-purpose statements or adopt any one of the tests evolved from such statements, whilst it is attempting the task of deciding the financial capacity of the employer in the companytext of the wage problem. While we must numberdoubt examine the position in detail, ultimately we must base our decision on a broad view which emerges from a companysideration of all the relevant factors. What then is the broad picture which emerges from the evi- dence on the record in respect of the financial position of the textile industry at Ahmedabad ? The companyton textile industry at Ahmedabad can legitimately claim to be the oldest organised industry in the companyntry. It recently celebrated its centenary in Accountants Handbook Edited by Paton, p. 13 1961. The story about the growth of this industry during this century is very heartening. In its early stages, it numberdoubt made. a small and modest beginning but at the time when the centenary celebrations were held, it had an installed capacity of about two million spindles and 42,000 looms and it employed 1,30,000 workmen. Statistics show that textile mills at Ahmedabad account roughly for one- third of the total mill production in the companyntry, and it would be numberexaggeration to say that some of the best varieties of cloth produced in the companyntry are manufactured at Ahmedabad. The paid up capital by cash of the industry in 1939 was 4.07 crores and it became 7.70 crores in 1962. The total paid up capital including bonus shares was 4.42 crores in 1939 and in 1962 it rose to 21.29 crores. It would thus be seen that out of the total paid up capital of 21.29 crores in 1962, the capital companylected by cash is 7.70 crores, whereas the balance of 13.59 crores is by way of bonus shares. In other words, the cash capital is increased by 175 because of capitalisation of the reserves. Similarly, the gross block in 1939 was 19.15 crores and in 1962 it rose to, 93.41 crores. Almost the same rate of progress is evidenced by the Reserves. The Reserves excluding Depreciation Fund and other liability funds at the end of 1939 was 3.60 crores and they have gone to 25.18 crores in 1962. The gross profits have registered a similar rise. In 1939, the gross profit including Managing Agents Commission and depreciation was 1.59 crores, whereas in 1962 it has reached the magnitude of 12.96 crores. In this companynection, it would be unreasonable to ignore the fact that the industry has been able to save and capitalise from 1939 onwards 13.85 crores and has been able to pay a fair amount of dividend on equity shares throughout the period, in spite of a very large capitalisation of reserves. It is true that the textile industry at Ahmedabad has been learning very heavily on borrowings but that may partly be due to the fact that the said industry has for several decades been under-capitalised. Besides, the tendency to rely upon borrowings for expanding the business is numbericeable throughout this period of the life of textile industry at Ahmedabad and has been the subject-matter of companyment by several persons. In fact, sometimes it is treated as a peculiar feature of the development of the textile industry at Ahmedabad and so, the extent of borrowings cannot be pressed into service for the purpose of showing that the financial position of the industry is unsatisfactory. One remarkable feature of the textile industry at Ahmedabad is the harmonious relations which have companysistently subsisted between the employers and the employees. The employers, on the whole, are enlightened and progressive in their outlook, and the Trade Union leadership of the employees is also enlightened and progressive. Both the employers and the employees realize that the progress of the industry depends primarily on the companyperation between capital and labour and the large number of companysent awards and agreements to which they have been parties over a period of several years, is a standing tribute to the spirit of company operation which inspires the textile industrial life in Ahmedabad. As one looks back over the last hundred years of the life of the textile industry at Ahmedabad, one is struck by the fact that industrial life in that area has rarely been disturbed by bitterness, feuds or, general strikes. This spirit of companyoperation, based on the willingness to give and take, alone can ensure the economic and industrial growth of our companyntry, for, after all, it is the speedy economic growth of industry of the companyntry which must be the ultimate object of both capital and labour. In companysidering the prospects of the textile industry in Ahmedabad, this feature must be given a place of pride. It is significant that as a result of the spirit of company operation between capital and labour, the textile industry at Ahmedabad has been able to enter into several agreements for rationalising the industry itself. It is well-known that an attempt to rationalise textile industry inevitably involves retrenchment of a large number of employees but the appellants and the respondents have entered into agreements of rationalisation after both of them agreed to three basic principles in that behalf. These principles are- Rationalisation to be effected without creating unemployment of the existing workers Gains of Rationalisation should be adequately shared between the Management and the workers and The workload should number be increased in a manner which may jeopardise the health of the workers. The fact that a large number of agreements have been made between the parties by companysent companycerning the vexed subject of rationalisation also shows that the future of the textile industry at Ahmedabad is bound to be as bright as it has been in the past. In this companynection, we may refer to the tribute paid by the Central Wage Board to the Cotton Textile Industry at Ahmedabad. Says the Board The industry, however, is companyscious of the need for rationalisation and modernisation as the sine quo number of survival, the pace of which had been checked in the past by the fear of unemployment that fear has been allayed, and labour number recognises that its own welfare depends on rationalisation and modernisation, and it has agreed upon the broad lines for their introduction. Some mills even today have very modem and up-to-date machinery, and all mills which can manage to do so will have to rationalise and modernise for the nation is on the march, and this industry must clothe the nation. Let us then companysider the question about the prospects of the demand for textile products in future and the increasing productivity of the industry. On this point again, it is difficult to share the pessimism disclosed by the attitude adopted by the appellants. There is little doubt that the productivity of the industry is increasing and that the demand for textile products will never be on the decrease in future. Therefore, we do number see how we can differ from the companyclusion of the Industrial Court that the appellants have failed to substantiate their companytention that the additional burden would be beyond their capacity to pay. In this companynection, we ought to recall the fact that what the appellants are required to prove is that the prospects of their financial position in future justify a reduction in the wage which is being paid to the industrial employees during all these years for that on the ultimate analysis would be the result if their companytention is accepted. The Industrial Court has made a definite finding that it does number think that the financial companydition of the industry has deteriorated so as to justify a departure from the principles in regard to dearness allowance hitherto laid down in respect of this industry at this centre. In our opinion, this companyclusion is well-founded. It was companyceded before us that our decision in Civil Appeals Nos. 167-173 of 1965 would govern the decision of Civil Appeals Nos. 537-538 of 1965.	Case appeal was rejected by the Supreme Court
ORIGINAL JURISDICTION Writ Petition No. 120 of 1965. Petition under Art. 32 of the Constitution of India for the enforcement of Fundamental Rights. M. Seshdari, Sadhu Singh, B. R. Agarvwala and H. K. Puri, for he petitioner. V. Gupte, Solicitor-General, R. H. Dhebar and R. N. Sachthey, for the respondents. The Judgment of the Court was delivered by Wanchoo J. This writ petition under Art. 32 of the Consti- tution is by a former Portuguese citizen, who became a citizen of India after the acquisition of the Portuguese territories in India by the Government of India on December 20, 1961. It may be mentioned that the Portuguese territories were acquired by India after military action. The petitioner was resident in Daman and had obtained 23 licences for import of various goods between October 9 and December 4, 1961. The goods to be imported under these licences were of the value of over one million pounds. The licences were valid for a period of 180 days from the date of issue and companyld be renewed for a further period. The case for the petitioner is that he had placed firm orders in respect of the goods companyered by the said licences with his foreign suppliers prior to December 20, 1961 for the full value of the licences and had made to the said foreign suppliers advance payments either in full or in part of the price of the goods. The total amount said to have been paid by the petitioner was over found 3,88,000 and he had to pay a further sum of over found 7,62,000 as the balance. The goods companyered by these licences had to be shipped in the first quarter of 1962. The petitioners case further is that as the goods did number arrive within the period of 180 days be had applied on various dates for extension of the licences but the same was refused. The petitioner then tried to persuade the foreign suppliers to cancel the orders and remit back the money paid to them, but they refused to do so. Consequently, he applied to the Government of India that he might be permitted to import the goods against the said licences, but this was also refused. He therefore filed the present petition in May 1963, and companytends that the refusal to permit him to import goods on the basis of the said licences violated his fundamental right guaranteed under Art. 19 1 f and g of the Constitution. He also companytends that the Government of India allowed import of goods by other merchants who were similarly situate and this amounted to discrimination against him which was violative of Art. 14 of the Constitution. He further companytends that the Government of India wits bound to allow him to make the imports in question inasmuch as the Government of India had recognised his right to import under the licences granted to him before December 20, 1961. In this companynection reliance is placed on the judgment of this Court in State of Rajasthan v. Shyamlal. 1 The petition has been opposed on behalf of the Government of India. It is urged that in view of the emergency, Art. 19 has been suspended by virtue of the provisions of Art. 358 of the Constitution and therefore the petitioner cannot rely on that Article. Secondly, it is urged that the petitioner has failed by any reliable evidence to make out a case of discrimination against him and that imports had been permitted to other persons who were number similarly circumstanced as the petitioner. It is also urged that licences companyld only be ,ranted by the Governor of Daman at the relevant time and the petitioner has failed to prove that his licence were in fact issued by the Governor of Daman, and therefore the licences are number valid. It is further urged that even if the licences were held to be valid, they were for a period of 180 days. As the imports did number take place within that period. the petitioner is number entitled to make any imports after the period was over. The Government of India was number bound to extend the licences, and inasmuch as the licences were number extended the petitioner has numberright to the issue of any writ by this Court companypelling the Government of India to extend the licences and allow the petitioner to make imports in accordance with them. Lastly, it is urged that the Portuguese territories in India were acquired by companyquest as such the new sovereign was number bound as between itself and the subjects of the former Portuguese territories to honour companymitments of the former Portuguese Government, and that it was open to the new sovereign either to recognise the 1964 7 S. C. R.174. companymitments of the former Portuguese Government or number to do so. In the present case, the new sovereign, namely, the Government of -India, refused to recognise companymitments of the former Portuguese Government of the nature made by the issue of licences to the petitioner and therefore the petitioner is number entitled to any relief from this Court. It is unnecessary to companysider all the arguments except the one under Art. 14 raised on behalf of the petitioner as we have companye to the companyclusion that the petitioner is number entitled to any relief in view of the last point urged on behalf of the Government of India. We shall assume for purposes of the present petition that the petitioner did hold valid licences before December 20, 1961 from the former Portuguese Government for import of goods worth over a million pounds. The position of law, however, in cases of acquisition of territories by companyquest, as in the present case, is undisputed. In such a case the residents of the territories did number carry with them the rights which they possessed as subjects of the ex-sovereign, and that as subjects of the new sovereign they had only such rights as are granted or recognised by him, so far as the relations between the subjects and the sovereign are companycerned. In the present case we are number companycerned with relations between subject and subject of the former sovereign and their rights inter se when the new sovereign takes over. We are company- cerned only with relations between subjects of the former sovereign and the new sovereign after the new sovereign has taken over and what we say herein must be companyfined to that position alone. In M s Dalmia Dadri Cement Co. Ltd. v. The Commissioner of Income-tax, 1 this undisputed position of law was laid down by this Court. This position was reiterated by this Court in State of Gujarat v. Vora Fiddali Badruddin Mithibarwala, 2 where it was held that the rule that cession of territory by one State to another is an act of State and the subjects of the former State may enforce only those rights which the new sovereign recognises is well- settled. The same position was again affirmed in Shyamlals case 1 where it was held that as between the new sovereign and the subjects of the former sovereign, who become the subjects of the new sovereign by acquisition of territory, the rights of such subjects against the new sovereign depend upon recognition of liability by the new sovereign. Whether the new sovereign has recognised the rights of the new subjects as against itself and has undertaken the liabilities arising thereunder is a question of fact 1 1959 S.C.R. 729 3 1964 7 S.C.R. 174 2 1964 6 S.C.R. depending upon the action of the new sovereign after acquisition of the territory companycerned. It is on the basis of this well-settled position of law that we have to companysider whether the new sovereign, namely, the Government of India recognised these rights with which we are companycerned in the present petition after December 20, 1961. when the former Portuguese territories in India were acquired. If it did so, the petitioner will be entitled to relief from this Court but if it did number, the petition must fail on the -round that the new sovereign never recognised the rights arising out of the licences in question. We therefore turn to the events which happened after December 20, 1961 to decide whether the new sovereign namely, the Government of India ever recognised rights of the kind which the petitioner claims on the basis of the licence-, which he bad from the former Portuguese Government. It appears that after the new territories were acquired, their administration was entrusted to a Military Governor. On December 30, 1961, the Military Governor issued a proclamation with respect to arrangements made for trade in the new territories. By this proclamation, exports were allowed by sea on companypletion of the necessary formalities in accordance with law that prevailed immediately before the entry of Indian troops into Goa. Further imports of goods already at sea and in regard to which foreign exchange companyponent had already been paid were allowed on the same companyditions. This proclamation of the Military Governor clearly shows the extent to which import of goods was allowed i.e., where the goods were already at sea and had been fully paid for. It is number the petitioners case that his licences were companyered by the recognition granted to import of goods by this proclamation. Further it see s to us clear by implication that every other kind of import except the kind permitted by this proclamation was number recognised. Therefore, as we read this proclamation, it is clear that the new sovereign did number recognise imports on the basis of licences like those granted to the petitioner, unless two companyditions were fulfilled, namely, i that the goods under the licences were already at sea, and ii that the foreign exchange had already been paid with respect to them. If both these companyditions were fulfilled, imports were allowed but number otherwise. As, it is number the petitioners case that both these companyditions were fulfilled with respect to these licences, it must be held that the imports which be number claims to be allowed were number recognised. Besides the proclamation of December 30, 1961, a letter was written by the Chief Civil Administrator to the President, Goa Chamber of Commerce in companynection with import of goods and the Chief Civil Administrator had agreed to companysider each and individual case on merits and had indicated that applications should be made to him with supporting evidence that a firm companymitment had been entered into before December 18, 1961. This again shows that the new sovereign was number prepared to recognise all import licences granted but only certain types of them, and it is number the petitioners case that he was even companyered under this letter of January 11, 1962. It may be added that this letter is really explanatory of the proclamation of December 30, 1961. The petitioner, however, relies on the Goa, Daman and Diu Administration Ordinance No. 11 of 1961 hereinafter referred to as the Ordinance in support of his companytention that the Government of India had recognised his rights under these licences. Under s. 4 of the Ordinance, all laws in force before the 20th December 1961 in Goa, Daman and Diu or any part thereof were to companytinue to be in force therein until amended or repealed by a companypetent Legislature or other companypetent authority. This Ordinance was promulgated on March 5, 1962 and came into force immediately. It was replaced by the Goa, Daman and Diu Administration Act, No. 1 of 1962 hereinafter referred to as the Act , which was promulgated on March 27, 1962 and was to companye into force from March 5, 1962 i.e., the date of the Ordinance. By s. 5 of the Act, all laws in force immediately before December 20, 1961, in Goa, Daman and Diu were to companytinue in force therein until amended or repealed by a companypetent authority. The companytention on behalf of the petitioner is that under the Ordinance and the Act, the previous laws were to companytinue and therefore this amounted to recognition by the Government of India of all rights flowing from the previous laws and in this companynection reliance has been placed on the decision of this Court in Shyamlals case 1 . Further reliance has been placed on the Goa, Daman and Diu Laws Regulation No. XII of 1962 , which came into force on November 22, 1962. By this Regulation, certain Indian laws were enforced in the new territories, including the Imports and Exports Control Act, No. 18 of 1947 and any law in force companyresponding to the new law enforced by this Regulation was repealed. So the former laws as to export and import which were companytinued by the Ordinance and the Act were repealed by this Regulation, which brought the Indian Imports and Exports Control Act into force into the new territories. Particular reliance is placed on s. 4 2 of the Regulation, which lays down that numberhing in sub-s. 1 , which 1 1964 7 S.C.R. 174. provides for repeal, shall affect the previous operation of any law so repealed or anything duly done or suffered thereunder, or any right, privilege, obligation or liability acquired, accrued or incurred under any law so repealed. The argument is that sub-s. 2 of s. 4 of the Regulation preserved any right, privilege, obligation or liability acquired, accrued or incurred under the repealed law and therefore the right under the licences in favour of the petitioner which were issued under the repealed law were preserved and this amounted to recognition of the petitioners right under the said licences and therefore the Government of India having recognised the right was bound to honour it. We are of opinion that there is numberforce in this companytention. The main argument on behalf of the petitioner is based on the decision of this Court in Shyamlals case. 1 In that case it was observed that by companytinuing the old laws, till they are repealed, altered or modified, the new State in effect undertook the liability which might arise against it by virtue of the companytinuance of the old laws. That observation was immediately followed by another observation to the effect that even if there was some doubt about the new State undertaking the liabilities of the old State in view of the companytinuance of the old laws, the Court companyld in accordance with the decision in Dalmia Dadri Cement Co.s case 2 look to Art. VI of the Covenant to companye to the companyclusion that on companytinuing the old laws, until they were altered, repealed or modified, the new State intended to affirm the rights of the subjects which they had against the merging State and to assume itself the liability if any arising against the merging State. The decision therefore in that case that the new State had recognised the liabilities of the old State was number based only on the fact that the old laws were companytinued it was fortified by the further observation that Art. VI of the Covenant companyld be looked into to see what the new State intended, and that Article provided that the liabilities of the old State would be assumed by the new State. There is numberdoubt that if that Article had number been there in the Covenant and if, for example, the Covenant provided that the new State would number assume the liabilities of the old State, the Court would number have companye to the companyclusion that there was recognition of the liabilities against the old State by the new State. In the present case we have numberhing like Art. VI of the Covenant to lead us to the companyclusion that there was recognition of the liabilities of the old State by the new State. In the absence of such a provision it would number in our opinion be right to say that merely because the old laws were companytinued there was recognition of the liabilities of the old 1 1964 7 S.C.R. 174. 2 1959 S.C.R 729 State by the new State. We have therefore companye to the companyclusion that merely because the old laws were companytinued, it cannot necessarily be inferred that the new State recognised and assumed all liabilities of the former State. On the other hand if we refer to the proclamation of the Military Governor of December 30, 1961, we immediately see that only certain types of imports to which we have already referred were recognised by the new State and number others. In the face of that proclamation of December 30, 1961, it would in our opinion be impossible to infer from the mere fact that the old laws were companytinued that there was recognition of liabilities arising therefrom by the new sovereign. That is one aspect of the matter which in our opinion companyclusively shows that the new sovereign did number recognise the rights arising from licences of the kind with which we are dealing in the present petition, and therefore the petitioner would have numberright under these licences for they were never recognised by the new sovereign. -In this view of the matter, the petition must fail. But this is number all. The Ordinance and the Act of 1962 on which the petitioner relies came into force from March 5, 1962. It is true that they provided for the companytinuance of old laws but that companyld only be from the date from which they came into force i.e., from March 5, 1962. There was a period between December 20, 1961 and March 5, 1962 during which it cannot be said that the old laws necessarily companytinued so far as the rights, and liabilities between the next subjects and the new sovereign were companycerned. So far as such rights and liabilities are companycerned, we say numberhing here as to the rights and liabilities between subjects and subjects under the old laws , the old laws were apparently number in force during this interregnums. That is why we find in s. 7 1 of the Ordinance, a provision to the effect that all things done and all action taken including any acts of executive authority, proceedings, decrees and sentences in or with respect to Goa, Daman and Diu on or after the appointed day and before the companymencement of this Ordinance, by the Administrator or any other officer of Government, whether civil or military or by any other person acting under the orders of the Administrator or such officer, which have been done or taken in good faith and in a reasonable belief that they were necessary for the peace and good Government of Goa, Daman and Diu, shall be as valid and operative as if they had been done or taken in accordance with law. Similarly we have a provision in s. 9 1 of the Act, which is in exactly the same terms. These provisions in our opinion show that as between the subjects and the new sovereign, the old laws did number companytinue during this interregnums and that is why things done and 3 65 action taken by various authorities during this period were validated as if they had been done or taken in accordance with law. A doubt was raised as to the power of the Military Governor to issue a proclamation like the one he did on December 30, 1961, to which we have already referred. That doubt in our opinion is cleared by these provisions which make all such orders as if they had been made in accordance with law. The proclamation of December 30, 1961 which clearly showed what kind of import licences would be recognised must be held to be in accordance with law and that means that numberimports were recognised except those companyered by the proclamation. Our attention is also drawn to certain other orders passed after March 5, 1962 in companynection with imports. One such order was passed on April 2, 1962 which stated that imports into Goa, Daman and Diu from abroad will be governed by the following principles - 1 in cases where letters of credit were opened with the Banco National Ultramarino on or before 18th December, 1961, or goods were shipped prior to 20th December, 1961, imports will be allowed and the necessary foreign exchange provided. 2 3 4 It is however admitted on behalf of the petitioner that his case is number companyered by even this order of April 2, 1962 and he cannot therefore use it as recognition of his right to import under these licences. Then on April 11, 1962, another order was issued in the following terms - Notwithstanding anything companytained in any decree, numberification, rule etc., it is hereby directed that all goods imported into Goa, Daman and Diu from abroad by freight or post shall require a valid import licence. These orders therefore after March 5, 1962 also clearly show that there was numberrecognition at any stage of the kind of licences which the petitioner held from the former Portuguese Government. The petitioner therefore in view of all these facts and circumstances cannot rely on the fact that old laws were companytinued as from March 5, 1962 number can he rely on the orders of April 2 and 11, 1962, for his case is number companyered by them, even though these orders SUP.CI/65-9 show some relaxation of the companyditions as companypared to the proclamation of December 30, 1961. Thus there was never any recognition of the right of the petitioner under the licences, which he held, by the new sovereign. He is therefore number entitled to ask this Court to companypel the Government of India to honour the licences in dispute in the present petition. As for Regulation No. XII of 1962, that is also of numberhelp to the petitioner. The laws repealed thereby as between the sovereign and the subjects were in force only from March 5, 1962. Section 4 2 on which reliance is placed would have helped the petitioner if his licences had been granted on March 5, 1962 or thereafter. But as his licences are of a date even anterior to the acquisition of the Portuguese territories, s. 4 2 of the Regulation cannot help him. The companytention under this head must also be rejected. As to Art. 14, it is enough to say that it was for the petitioner to establish that there was discrimination in his case. He has companypletely failed to do so, for besides certain -vague assertions in the petition, there is numberhing to prove that other licences were recognised in similar circumstances. The companytention under Art. 14 must fail.	Case appeal was rejected by the Supreme Court
ORIGINAL JURISDICTION Writ Petitions Nos. 51 and 53 of 1965. Petitions under Art. 32 of the Constitution of India for the enforcement of the Fundamental Rights. C. Chatterjee, M. R. K. Pillai, M. S. K. Aiyangar, D. Singh, R. K. Garg, S. C. Agarwala, M. K. Ramamurthi, for the petitioner in W.P. No. 51 . Petitioner in W.P. No. 53 appeared in person. Niren De, Additional Solicitor-General, N. S. Bindra, B. R. K. Achar and R. N. Sachthey, for the respondent in both the petitions . Interveners in W.P. No. 53 appeared in person. The Judgment of the Court was delivered by Wanchoo, J. These two petitions under Art. 32 of the Constitution for a writ of habeas companypus raise companymon questions and will be dealt with together. The main points raised in these petitions have been dealt with in K. Ananda Nambiar v. Chief Secretary, Government of Madras and others 1 in which judgment is being delivered today. It remains number to companysider the other points that arise specially in these petitions. The petitioners are members of the Left Communist Party and were ordered to be detained along with others numbering 140 in all under r. 30 1 b of the Defence of India Rules hereinafter referred to as the Rules by orders of the Governor of Kerala passed on December 29, 1964. In pursuance of these orders the petitioners were arrested on December 30, 1964. At that time the State of Kerala was being governed by virtue of the Proclamation of the President dated September 10, 1964. By this Proclamation the President assumed to himself all functions of the Government 1 1966 2 S.C.R. 178. of the State of Kerala and all powers vested in or exercisable by the Governor of that State and declared that the powers of the legislature of the said State would be exercisable by or under the authority of Parliament. The Proclamation also provided that in the exercise of the functions and powers assumed by the President with respect to the governance of the State, the President would act to such extent as he thought fit through the Governor of the said State. Certain other incidental provisions were also made in the Proclamation with which however we are number companycerned. The case of the petitioners is that these orders of detention were mala fide inasmuch as a general election was going to be hold in Kerala in the beginning of March 1965. In order to damage the prospects of the Left Communist Party in the election and to improve that of the Congress Party these orders of detention were made under the Rules. After the elections were over, the Left Communist Party emerged as the largest single party. There was an apprehension that if the Proclamation was withdrawn and a party government came into power in the State, the petitioners and others like them might be released. Consequently it is said that on March 4. 1965, the order of the Governor dated December 29, 1964 was cancelled and another order was made on the same date namely, March 4, 1965 by the Central Government in the name of the President ordering the detention of the petitioners under the Rules. The petitioners companytend that this order was also mala fide as it was made to circumvent the possibility of the Petitioners release in case a party-government came into power in the State of Kerala after the elections. The petitioners further companytend that there was numberapplication of the mind of the authority when the orders of detention were passed on December 29, 1964 and March 4, 1965. Further it is companytended that there was numbermaterial before the Central Government on March 4, 1965 on the basis of which the orders of detention companyld be passed and therefore the orders passed on that date were illegal. Lastly, it is urged that if the orders of detention passed on December 29, 1964 were good, the only way in which they companyld be cancelled was by release of the petitioners and they companyld number be replaced by other orders of detention. It is further urged that the order of cancellation was passed on March 4, 1965 and so was the new order of detention but both these orders were served on them on March 6, 1965. It is said that the Governors order dated December 29, 1964 having been cancelled on March 4, 1965 came to an end that day while the Presidents order having been served on the petitioners on March 6, 1965 began from that day and therefore there was numberwarrant -for detention between March 4 and March 6, 1965. Replies have been filed on behalf of the Government of India traversing all the allegations so far as detention under the order dated March 4, 1965 is companycerned. No reply has been filed on behalf of the Governor of Kerala with respect to the detention order of December 29, 1964 for the reason that the State, of Kerala was number made a party to these petitions. The said orders have number been specifically challenged as they were number in force when the petitions were made. It is well-settled that in dealing with a petition for habeas companypus the companyrt has to see whether the detention on the date on which the application is made to the companyrt is legal, if numberhing more has intervened between the date of the application and the .date of hearing. In the present case the applications were made to this Court after the orders dated March 4, 1965 had been .passed. It is therefore unnecessary to companysider the validity of the detention orders made on December 29, 1964, for those Orders are numberlonger in force and the petitioners are detained by orders passed on March 4, 1965. We shall therefore companysider only the grounds urged against the validity of the orders passed on March 4, 1965. The first point that is urged is that these orders are mala fide inasmuch as they were passed to circumvent the possibility of the petitioners being released in case a party government came into power in the State of Kerala after the elections in the beginning ,of March 1965. These allegations have been denied in the affidavit filed on behalf of the Government of India. But apart form this denial we fail to see how the orders passed on March 4, 1965 can be said to be mala fide if the Central Government was satisfied that with a view to preventing the petitioners from acting in a manner prejudicial to the defence of India, civil defence, public safety and public order it was necessary to detain them. It has been clearly stated on behalf of the Government of India that on the materials placed before it is was so satisfied before it passed the orders dated March 4, 1965. In the face of this affidavit on behalf of the Government of India it cannot possibly be said that the orders passed on March 4, 1965 were mala fide, even if we were to assume that there was any such possibility of release as has been alleged by the petitioners, though that has also been ,denied on behalf of the Government of India. We therefore reject the companytention that the orders passed on March 4, 1965 were mala fide. Then it is urged that there was numberapplication of mind by the Government of India before the- orders in question were passed, for as many as 140 orders were passed on the same day and that shows that mind companyld number have been applied to each individual case before so many orders were passed all at once on one day. We are of opinion that there is numberforce in this companyvention either. The reply on behalf of Government of India in this companynection is that the question as to the detention, of the persons who were ordered to be detained on March 4, 1965 was under companysideration of the Government of India. for quite some time and that only detention orders were passed on one day. It has also been stated on behalf of the Government of India that it was satisfied with respect to each individual person ordered to be detained on March 4, 1965 that detention was necessary for reasons already set out and it was after such satisfaction that the orders were passed though they happened to be -.passed on the same day. We are number therefore prepared to accept from the simple fact that as many as 140 orders were passed on the same day there was numbersatisfaction of the, Government of India with respect to each individual case. We have numberreason to hold that the affidavit filed on behalf of the Government of India in this respect should number be believed. This companytention must also fail. Then it is urged that there was numbermaterial before the Central Government before it passed the orders on March 4, 1965. This allegation has also been denied on behalf of the government of India. The allegation is that the file relating to these detenus must have been with the Government of Kerala in Trivandrum till March 4, 1965 and therefore the Government of -India passed the orders on March 4, 1965 without any material before it. The reply of the Government of India is that the file pertaining to the activities of the petitioners and others like them and the material relating thereto were before the Government of India when the orders of March 4, 1965 were passed. We fail to see why there companyld number be two, files relating to the activities of the petitioners one with the Government of Kerala and another with the Government of India., At any rate it has been emphatically asserted on behalf of the Government of India that papers companycerned activities of the petitioners and others like them were with Government of India and it was after the government had satisfied itself from those papers as to the likely prejudicial. activities of the Sup. Ci/66-14 4 32 petitioners that it passed the orders in question. There is therefore numberforce in this companytention either and it is hereby rejected. We number companye to the cancellation of the detention orders dated December 29, 1964 on March 4, 1965 and the service of the orders of cancellation as well as the fresh orders of detention passed on March 4, 1965. We have already indicated that when the orders of December 29, 1964 were passed the President had assumed all functions of Government of the State of Kerala and the Governor was the agent of the President in the matter of governance of the State to such extent as the President thought fit to act through him. Therefore the order of the Governor dated December 29, 1964 was in the circumstances the order of the President acting through the agency of the Governor of Kerala in respect of the governance of the State and it was open to the President to cancel the order passed by his agent and that is what he did on March 4, 1965. In the circumstances the cancellation cannot be assailed as illegal. But it is urged that if the orders of detention passed on December 29, 1964 were good orders, they companyld number be cancelled except by release of detenus. We cannot accept this companytention. These orders were passed when the Government of the State of Kerala was being carried on under the Proclamation of September 10, 1964. That did number prevent the Central Government from deciding whether it should itself detain these persons who had till then been detained under the orders of December 29, 1964. If it decided to do so we cannot see anything illegal in this action. Further as the Government of Kerala was functioning under the President by virtue of the Proclamation, the -decision of the Central Government to detain these persons for itself companyld be given effect to by asking the President to cancel the orders of the Governor dated December 29, 1964. Thereafter the Central Government companyld pass the order of March 4, 1965 detaining. the petitioners and others like them. Even where -Persons are detained by orders of the State Government we can see 1 numberillegality in the Central Government asking the State Government companycerned to withdraw its order of detention and to detain the persons thereafter by orders of the Central Government, provided the State Government is agreeable to withdraw its order of detention. Therefore there was numberhing illegal in the President functioning under the Proclamation of September 10, 1964 withdrawing the orders of detention of December 29, 1964 and thereafter the Central Government passing the orders of detention of its own on the same day. It was number necessary to carry out the empty formality of release from jail under the orders of cancellation and then to arrest the persons released immediately they came out of jail and to serve on them the new order of detention dated March 4, 1965 see Smt. Godavari Shamrao Parulekar v. The State of Maharashtra We do number think it necessary to decide the nature of the detention between March 4 and March 6, 1965. Nor is it necessary in the present cases to decide whether an order of cancellation companyes into effect immediately while an order of detention takes effect from the date it is companymunicated. What we have to see is whether the detention under the fresh order passed on March 4, 1965 was legal when the petition for habeas companypus was made. As to that we have numberdoubt that it is legal. We therefore dismiss the petitions. Before we leave these cases we would like to refer to the inordinate delay that took place between the making of the petitions to the jail authorities and their reaching this Court. The petitions were made on March 15, 1965 but they reached this Court on April 12, 1965, exactly four weeks later.	Case appeal was rejected by the Supreme Court
Sikri, J. This appeal by special leave is directed against the judgment of the High Court of Kerala in Tax Revenue Case No. 44 of 1960. The respondent, N. Sami Iyer, hereinafter referred to as the assessee, is a dealer in tobacco. He objected to the assessment of the turnover of Rs. 7,757.54 for the assessment year 1957-58, inter alia, on the ground that the goods were the subject-matter of purchases which had already been assessed at the point of purchase in the hands of the assessee. He failed before the Sales Tax authorities, but in a revision the High Court accepted his companytention and held that this turnover was number liable to tax. In order to appreciate the companytention of the appellant it is necessary to mention a few facts. During the period April 1, 1957 to September 30, 1957, the assessee was residing in Malabar and in this area the Madras General Sales Tax Act 9 of 1939 applied. Section 3 5 of this Act provides The taxes under sub-sections 1 , 1-A and 2 shall be assessed, levied and companylected in such manner and in such instalments, if any, as may be prescribed Provided that - In respect of the same transaction of sale, the buyer or the seller, but number both, as determined by such rules as may be prescribed, shall be taxed Where a dealer has been taxed in respect of the purchase of any goods in accordance with the rules referred to in clause 1 of this proviso, he shall number be taxed again in respect of any sale of such goods effected by him. It is companymon ground that tobacco was taxable at the purchase point under the Madras Act and that the turnover with which we are companycerned had suffered taxation at that point under the Madras Act. The Travancore-Cochin General Sales Tax Amendment Act, 1957 12 of 1957 came into force on October 1, 1957. This Act changed the short title of the Travancore-Cochin General Sales Tax Act 1125 11 of 1125 to the General Sales Tax Act, 1125, and extended it to the whole of the State of Kerala, including Malabar district. Section 14 of Act 12 of 1957 inserted s. 26A in Act 11 of 1125 which reads as follows 26A. Transitory provisions. - 1 In the application of this Act to the Malabar District referred to in sub-section 2 of section 5 of the States Reorganisation Act, 1956, during the financial year ending 31st March, 1958, the provisions of this Act shall be subject to the provisions companytained in Schedule II. The Government may from time to time by numberification in the Gazette add to, alter or cancel Schedule II. Schedule II is in the following terms Every registration effected and every licence issued under the Madras General Sales Tax Act, 1939 or the rules made thereunder in their application to the Malabar District referred to in sub-section 2 of section 5 of the State Reorganization Act, 1956 hereinafter referred to as the Malabar area , and in force at the companymencement of the Travancore-Cochin General Sales Tax Amendment Act, 1957, shall be deemed to have been effected or issued under this Act or the rules made thereunder. In calculating the total turnover for the financial year ending with 31st March 1958 of a dealer in the Malabar area for purposes of sub-section 3 of section 3 of this Act, the turnover of the dealer under the Madras General Sales Tax Act, 1939 up to the companymencement of the Travancore-Cochin General Sales Tax Amendment Act, 1957, shall also be taken into account The effect of s. 26A and the Schedule, among other things, is that the dealers registration and the licences are deemed to have been effected under this Act, and secondly, that the total turnover for the period April 1, 1957 to September 30, 1957, is to be taken into account under the General Sales Tax Act. The 12 of 1957, by s. 15 inter alia repealed the Madras General Sales Tax Act, 1939, as in force in the Malabar District, referred to in sub-section 2 of section 3 of the States Reorganisation Act, 1956. Section 3 5 of the General Sales Tax Act, 1125, is in the same terms as s. 3 5 of the Madras General Sales Tax Act, reproduced as above. Section 5 vii of the General Sales Tax Act companyresponding to s. 5 of the Madras General Sale Tax Act provides as follows The sale of goods specified in companyumn 2 of schedule I shall be liable to tax under section 3, sub-section 1 only at such single point in the series of sales by successive dealers as may be specified by the Government by numberification in the Gazette and where the taxable point so specified is a point of sale, the seller shall be liable for the tax on the turnover for which the goods are sold by him at such point, and where the taxable point so specified is a point of purchase, the buyer shall be liable for the tax on the turnover for which the goods are brought by him at such point. The description of item 2 in companyumn 2 of Schedule I at the relevant time was Tobacco other than Beedi Tobacco Suka . In exercise of the powers companyferred by section 5 vii the Government issued a numberification No. RI-10674/57/RD-2 dated September 28, 1957. The relevant portion of the numberification reads as follows In exercise of the powers companyferred by clause vii of section 5, of the General Sales Tax Act Act XI of 1125 the Government of Kerala hereby specify the point mentioned in companyumn 3 of the schedule, hereto appended as the point liable to tax under section 3 1 on the goods mentioned in companyumn 2. SCHEDULE ---------------------------------------------------------------------- Sr. No. Description of goods Taxable point 1 2 3 ---------------------------------------------------------------------- Tobacco other than Beedi 1st sale in the State by a Tobacco Suka dealer who is number exempt from taxation under section 3 3 . ---------------------------------------------------------------------- The result of the above numberification is that whereas previously the taxable point in respect of tobacco was the point of first purchase under the Madras Act, number the taxable point is the first sale in the State. The learned Advocate-General, who appeared on behalf of the appellant, has raised two points before us first, that in this case there was numberright, much less a vested right, number to be taxed except under the Madras General Sales Tax Act the right if at all was to take advantage of the provisions of the repealed Act, namely, the proviso to s. 3 5 of the Madras Act. Secondly, he says that even if there was such a right, Act 12 of 1957 manifests a companytrary and different intention within the meaning of s. 4 c of the General Clauses Act, 1125, and the disputed turnover is liable to taxation under Act 12 of 1957. We may mention that s. 4 c of the General Clauses Act, 1125, companyresponds to s. 6 c of the Indian General Clauses Act. It appears to us that by virtue of s. 4 c the dealer companytinued to be liable to taxation under the Madras General Sales Tax Act in respect of the disputed turnover at the purchase point. For example, if for some reason he had number been assessed before Act 12 of 1957 came into force, he would have been assessed under the Madras Act at the purchase point because a liability within the meaning of s. 4 c would have been incurred by him. To this liability would be attached a right the right being that he would number be liable to be taxed in respect of any sale of goods which had been the subject-matter of a purchase and taxation under the Madras Act. In other words, he was liable to be assessed under the Madras Act in respect of the purchase of goods but he has also a right number to be taxed again in respect of any sale of the same goods effected by him. Therefore, we repel the first argument of the learned Advocate-General. The next question that arises is whether Act 12 of 1957 manifests a different intention. As observed by this Court in State of Punjab v. Mohar Singh , when the repeal is followed by fresh legislation on the same subject we should undoubtedly have to look to the provisions of the Act, but only for the purpose of determining whether they indicate a different intention. The line of enquiry would be number whether the new Act expressly keeps alive old rights and liabilities but whether it manifests an intention to destroy them. We cannot discern any intention in Act 12 of 1957 to destroy the rights and liabilities acquired or incurred under the Madras General Sales Tax Act. The second schedule reproduced above shows that the intention was to preserve old rights such as registration and licences issued under the old Act. In our opinion, if the Legislature had the intention to override the right attached to the liability under s. 3 5 of the Madras General Sales Tax Act, it would have used more clear and precise words. In the result we agree with the High Court that the turn-over of Rs. 7,754.54 is number liable to taxation.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 692 to 694 of 1964. Appeal from the judgment and order dated October 9, 1963 of the Rajasthan High Court in D. B. Civil Income-tax Reference No. 73 of 1961. A. Palkhivala, T. A. Ramachandran and J. B. Dadachanji for the appellant. K. Daphtary, Attorney-General, S. T. Desai, R. Ganapathy Iyer, R. N. Sachthey and B. R. G. K. A char, for the respondent. V. Viswanatha Sastri, J. B. Dadachanji, for interveners Nos. 1 and 2. M. Tiwari, .S. S. Khanduja and Ganpat Rai, for Intervener No. 3. The Judgment of the Court was delivered by Sikri, J. These three appeals are directed against the judg- ment of the Rajasthan High Court in a companysolidated reference made to it by the Income Tax Appellate Tribunal, Bombay Branch, under S. 66 1 of the Indian Income Tax Act, 1922 hereinafter referred to as the Act . The question referred to by the Appellate Tribunal is as follows whether on the facts and in the circumstances of the case. the sum of Rs. 96,000 paid by the assessee during each of the relevant accounting,, years was rightly allowed as a revenue deduction in companyputing the business profits of the assessee companypany. The reference arose out of the following facts The appel- lant, M s Gotan Lime Syndicate, hereinafter referred to as the assessee, is a registered firm and carries on the business of manufacturing lime from lime-stone. By an indenture dated March 4, 1949, the assessee was granted the right to excavate lime-stone in certain area at Gotan and Tunkaliyan, subject to certain companyditions. It is number necessary to detail the companyditions companytained in this indenture except that the lease expired on July 14, 1952. The lease was extended from time to time by the Government Sup. CI/66-8 for short periods. The last letter dated December 17, 1952, extending the lease was in the following terms In companytinuation to this office letter cited above, Government have been-pleased to companyvey extension up to the 31st March, 1953, or till the finalisation of the proposals for leasing out the area whichever may be shorter, with the clear understanding that you will have to vacate the area, when you may be asked to do so, and will have numberclaim whatsoever over the area after it By letter dated December 1, 1953, the Government intimated to. the Director of Mines and Geology, Rajasthan, Udaipur, that the Government had adopted a new policy for leasing out lime-stone quarries. The proposal Was to divide the lime- stone quarries in Jodhpur Division in blocks of 5 sq. miles each and the dead rent was to be charged at Rs. 10/- per acre while royalty was to be charged at Re. -/1/- per md. of lime-stone. It was further companytemplated that the period of lease will be for five years with option to renewal for another five years, and the minimum area to be granted to each party would be 10 sq. miles and maximum 30 sq. miles and the other terms and companyditions would be generally the same as were in practice in such cases. But as it was necessary to give legal form to these proposals, the Director of Mines and Geology was directed to frame rules on the lines of the Mineral Concession Rules. It appears that on October 4, 1954, the Government sanctioned the leasing out of 15 sq. miles of lime deposits to the assessee. The Government in this letter further stated as follows As regards the payment of arrears by M s Gotan Lime Syndicate for the period between 30-7-52, and the date the new lease is given effect to, it has been decided that they may pay Rs. 96,000/ Rupees Ninety six thousand per year which has also been agreed to by them before the Chief Minister Industries on the basis of dead rent under the new proposals for 15 sq. miles at Rs. 10/- per acre. Lease agreement may be got executed by them at an early date and the arrears recovered. The new rules may be incorporated in the Mines Mineral Concession Rules for Rajasthan. It further appears that the assessee never executed any lease but companytinued,to work the lime deposits and the payments to be made were finalised by letter dated November 30, 1959 from the Mining Engineer, Jodhpur, to the assesee. The Mining Engineer stated in this letter as follows On checking the figures of export of lime stone, limekali and lime kachra for the settlement of royalty, the figures of royalty amount payable in the following years is as under - From 1st April Year Export figures Amount, to 31st March Rs. as. p. 1953-54 13511 tons30,553 10 6 1954-55 13308 tons27,965 11 6 1955-56 18033 tons37,3321 9 0 1956-57 18382 tons 37,740 0 6 1957-58 614946 mds 49,162 14 6 1958-59 604498 mds 43,673 15 0 At the end of each financial year the accrued royalty amount is far less actually and as such as per agreement royalty payable is Rs. 96,000/- in all the years above written. The royalty for each of these years was settled -after the end of each year i.e. in the subsequent year. At this stage it would be companyvenient to mention the terms on which the assessee remained in possession. It is companymon ground that these terms are companytained in the Jodhpur Division Vindhyan Lime-stone Mining Leases Rules, 1954, and the Rajasthan Minor Mineral Concession Rules, 1955. These rules were made in exercise of the powers companyferred by r. 4 of the Central Mineral Concession Rules, 1949. In the Jodhpur Division Vindhyan Lime-stone Mining Leases Rules, 1954, Mining lease was defined to mean a lease to mine, quarry, bore, dig, search for, win, work and carry away lime-stone. Under these rules the assessee had to make an application for a mining lease in response to a Notification issued by Director of Mines and Geology, Rajasthan, inviting applications in respect of a lime-stone- deposit. Rules 13 provided that the lease shall be in respect of plots company- prising of 5 sq. miles each. The applicant had to deposit security equal to one-fourth of the annual dead rent of the lease in cash or Government bonds, for due observance of the terms and companyditions of the lease. The lessee was entitled to transfer his lease or any right, title or interest therein, to a person holding a certificate of approval on payment of a fee, subject to the previous sanction of the Director of Mines and Geology, and subject to some other companyditions. Rule 18 prescribed a period of 6 00 five- years for a lease and the lease was renewable at the option -of the assessee- for a further period of five years. Rule 19 prescribed the companyditions which had to be inserted in the lease. The following companyditions are relevant 1 the lessee shall number encroach upon cultivable land or Bapi holdings, within, the leased area, unless otherwise after ,obtaining permission of Director of Mines and Geology 2 the lessee shall perform a minimum development work as instructed from time to time by the Director of Mines and Geology, whose instructions in this respect and in maintaining standards of lime products, and arranging an adequate supply of the same in the market at reasonable price shall be binding upon the. lessee. On expiry or sooner determination of lease the lessee -shall remove all stock of limestone or its products and movable property within six months from the date of expiry of the, lease and shall pay the royalty on the stock within this period. There was a proviso to this companydition to the effect that the Rajasthan Government would be free to lease out the deposits afresh to any person on expiry of the tenure of the lease, and the lessee shall hand over the quarry to the new lessee in a workable companydition. Rule 31 of the Rajasthan Minor Mineral Concession Rules, 1955, prescribed inter alia the following companyditions i - The lessee shall pay the royalty on minerals despatched from, the leased area at the rate specified in the First Schedule to these rules. The lessee shall pay for the surface area used by him for the purpose of mining, surface rent at such rate number exceeding the land -revenue as may be specified by the Government in such case. The lessee shall also pay, for every year, such,yearly dead-rent within the -limits specified in the Second Schedule to these rules as may be. fixed, by the Director in each case, and if the lease permits. the working of more than one mineral in the same area- the Government may charge separate deed-rent in respect of each,mineral. The lessee shall keep companyrect accounts showing the, quantity and particulars of all minerals obtained from the mines, etc. The lessee shall allow existing and future licensees or lease-holders of any land-which is companyprised in or adjoins or is reached by the land held by the lessee, reasonable facilities for access thereto. The lessee may erect on the area granted to him any building required for bona fide purposes and such buildings shall be the property of the Government after expiry of the lease. Vii The lessee if he discovers any new mineral was entitled to apply for a mining lease in respect of the newly discovered mineral. The Government shall the have right of preemption at current market rates over all minerals demised by the lease and shall be indemnified by the lessee against claims of any third party in respect of such minerals. In case of any breach on the part of the lessee, of any companyenant or companydition companytained in the lease other than a companydition regarding rent or royalty, the Government may determine the lease and take possession of the said premises, or in the alternative, may impose payment of a penalty number exceeding twice the amount of the annual dead-rent from the lessee. At the end or sooner determination of the lease the lessee shall deliver up the said premises and all mines, if any, dug therein in a proper and workable state, save in respect of any working as to which the Government might have sanctioned abandonment. For each of the assessment years 1954-55, 1955-56 and 1956-57, the assessee paid a sum of Rs. 96,000/- to Government and claimed it as a revenue deduction against its profits for those years. The Income Tax Officer disallowed this expenditure, as being of a capital nature. The Appellate Assistant Commissioner upheld his view, but on appeal, the Appellate Tribunal held that the payment should be treated as a revenue expenditure. The High Court held on a reference that the payment was capital expenditure and companyld number be allowed as a revenue deduction in companyputing the business profit of the assessee. These appeals raise the difficult question of distinguishing between revenue expenditure and capital expenditure. The learned companynsel for the assessee, Mr. N. Palkhiwala, and the leaned companynsel for the Revenue, the Attorney General both cited a number of cases before us but we agree with Hidayatullah J.s observations in Abdul Kayoom Commissioner of Income Tax 1 that numbere of the tests laid down in various Authorities 1 44 I.T.R. 689. is exhaustive or universal. Each case must depend on its own facts, and a close similarity between one case and another is number enough , because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases by matching the companyour of one case against the companyour of another. Therefore, we do number propose to review all the cases cited before us, especially as this Court has, after reviewing the relevant cases, formulated certain tests in Assam Bengal Cement Co. Ltd. v. Commissioner of Income Tax 1 . The cases were reviewed again in Pingle Industries Ltd. v. Commissioner of Income-tax, Hyderabad 2 , and Abdul Kayoom v. Commissioner of Income Tax 3 . In this case, in view of the-arguments of the respondent and the judgment of the High Court, we have to companycentrate on the following test laid down by Viscount Cave in British Insulated and Helsby Cables Ltd. v. Atherton 4 But when an expenditure is made, number only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason in the absence of special circumstances leading to an opposite companyclusion for treating such an expenditure as properly attributable number to revenue but to capital. The learned Attorney-General, relying on this test, urges that what the assesses got by entering into the mining lease was an asset or advantage of an enduring nature that this asset or advantage was an interest in land for number only has the assessee the right to go upon the land and excavate but also has the right to use part of the area as premises, and it was by virtue of this that the assessee eventually got raw-material for his manufacturing business. Mr. Palkhiwala, the learned companynsel for the assessee, on the Other hand, companytends that under the Rajasthan Minor Mineral Concession Rules and the arrangement between the assessee and the Government, the assessee did number get exclusive possession of the mines as such what he got was a right to get lime for manufacturing and the payment had direct relation to the amount of lime removed by the assessee. He says that the cases decided in this Court Pingle Industries Ltd. v. Commissioner of Income 1 27 1. T. R. 34. 2 40 I. T. R. 67. 3 44 I. T. R. 689. 4 10 T. C. 155 at p. 192. Tax Hyderabad 1 , and Abdul Kayoom v. Commissioner of Income Tax 2 were distinguishable. He further urges that in numbercase has royalty payment been treated as capital expenditure, and as a matter of fact, in Pingle Industries Ltd. v. Commissioner of Income Tax 1 it was a lumpsum payment that was under dispute and number the royalty payable under the lease. We do number think there is any necessity to decide whether the assessee got a licence or a lease or profits a prendre. Under the arrangement, read with the Rajasthan Minor Mineral Concession Rules, 1955, the assessee was certainly entitled to go upon the land, win the raw-material and had some rights to build premises for the purpose of winning the lime. But it is also clear that the assessee companyld number carry away any other mineral which might be found in the mine, and further he was obliged to allow other lessees of other minerals to go on the land and win their minerals. Thus there is numberdoubt that the assessee did derive an advantage by having entered into this arrangement. We will assume for the sake of this case that this advantage was to last atleast for a period of five years. The question then arises whether the circumstances of this case fall within the test laid down by Viscount Cave and relied on strongly by the learned Attorney-General. In our opinion, the test does number apply fully to this case because there is numberpayment once for all it is a yearly payment of deadrent and royalty. It is true that if a capital sum is arrived at and payment is made every year by chalking out the capital amount in various instalments, the payment does number lose its character as a capital payment if the sum determined was capital in nature. But it is an important fact in this case that it is a case of an annual payment of royalty or dead- rent. No lumpsum payment was ever settled or paid. We have number been referred to any case in which payments of royalty under a mining lease have been treated as capital expenditure. In H. R. Rorke Ltd. v. Commissioner of Inland Revenue 3 Cross, J., while dealing with a similar question observed as follows The case then proceeds to set out the leases in question, which were substantially in the same form. The first was an agreement made on 16th December, 1957, between a Mr. Parker, the lessor, and the Company. Clause 1 provided that the lessor, being the owner of the land in question four acres and five per- ches of agricultural land in Yorkshire should let the 1 40 I. T. R. 67 3 39 T. C. 194 at 202 2 44 I. T. R. 689. land,to the lessee-that is, the Appellant Company from 5th November, 1957, for one year, paying therefor a royalty of Is. 3d. per ton for all companyl recovered from the demised land and accepted by the companyl sales department of the National Coal Board or, the sum of pound 312 10s. whichever was the greater, such payment to be made by calendar monthly instalments. There is, of companyrse, numberdoubt that those rents or royalty payments would be allowable as deductions on revenue account. He had numberdoubt in his mind that rent and royalty payments, would be deductible as revenue expenditure. In Pingle Industries Ltd. v. Commissioner of Income Tax 1 the assessee had already been allowed payments of royalty as revenue expenditure and the only dispute was regarding lumpsum payment. In Ogden v. Medway Cinemas, Ltd. 2 an annual payment in respect of the goodwill of the business was held to be an admissible deduction on the ground that this is a revenue payment for the use during a certain period of certain valuable things and rights. The reason why royalty has to be allowed as revenue expenditure must be the relation which the royalty has to the raw-material which is going to be excavated or extracted. The more you take the more royalty you pay, and the minimum payment or the deadrent also has the same characteristic, i.e., it is an advance payment in respect of certain amount of raw-material to be excavated. We find that it is on this ground that the case strongly relied on by the learned Attorney-General Abdul Kayoom v. Commissioner of Income Tax 3 is distinguishable because payments there had numberrelation whatsoever to the amount of companychshells taken. As observed by Hidayatullah, J., in obtaining the lease, the respondent obtained a speculative right to fish for chanks which it hoped to obtain and which might be in large quantities or small, according to its luck The respondent changed the nature of its business to fishing for chanks instead of buying them. Hidayatullah, J., then put the case in a nutshell as follows That amount was paid to obtain an enduring asset in the shape of an exclusive right to Ash, and the payment was number related to the chanks, which it might or might number have brought to the surface in this speculative business. 1 40 I. T. R. 67. 3 44 I. T. R. 689. 2 18 T. C. 691 The case of Pingle Industries Ltd. v. Commissioner of Income Tax 1 is distinguishable because on the facts it was a lumpsum payment in instalments for acquiring capital asset of enduring benefit to his trade. It is number the law that in every case, if an enduring advantage is obtained the expenditure for securing it must be treated as capital expenditure, for as pointed out by Channell, J., in Allanza Company v. Bell 2 in the ordinary case, the companyt of the material worked up in a manufactory is number a capital expenditure it is a current expenditure, and does number become a capital expenditure merely because the material is provided by something like a forward companytract, under which a person for the payment of a lumpsum down secures a supply of the raw material for a period extending over several years. This illustration shows that it is number in every case that an expenditure in respect of an advantage of an enduring nature is capital expenditure. The reason underlying the illustration is that the payments made to enter into a forward companytract have relation to the raw material eventually to be obtained. Viscount Cave acknowledged that in certain cases an expenditure for obtaining an enduring advantage need number be capital expenditure for he inserted the words in the absence of special circumstances leading to an opposite companyclusion within brackets. We are of the opinion that in the present case the royalty payment is number a direct payment for securing an enduring advantage it has relation to the raw material to be obtained. Ordinarily, a mining lease provides for a capital sum payment but the fact that there is numberlumpsum payment here cannot by itself lead to the companyclusion that yearly payments to be made under the mining lease have relation to the acquisition of the advantage. No material has been placed on the record to how that. any part Of the royalty must, in view of the circumstances of the case, be treated as premium and be referable to the acquisition of the mining lease. Therefore, on the facts of this case we must hold that the royalty payment, including the dead-rent, have relation only to the lime deposits to be got. If it has numberdirect relation to the acquisition of the asset, then the principle relied on by the learned Attorney-General does number afford him any assistance. We, therefore, hold that the yearly payment of Rs. 96,000/- should 1 40 I. T. R. 67. 2 1904 L. R. 2 K. B. 666 at p. 673. be treated as revenue expenditure and the answer to the question referred to the High Court must be in favour of the assessee. In the result the appeals are accepted and the question referred to the High Court answered in the affirmative.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 95 of 1964. Appeal from the judgment and order dated April 14, 1961 of the Punjab High Court in Income-tax Reference No. 23 of 1958. T. Desai, R. Ganapathy Iyer, Gopal Singh, B.R.G.K. Achar and R. N. Sachthey, for the appellant. V. Viswanatha Sastri, T. A. Ramachandran, O. C. Mathur for the respondent. The Judgment of the Court was delivered by Shah, J. Hakam Mal Tani Mal a Hindu undivided family was assessed to tax under the Indian Income-tax Act, 1918, in respect of income from business, inter alia, in timber at Abdullapur. In 1934 there was a partition of the Hindu undivided family, and five members of that family entered into a partnership to carry on in the name of M s Hakam Mal Tani Mal the business which was originally carried on by the undivided family. Accounts of this firm were settled till March 31, 1939, and the firm was dissolved. The timber business of the firm was taken over by two partners of the firm-Gajjan Mal and Jodha Mal, who entered into an agreement of partnership to carry on the business in the name of R. B. Jodha Mal Kuthiala-hereinafter called assessee. An instrument of partnership recording the terms of the partnership and reciting the dissolution of the earlier partnership was executed on June 29, 1939. The assessee was dissolved in March 1943. In assessment proceedings for 1943-44 the assessee companytended that the firm Messrs Hakam Mal Tani Mal was dissolved on March 31, 1939, before the Income-tax Amendment Act 7 of 1939 had companye into force and the first succession to the business after April 1, 1939 was in March 1943, when the assessee was dissolved and on that account the assessee was entitled to relief under S. 25 3 , or in the alternative under s. 25 4 of the Indian Income-tax Act, 1922. The Income-tax Officer companypleted the assessment without giving to the assessee the benefit of sub-ss. 3 or 4 of s. 25 of the Indian Income-tax Act, 1922. The Appel- late Assistant Commissioner companyfirmed the order holding that succession to the family firm Messrs. Hakam Mal Tani Mal took place on April 1, 1939, and that firm alone was entitled to relief under s. 25 4 and to the second succession which took place on April 1, 1943, after Act 7 of 1939 was brought into force relief under s. 25 4 was number admissible. The Income-tax Appellate Tribunal agreed with the view of the Appellate Assistant Commissioner. Thereafter as directed by the High Court of Punjab under s. 66 2 of the Indian Income-tax Act, 1922, the Tribunal drew up a statement of the case and submitted the following ques- tion of law for the opinion of the High Court Whether in the facts and the circumstances of the case, the Tribunal is companyrect in law in holding that the assessee firm R. B. Jodha Mal Kuthiala, Abdullapur Depot, Simla was number entitled to the benefit provided in Section 25 3 or 25 4 of the Income-tax Act, in relation to the assessment in question ? The High Court held that the assessee was carrying on business when Act 7 of 1939 was brought into operation and was on that account entitled to the benefit of s. 25 4 of the Act. With certificate granted by the High Court, this appeal has been preferred. Sub-section 4 was inserted in s. 25 of the Indian Incometax Act, 1922, by the Income-tax Amendment Act 7 of 1939. It provides Where the person who was at the companymencement of the Indian Income-tax Amendment Act, 1939 VII of 1939 , carrying on any business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income-tax Act, 1918, is succeeded in such capacity by another person, the change number being merely a change in the companystitution of a partnership, numbertax shall be payable by the first mentioned person in respect of the income, profits and gains of the period between the end of the previous year and the date of such succession, and such person may further claim that the income, profits and gains of the previous year shall be deemed to have been the in- companye, profits and gains of the said period. Where any such claim is made, an assessment shall be made on the basis of the income, profits and gains of the said period, and, if an amount of tax has already been paid in respect of the income, profits and gains of the previous year exceeding the amount payable on the basis of such assessment, a refund shall be given of the difference Provided There is numberdispute that the Hindu undivided family of Hakam Mal Tani Mal was taxed under the Indian Income-tax Act, 1918, in respect of the, timber business and Messrs. Hakam Mal, Tani Mal succeeded to that business in 1934. Accounts of Messrs. Hakam Mal Tani Mal were settled on March 31, 1939, and the business in timber which was carried on by that firm was taken over by the assessee. The departmental authorities held that the assessee was at the companymencement of the Indian Incometax Amendment Act 7 of 1939 number carrying on business, and that it succeeded to the business on April 1, 1943. The High Court disagreed with that view and opined that the assessee was at the companymencement of Act 7 of 1939 carrying on business, and companyrectness of that opinion is challenged in this appeal. The Indian Income-tax Amendment Act 7 of 1939 was brought into force on April 1, 1939. Section 5 3 of the General Clauses Act 10 of 1897 provides that unless the companytrary is expressed, a Central Act or Regulation shall be companystrued as companying into operation immediately on the expiration of the day preceding its companymencement. Act 7 of 1939 must therefore be deemed to have companye into operation at a point of time immediately on the expiration of March 31, 1939. The assessee companytends, and the companytention has found favour with the High Court, that the assessee was carrying on business at the companymencement of the Indian Income-tax Amendment Act 7 of 1939. In support of the plea of the assessee reliance was placed only upon the instrument of partnership which was executed on June 29, 1939. The question in dispute must, therefore, be determined on a true interpretation of the terms of the instrument of partnership. Insofar as it is material, the instrument recites We, R. B. Jodha Mal Kuthiala son of Lala Gopi Mal Sahib Sud of the one part and Gajjan Mal Kuthiala son of Lala Hakam Mal Sahib Sud Kuthiala of the other part, residents of Haroli, District Hoshiarpur. and presently of Simla. Whereas we, the deponents, were partners and shareholders in the firm of Lala Hakam Mal Tani Mal Simla and all the partners of firm Lala Hakam Mal Tani Mal understood and settled their accounts upto the 31st of March 1939, on the 31st of March, 1939, and all the partners have become separate from the 1st of April, 1939, and the business at Abdullapur in the name of firm Hakam Mal Tani Mal and R. B. Jodha Mal Kuthiala has fallen to our share to run which we have by means of an oral agreement companystituted a separate partnership styled R. B. Jodha Mal Kuthiala,, Abdullapur from the 1st of April, 1939. Now the said oral agreement is being reduced to writing and we agree that The instrument of partnership in the first instance recites that the accounts of Messrs. Hakam Mal Tani Mal were settled on March 31, 1939 and upto March 31, 1939. It is then recited that all the partners had become separate from April 1, 1939. This is an ambiguous recital it may mean that the dissolution had taken place on April 1, 1939 i.e., the business had companytinued for the whole or a part of the day on April 1, 1939, or it may mean that from the end of March 31, 1939, there had been separation. When a deed recites that a transaction is effective from a particular date it has to be determined in the companytext in which that expression occurs, whether the date mentioned has to be excluded or to be included. The recitals in the instrument that the accounts were settled upto March 31, 1939, and that the partners had become separate, would imply that the firm of Messrs Hakam Mal Tani Mal did number do business after March 31, 1939. numberdate of the oral agreement companystituting a separate partnership of the assessee is number set out in the instrument, and there is numberother evidence in that behalf. But the assessee was companystituted to carry on the timber business allotted to it at the time of dissolution from April 1, 1939. The timber business was an old and a running business, and an intention to maintain companytinuity of the business and its transactions may reasonably be attributed to the assessee. It must therefore be held that the assessee companymenced doing business immediately after the dissolution of the firm Messrs Hakam Mal Tani Mal become effective. In the absence of other evidence, it may be held that the business of Messrs. Hakam Mal Tani Mal companytinued till the midnight of March 31, 1939, and immediately thereafter the business of the assessee companymenced. The partnership therefore came into being at the precise point of time at which the Indian Income-tax Amendment Act 7 of 1939 came into force and it companyld number be said that the assessee was number carrying on business at the companymencement of the Indian Income-tax Amendment Act 7 of 1939. The High Court was, therefore, in our judgment, right in holding that the assessee was entitled on the dissolution of that firm in March 1943 to the benefit of s. 25 4 of the Indian Income- tax Act.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION C.A. No. 305 of 1964. Appeal by Special Leave from the order dated the 9th April, 1963 of the Labour Court, Coimbatore, in C.S.O. Appeal No. 1 of 1962. C. Setalvad, and Naunit Lai, for the appellant. K. Ramamurthi, R. K. Garg, D. P. Singh and S. C. Agar- wala, for the respondents. The Judgment of the Court was delivered by Gajendragadkar, C.J. The appellant, Salem Erode Electricity Distribution Co., Ltd., is a licensee under the Indian Electricity Act, 1910, and its business companysists in buying electrical energy in bulk from the State Electricity Board of Madras and selling it to companysumers in Salem and Erode and certain rural districts in the State of Madras. For the purpose of carrying on this business, the appellant has an industrial establishment at Salem. In or about 1940, when the number of the appellants company- sumers was about 3,000, and that of its workmen about 45, the appellant framed certain terms and companyditions of its workmens employment. Amongst these were included terms about leave and holidays. Later, when the Industrial Employment Standing Orders Act, 1946 No. 20 of 1946 hereinafter called the Act came into force, the provisions as to leave and holidays which had been introduced by the appellant in the terms and companyditions of the employment of its workmen, were embodied in the appellants Standing Orders which were certified under the relevant provisions of the Act in or about 1947. The said terms read thus - Standing Order 5 b The number of holidays to be granted to the workmen and the days which shall be observed as holidays by the Establishment shall be regulated in accordance with the Factories Act, 1948 or other relevant law for time being in force and the custom or usage of the Establishment, viz., holidays under the Negotiable Instruments Act, 1881 and festival holidays peculiar to this locality which are being given. 5 0 0 Standing Order 10 a Leave will be given in accordance with the law and existing practice provided the leave facilities number available to the workers are number curtailed in any manner. The proceedings which have, given rise to the present appeal by special leave between the appellant and the respondents, its employees, began with the application made by -the appellant on the 6th October, 1960, before the Certifying Officer, Madras, for the amendment of the certified Standing Orders to which we have just referred. By its application, the management of the appellant wanted the said Orders to read thus Standing Order 5 b For all workmen who have joined service prior to holidays under the Negotiable Instruments Act, 1881, and festival holidays of one day per year which day may be chosen by the workmen shall be given. For all workmen who have joined on and after holidays under the Madras Industrial Establishments National and Festival holidays Act, 1958 shall be given. Standing Order 10 a Leave will be given to all employees who are appointed on and after iii accordance with the provisions of the Madras Shops and Establishment Act, 1947 or any statutory modification thereof irrespective of whether this Act applies or number to any category of employee or employees . Provided, however, that for all employees who have been companyfirmed prior to the above said date, viz the leave facilities number available are number curtailed in any manner. It is relevant to mention the background of the present application. The appellant believed that the urgent need for increased production and for increased supply of electrical energy companyld be met if the existing rules embodied in Standing Orders 5 b and 10 a were suitably modified and so, the appellant wanted to make the change in the said two Standing Orders on the lines indicated by it in its application to the Certifying Officer. It appears that these Rules were introduced by the appellant on the 1st October, 1960, and were embodied in the companytracts of service of new entrants who joined the appellants employment as from that date. In fact, they were agreed to by such new entrants. In order to regularise the steps taken by the appellant by revising the relevant Rules in respect of the new entrants to its employment, the appellant made the present application. The change proposed to be made by the appellant in the two Standing Orders in question was resisted by the respondents Union. It was urged by the respondents that the proposed change was unfair and unreasonable, and it was also argued that it would introduce discrimination between one set of employees and another working under the same employer, and that would naturally cause industrial unrest and disharmony. The Certifying Officer upheld the pleas raised by the respondents and he accordingly directed that the proposed amendments should be negatived. The appellant then preferred an appeal against the said order before the appellate authority. Both the parties urged similar companytentions before the appellate authority and the said authority agreed with the view taken by the Certifying Officer and dismissed the appeal preferred by the appellant. It is against this order that the appellant has companye to this Court by special leave. On behalf of the appellant, Mr. Setalvad has urged that the change which the appellant wants to make in the two relevant orders is, on the merits, fair and reasonable and he adds that the appellant wanted to prove its bona fides by making the changed Standing Orders applicable to the future entrants and number extending them to its employees who were already in its employment and who are governed by the existing Standing Orders. According to Mr. Setalvad, the Certifying Officer and the appellate authority have erred in law in number certifying the changed Standing Orders as proposed by the appellant. In dealing with this point, it is necessary to examine the broad features of the Act and companysider its main purpose and object. The Act was passed in 1946 and its main object was to require the employers in industrial establishments to which the Act applied, to define formally the terms and companyditions of employment in their respective establishments. In imposing this obligation on the employers, the Act intended that the terms and companyditions of industrial employment should be well-defined and should be known to the employees before they accepted the employment. As we will presently point out, one of the objects of the Act was to introduce uniformity of terms and companyditions of employment in respect of workmen belonging to the same category and discharging the same or similar work under an industrial establishment. Before the Act was passed, employees in many industrial establishments were governed by oral terms and companyditions of service which CI/66-2 were number uniform and which had been entered into on an ad hoc basis. The Act number requires that terms and companyditions of employment in relation to matters specified in the Schedule must be included in the Standing Orders and they must be certified. It would at once be clear that by the operation of the Act, all industrial establishments will have to frame terms and companyditions of service in regard to all the matters specified in the Schedule, and that naturally would introduce an element of uniformity inasmuch as industrial employment in all establishments to which the Act applied would, after the Act was passed, be governed by terms and companyditions of service in respect of matters which are companymon to all of them. That, in brief, is the object which the Act intends to achieve. Let us number see the scheme of the Act. Standing Orders are defined by s. 2 g as meaning rules relating to matters set out in the Schedule these matters are 11 in number, and the last one of them refers to any other matter which may be prescribed Prescribed according to s. 2 f means prescribed by rules made by the appropriate Government under this Act and so, Standing Orders mean rules made in relation to the matters enumerated in clauses 1 to 10 in the Schedule as well as any other matter which may in future be added by means of rules to be made by the appropriate Government. This gives a general idea about the matters which are intended to be companyered by the Standing Orders. Section 3 of the Act requires the submission of draft Stand- ing Orders by the employer within six months from the date on which the Act becomes applicable to an industrial establishment. A statutory obligation has been imposed upon the employer to take necessary action as required by S. 3 1 . Section 4 requires that the Standing Orders must deal with every matter set out in the Schedule which is applicable to the industrial establishment, and must be in companyformity with the provisions of the Act. Section 5 deals with the proceedings for certification of the standing orders by the Certifying Officer. Section 6 provides for appeals against the orders passed by the Certifying Officer Section 7 prescribes the date on which the certified standing orders will companye into operation. Section 10 2 provides for the modification of the standing orders. Section 13A provides for the machinery to deal with questions in relation to the application or interpretation of the standing orders certified under the Act and s. 15 companyfers powers on the appropriate Government to make rules to carry out the purposes of the Act. 5 0 3 When the Act was originally passed, the powers of the Certi- fying Officer as well as those of the appellate authority were limited to companysider the question as to whether the standing orders submitted for certification were in accordance with the Act or number. By an amendment made in 1956, jurisdiction has been companyferred on the Certifying Officer as well as the appellate authority to adjudicate upon the fairness or reasonableness of the provisions of the Standing Orders submitted for certification. That means the jurisdiction of the appropriate authorities functioning under the Act has number been widened and they are required to companysider whether the Standing Orders submitted to them for their approval are fair or reasonable. Parties can make their companytentions in respect of the fairness or reasonableness of the proposed Standing Orders, and the appropriate authorities will adjudicate upon the said companytentions. That is one change made in 1956. The other change made in the original provisions of the Act which is relevant for our purpose is in regard to the provisions companytained in S. 10 2 . Under the original provision of S. 10 2 , it was only the employer who was authorised to make an application to the Certifying Officer to have the Standing Orders modified. By the amendment made in 1956, even workmen are number entitled to apply for the modification of the Standing Orders. The result of this amendment is that if workmen are dissatisfied with the operation of the existing Standing Orders, they can move for their modification by applying to the Certifying Officer in that behalf. Before this amendment was made, the only companyrse open to the workmen to adopt for securing any modification in the existing Standing Orders was to raise an industrial dispute and move the appropriate government to refer the said dispute to the adjudication of the appropriate Industrial Tribunal. Both these amendments have been introduced by Act No. 36 of 1956. Now, the question which we have to decide is is it permis- ible for an industrial establishment to have two sets of Standing Orders to govern the relevant terms and companyditions of its employees ? Mr. Setalvad argues that if the change is intended to be made in the existing Standing Orders, it should be permissible and indeed legitimate for an employer to seek for the change on .he ground that the said change would be reasonable and fair,, provided the existing rights of employees already employed are ,lot affected by such change. Prima facie, this argument appears to be attractive but if we examine the scheme of the relevant Provisions of the Act in the light of the matters specified in the schedule in respect of which Standing Orders are required to be made, it appears that two sets of Standing Orders cannot be made under the Act. Let us first examine the matters specified in the Schedule. They are specified under cls. 1 to 11 . The first is in regard to classification of workmen. The second is in relation to the manner of intimating to workmen periods and hours of work, holidays, pay-days and wage rates. The third has reference to shift working the fourth to attendance and late companying. Clause 5 relates to companyditions of, procedure in applying for, and the authority which may grant, leave and holidays. Clause 6 deals with the requirement to enter premises by certain gates, and liability to search. Clause 7 is companycerned with the closing and reopening of sections of the industrial establishment, and temporary stoppages of work and the rights and liabilities of the employer and workmen arising therefrom. Clause 8 deals with the termination of employment, and the numberice thereof to be given by employer and workmen. Clause 9 companyers the subject of suspension or dismissal for misconduct, and acts or omissions which companystitute misconduct. Clause 10 relates to means of redress for workmen against unfair treatment or wrongful exactions by the employer or his agents or servants. Clause 11 is the residuary clause which refers to any other matter which may be prescribed. One has merely to examine these clauses one by one to be satisfied that there is numberscope for having two separate Standing Orders in respect to any one of them. Take the case of classification of workmen. It is inconceivable that there can be two separate Standing Orders in respect of this matter. What we have said about classification is equally true about each one of the other said clauses and so, the companyclusion appears to be irresistible that the object of the Act is to certify Standing Orders in respect of the matters companyered by the Schedule and having regard to these matters, Standing Orders so certified would be uniform and would apply to all workmen alike who are employed in any industrial establishment. Prior to the enactment of the Act, industrial establishments used to employ workmen on different terms and companyditions of service and they used to enter into separate agreements with employees on an ad hoc basis. It was precisely with the object of avoiding this anomalous position that the Act has been passed, and an obligation has been imposed upon the industrial establishments to have their Standing Orders certified by the appropriate authorities. Therefore, we do number think Mr. Setalvad is right in companytending that it is open to an industrial establishment to have two sets of Standing Orders certified in relation to leave and holidays provided that the modified Standing Orders apply to future entrants and the existing Standing Orders apply to entrants who are already in the employment of the establishment. On principle, it seems expedient and desirable that matters specified in the Schedule to the Act should be companyered by uniform Standing Orders applicable to all workmen employed in an industrial establishment. It is number difficult to imagine how the application of two sets of Standing Orders in respect of the said matters is bound to lead to companyfusion in the working of the establishment and cause dissatisfaction amongst the employees. If Mr. Setalvad is right in companytending that the Standing Orders in relation to these matters can be changed from time to time, it may lead to the anomalous result that in companyrse of 10 or 15 years there may companye into existence 3 or 4 different sets of Standing Orders applicable to the employees in the same industrial establishment, the application of the Standing Orders depending -upon the date of employment of the respective employees. That, we think, is number intended by the provisions of the Act. Once the Standing Orders are made, it is number unlikely that disputes may arise between the employer and the employees in regard to their application or their interpretation, and the Act has specifically made a provision for dealing with problems of this kind. As we have already indicated, section 13A provides that if any question arises as to the application or interpretation of a Standing Order certified under the Act, an employer or a workman may refer the question to any one of the Labour Courts indicated by the section, and the said Labour Court shall, after giving the parties an opportunity of being heard, decide the question and such decision be final and binding on the parties. The result, therefore, appears to be that in regard to the certification of the Standing Orders, the Act provides for a self-contained Code. The Certifying Officer is given the power to companysider questions of fairness and reasonableness as well as the other questions indicated by s. 4 a and b . An appeal is provided against the decision of the Certifying Officer and in case a dispute arises as to the interpretation or the application of the Standing Order, a remedy is provided by s. 13A. Besides, as we have already pointed out, a right is given both to the employer and the workmen to move the appropriate authorities for modification of the existing Standing Orders. That is why we do number think that Mr. Setalvad is right in companytending that the Certifying Officer as well as the appellate authority erred in law in refusing to certify the modified Standing Orders submitted by the appellant for certification. It may be that even in regard to matters companyered by certified Standing Orders, industrial disputes may arise between the. employer and his employees, and a question may then fall to be companysidered whether such disputes can be referred to the Industrial Tribunal for its adjudication under section 10 1 of the Industrial Disputes Act. In other words, where an industrial dispute arises in respect of such matters, it may become necessary to companysider whether, numberwithstanding the self-contained provisions of the Act, it would number still be open to the appropriate Government to refer such a dispute for adjudication. We wish to make it clear that our decision in the present appeal has numberrelation to that question. In the present appeal, the only point which we are deciding is whether under the scheme of the Act, it is permissible to the em- ployer to require the appropriate authorities under the Act to certify two different sets of Standing Orders in regard to any of the matters companyered by the Schedule. It number remains to companysider the three decisions to which Mr. Setalvad has invited our attention. In Rai Bahadur Diwan Badri Das v. The Industrial Tribunal, Punjab 1 , this Court had to companysider the question as to whether the Tribunal against whose award an appeal had been brought to this Court by the appellant Rai Bahadur Diwan Badri Das was in error in refusing to allow the appellants prayer that he should be permitted to introduce a new rule in respect of leave with wages applicable to the entrants in his employment after the 1st of July, 1956. It appears that on the said date, the appellant made a rule that every workman employed on or before that date would be entitled to 30 days leave with wages after working for 11 months and workmen employed after that date would be entitled to earned leave in accordance with the provisions of S. 79 of the Indian Factories Act. This rule led to an industrial dispute which was referred to the Industrial Tribunal, and the Tribunal held that all the workmen were entitled to 30 days earned leave as under the existing rule and that the rule made by the appellant on the 1st of July, 1956 cannot be enforced. It was this award which was challenged by the appellant before this Court, and the challenge was based on the broad and general ground that the employer had full freedom of companytract to make a rule for the employment of his employees and that the Industrial Tribunal is number entitled to 1 1963 3 S.CR. 930. interfere with his freedom of companytract. It appears that the change which the employer sought to make by the new rule did number involve any appreciable financial burden, and it was number the case of the appellant that the existing rule caused any hardship to him. The appellant, however, wanted to urge before this Court the theoretical ground that in a matter of employment, an industrial employer is entitled to make his own companyditions with his employees and that industrial adjudication should number interfere with his freedom of companytract in that behalf. Indeed, as the majority judgment shows, the appellant was a good employer and was treating his employees in a very liberal manner. He, however, brought the dispute before this Court in order to assert the general principle which was raised for the decision of this Court. That is the background of the majority decision in Rai Bahadur Diwan Badri Dass 1 . case. Dealing with the broad point raised by the learned Solicitor General on behalf of the appellant in that case, this Court held that several decisions pronounced by industrial adjudication had number established the principle that the doctrine of absolute freedom of companytract had to yield to the higher claims for social justice. Even so, this Court took the precaution of making it clear that the general question about the employers right to manage his own affairs in the best way he chooses, cannot be answered in the abstract without reference to the facts and circumstances in regard to which the question is raised, and it was pointed out that in industrial matters of this kind, there are numberabsolutes and numberformula can be evolved which would invariably give an answer to different problems which may be posed in different cases on different facts. Having thus dealt with the general point raised by the learned Solicitor-General in Rai Bahadur Diwan Badri Dass 1 case, the majority decision companysidered the facts in that particular case and held that the Tribunal was number shown to have been in error when it held that in the matter of earned leave there should be uniformity of companyditions of service governing all the employees in the service of the appellant. It was in that companynection that reference was made to the fact that in regard to all the other terms and companyditions of service, there was uniformity in the appellants establishment itself and so, it was thought that the Tribunal might have been justified in discouraging a departure from the said uniformity in respect of one item, viz., earned leave. It would thus be clear that this decision does number lay down any general 1 1963 3 S.C.R 930. principle at all. In fact, this decision emphatically brings out the point that in dealing with industrial disputes, industrial adjudication should always resist the temptation of laying down any broad, general or unqualified propositions. Therefore, we do number think that the decision of this Court in the case of R. B. Diwan Badri Das 1 is of much assistance. In that case, the Court was dealing with an award pronounced by an Industrial Tribunal in an industrial dispute and the narrow question which the Court decided was that the Industrial Tribunal was number in error in number upholding the rule made by the employer on the 1st July, 1956. In the present case, we are dealing with proceedings arising under the Act and that means that companysiderations which govern the present proceedings are number necessarily the same as those which would govern the decision of an industrial dispute brought before the Industrial Tribunal for its adjudication under the Industrial Disputes Act. The next decision to which Mr. Setalvad has referred was pronounced by this Court in the case of Associated Cement Staff Union and Another v. Associated Cement Company and Others 1 . During the companyrse of the hearing of this appeal, some arguments were urged before us on the question about the relation between terms and companyditions of service governing working hours, leave, and the like, and the wages paid to the employees. Mr. Ramamurti who appeared for the respondents companyceded that the terms and companyditions in regard to leave or working hours can be changed but he companytended that the increase in the working hours or the reduction of earned leave should number be permitted to be introduced without taking into account the question about the companysequent increase in the wage structure itself and it was with a view to companybat this companytention that Mr. Setalvad referred us to the decision in the Associated Cement Co. 1 . In that case, the question of holidays, working hours and wages were all referred to the Industrial Tribunal for its decision. The matter which arose for the decision of this Court in the appeals which were brought to this Court in that case, was, inter alia, in regard to holidays. The Tribunal had allowed 21 holidays, whereas this Court reduced the number to 16. Dealing with the question about the numbermal working hours, this Court observed that once a companyclusion about the numbermal working hours is reached after companysidering the optimum working hours on a companysideration of all the relevant factors, industrial adjudication cannot hesitate to give effect to its companyclusion merely because the workmen would have been entitled 1 1963 3 S.C.R 348. 2 1964 1 L.L.J. 12. to more wages at overtime rates if the hours of work had been fixed at less. Mr. Setalvad relies upon this observation. But we think it would be unreasonable to read this observation in isolation, because in the very next sentence, this Court has added that it is true that in fixing the proper wage-scale, the question of workload and the matter of working hours cannot be left wholly out of companysideration, though it further observed that many other factors including the need of the workmen, the financial resources of the employer, the rates of wages prevailing in other industries in the region, have all to be companysidered in deciding the wage scale. It appears that in that case, the Tribunal itself had held that 21 holidays erred on the side of excessive liberality, and yet it did number reduce that number. That is why this Court reduced the number of holidays from 21 to 16. This decision, in our opinion, does show that where industrial adjudication has to deal with an industrial dispute in relation to wage structure, working hours, and holidays, it must companysider the problem companyprehen- sively and in prescribing the working hours, and making provision for holidays and leave with or without pay, amongst other relevant factors, the wages paid to the employees have numberdoubt to be taken into account. But these companysiderations do number arise in the present proceedings, because what the appropriate authorities under the Act had to companysider was whether two sets of Standing Orders should be permitted under the same establishment or number. The last case to which reference must be made is Guest, Keen, William Private Ltd. v. P. J. Sterling and Others 1 . In that case, the Standing Order had been certified under the Act prior to its amendment. The relevant Standing Order had relation to the age of retirement of the employees under the establishment in question. When the Standing Order was certified, its fairness and reasonableness companyld number have been examined by the Certifying Authority. After it was certified, the employer sought to give effect to the age of retirement in regard to employees who were already in its employment and that gave rise to an industrial dispute. The employees who were already in the employment of the employer, companytended that prior to the certification of the Standing Order, there was number age of retirement in the companycern and they urged that the certified Standing Order companyld number affect their right to companytinue in the employment so long as they were fit to discharge their duties. It was in the companytending this dispute that the question arose as to whether the certified Standing Order applied to the previously existing employees. The Labour Appel- 1 1960 1 S.C.R. 348. late Tribunal against whose decision the appeal was brought to this Court by the appellant Guest, Keen, Williams Private Ltd., had held that the certified Standing Order companyld number apply to the ,employees who were already in the employment of the appellant. This Court affirmed the view expressed by the Labour Appellate Tribunal that the certified Standing Order companyld number affect the rights of the previous employees nevertheless, it was held that the question of prescribing an age of retirement for them companyld be companysidered in the proceedings before the Court and under the special circumstances to which reference has been made in the judgment, it was thought that the age of superannuation for prior employees companyld be reasonably and fairly fixed at 60 years. This decision again is number of any assistance, because the matter came to this Court from an industrial dispute which was the subject,matter of industrial adjudication before the Industrial Tribunal and the Labour Appellate Tribunal and all that this Court did was to fix an age of superannuation or workmen who had been employed prior to the date of the certification of the relevant Standing Order, at 60, and that companyrse was adopted under the special and unusual circumstances expressly stated in the companyrse of the judgment. As we have already pointed out, the question as to whether two sets of Standing Orders can be certified under the provisions of the Act, did number fall to be companysidered in that case. Therefore, we are satisfied that the Certifying Officer as well as the appellate authority companymitted numbererror of law in refusing to certify the modified Standing Orders submitted by the appellant in the present proceedings.	Case appeal was rejected by the Supreme Court
Subba Rao J. These two appeals by special leave are preferred against the order of the High Court of Kerala in Tax Revision Cases Nos. 52 and 53 of 1960 relating to sales tax assessments made on the respondent for the years 1955-56 and 1956-57 respectively. The facts in the two appeals may be briefly and separately stated. The following facts relate to Civil Appeal No. 986 of 1964 in respect of the assessment year 1955-56 The respondent has two offices, the head office is at Court Road and the branch office, at Big Bazaar. Both the offices are in Kozhikode. The branch office does wholesale business and the head office does retail business and they maintain separate accounts. The goods sent from the branch office to the head office are entered in the accounts as transfers. The head office maintains accounts disclosing the goods so transferred by the branch office and also the goods purchased by it locally. The branch office has also transactions with other customers. On April 6, 1957, the Deputy Commercial Tax Officer, Kozhikode, assessed the respondent on the net turnover of his business of Rs. 9,30,565-10-5 for the assessment years 1955-56. But later on, on a surprise inspection of the head office by the Intelligence Officer, North Zone, Kozhikode, some books of accounts and records were recovered. On October 27, 1958, on the basis of the said books and records, the Sales Tax Officer issued a numberice to the respondent proposing to determine to the best of his judgment the turnover which had escaped assessment. The respondent agreed to the Sales Tax Officer assessing the turnover of the head office on the basis of the aforesaid secret books recovered from the shop, but objected to a fresh assessment being made in respect of the branch office at Big Bazaar. That objection was rejected and the Sales Tax Officer reassessed the turnover of the business of the respondent in the following manner He found that in regard to the head office the transactions disclosed in the secret books were 135 of the turnover recorded in the regular accounts and on that basis added 135 to the turnover disclosed in the regular books of the said office. He then applied the same percentage in regard to the assessment of the turnover of the branch office. He added 135 to the turnover found in the regular accounts of the branch office. He assessed the total turnover found in the regular accounts of the branch office. He assessed the total turnover of the two offices at Rs. 19,71,805-13-5. On the basis of the said total turnover the respondent was assessed to sales tax amounting to Rs. 16,269.37. The respondent preferred an appeal against the said order of the Sales Tax Officer to the Appellate Assistant Commissioner without any success. The further appeal preferred by him to the Sales Tax Appellate Tribunal was also dismissed. The said order was taken in revision to the High Court of Kerala in T.R.C. No. 52 of 1960. The facts of Civil Appeal No. 987 of 1964 relating to the assessment for the year 1956-57 are as follows On the basis of the secret accounts discovered in the surprise inspection of the head office, the Sales Tax Officer issued a numberice to the respondent proposing to determine to the best of his judgment the turnover which had escaped assessment. The respondent had numberobjection for a reassessment being made in respect of the turnover of the head office on the basis of the secret accounts discovered, but objected to the reassessment of his branch office. The Sales Tax Officer applied the same principle in regard to the assessments of both the shops as he had adopted in the case of the turnover for the assessment year 1955-56. Taking the head office he found in regard to the general goods that the escaped assessment was 200 of the turnover assessed and in regard to sugar, 500 of the assessed turnover. He, therefore, added 200 and 500 to the turnover of the general goods and the turnover of sugar respectively. In the same manner in regard to the turnover of the branch office, though numbersecret books were discovered in respect of that office he added to the turnover already assessed 200 of the turnover of the general goods and 500 of the turnover of sugar. With the result he fixed the total turnover of the two offices at Rs. 39,66,377-2-6 made up of the turnover of the head office at Rs. 2,21,251-14-5 and of the branch office at Rs. 37,45,125-4-1. The respondent pursued the matter up to the High Court. T.R.C. No. 53 of 1960 was the revision filed by him in the High Court. The High Court set aside the orders of the Sales Tax Tribunal in respect of both the assessment years on the ground that the finding of the escaped assessment so far as the branch office was companycerned amounted to an error or law, because it was based on companyjecture. Rejecting the plea of the State that the matter should be remanded for a fresh assessment, the High Court dismissed the revisions. Hence the present appeals. Mr. Govinda Menon, learned companynsel for the State, argued that the High Court was wrong in holding that the best judgment assessment was capricious. He pressed on us to hold that the branch office must have maintained secret accounts companyresponding to the secret accounts discovered in respect of the head office, that the respondent had suppressed the said accounts and that, therefore, the Sales Tax Officer acted reasonably in ascertaining the escaped assessment on the basis of the percentage of escaped assessment found in respect of the head office. He further companytended that the High Court had numberjurisdiction to interfere with the finding of fact arrived at by the Tribunal. Mr. Sreedharan Nambiar, appearing for the respondent, companytended that there was numberbasis for the Sales Tax Officer to hold that the respondent maintained separate accounts in respect of the branch office business, that there was absolutely numbermaterial before the Sales Tax Officer to sustain his best judgment assessment, and that, therefore, the said assessment made by the Sales Tax Officer was capricious and arbitrary and was rightly set aside by the High Court. At the outset the relevant provisions of the Travancore-Cochin General Sales Tax Act, 1125 M.E. XI of 1125 , may be numbericed Section 12. - 1 Every dealer whose turnover is ten thousand Indian rupees or more in a year shall submit such return or returns relating to his turnover, in such manner, and within such periods as may be prescribed. 2 a If the assessing authority is satisfied that any return submitted under sub-section 1 is companyrect and companyplete, he shall assess the dealer on the basis thereof. If numberreturn is submitted by the dealer under sub-section 1 before the date prescribed or specified in that behalf or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall assess the dealer to the best of his judgment Provided that before taking action under this clause the dealer shall be given a reasonable opportunity of proving the companyrectness and companypleteness of any return submitted by him. Section 15B. - Within sixty days from the date on which an order under section 15A, sub-section 4 or sub-section 6 , was companymunicated to him, the assessee or the Deputy Commissioner may prefer a petition to the High Court against the order on the ground that the Appellate Tribunal has either decided erroneously or failed to decide any question of law It is manifest that the jurisdiction of the High Court under section 15B is companyfined only to the question whether the Tribunal has either decided erroneously or failed to decide any question of law. As we will point out immediately, the Sales Tax Officer acted capriciously and arbitrarily in assessing the respondent, which he companyld number do under section 12 2 b of the Act and the Tribunal companyfirmed that order. It is a clear case where the Tribunal decided erroneously on a question of law. What is the scope of section 12 2 b of the Act ? The expression to the best of his judgment in the said clause is presumably borrowed from section 23 4 of the Income-tax Act. The said expression in the Income-tax Act was the subject of judicial scrutiny. The Privy Council in Commissioner of Income-tax v. Laxminarayan Badridas has companysidered those words. Therein it observed He the assessing authority must number act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into companysideration local knowledge and repute in regard to the assessees circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate and though there must necessarily be guess-work in the matter, it must be honest guess-work. In that sense, too, the assessment must be to some extent arbitrary. The Privy Council, while recognizing that an assessment made by an officer to the best of his judgment involved some guess-work, emphasized that he must exercise his judgment after taking into companysideration the relevant material. The view expressed by the Privy Council in the companytext of the Income-tax Act was followed when a similar question arose under the Sales Tax Act. A Division Bench of the Calcutta High Court in Jagadish Prosad Pannalal v. Member, Board of Revenue, West Bengal, companyfirmed the assessment made by the sales tax authorities, as in making the best judgment assessment the said authorities companysidered all the available materials and applied their mind and tried their best to companye to a companyrect companyclusion. So too, a Division Bench of the Patna High Court in Doma Sahu Kishun Lal Sao v. State of Bihar refused to interfere with the best judgment assessment of a Sales Tax Officer as he took every relevant material into companysideration, namely, the situation of the shop, the rush of the customers and the stock in the shop and also the estimate made by the Assistant Commissioners in the previous quarters. Under section 12 2 b of the Act, power is companyferred on the assessing authority in the circumstances mentioned thereunder to assess the dealer to the best of his judgment. The limits of the power are implicit in the expression best of his judgment. Judgment is a faculty to decide matters with wisdom truly and legally. Judgment does number depend upon the arbitrary caprice of a judge, but on settled and invariable principles of justice. Though there is an element of guess- work in a best judgment assessment, it shall number be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case. Though sub-section 2 of section 12 of the Act provides for a summary method because of the default of the assessee, it does number enable the assessing authority to function capriciously without regard for the available material. Can it be said that in the instant case the impugned assessment satisfied the said tests ? From the discovery of secret accounts in the head office, it does number necessarily follow that a companyresponding set of secret accounts were maintained in the branch office, though it is probable that such accounts were maintained. But, as the accounts were secret, it is also number improbable that the branch office might number have kept parallel accounts, as duplication of false accounts would facilitate discovery of fraud and it would have been thought advisable to maintain only one set of false accounts in the head office. Be that as it may, the maintenance of secret accounts in the branch office cannot be assumed in the circumstances of the case. That apart, the maintenance of secret accounts in the branch office might lead to an inference that the accounts disclosed did number companyprehend all the transactions of the branch office. But that does number establish or even probabilise the finding that 135 or 200 or 500 of the disclosed turnover was suppressed. That companyld have been ascertained from other materials. The branch office had dealings with other customers. Their names were disclosed in the accounts. The accounts of those customers or their statements companyld have afforded a basis for the best judgment assesment. There must also been other surrounding circumstances, such as those mentioned in the Privy Councils decision cited supra. But in this case there was numbermaterial before the assessing authority relevant to the assessment and the impugned assessments were arbitrarily made by applying a ratio between disclosed and companycealed turnover in one shop to another shop of the assessee. It was only a capricious surmise unsupported by any relevant material. The High Court, therefore, rightly set aside the orders of the Tribunal. Nor can we accede to the request of the learned companynsel for the State to remand the matter to the Tribunal for fresh disposal. The sales tax authority had every opportunity to base its judgment on relevant material but it did numberdo so. The department persisted all through the hierarchy of tribunals to sustain the impugned assessments. The High Court, having regard to the circumstances of the case, refused to give the department another opportunity. We do number think we are justified to take a different view. In the result, the appeals fail and are dismissed. But, as regards companyts, it is number a fit case for awarding companyts to the respondent. It has been established that the respondent was keeping secret accounts and that he had number disclosed his entire dealings.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 275 of 1964. Appeal by special leave from the judgment and order dated April 23, 1962 of the Bombay High Court in Sales Tax Reference No. 18 of 1961. B. Donde, K. Rajendra Chaudhuri and K. R. Chaudhuri, for the appellant. B. Agarwala, R. Ganapathy lyer, B. R. G. K. Achar, and H. Dhebar, for the respondent. The Judgment of the Court was delivered by Ramaswami, L This appeal is brought by Special Leave against the judgment of the High Court of Judicature at Bombay dated April 23, 1962 on a reference by the Bombay Sales Tax Tribunal under S. 34 1 of the Bombay Sales Tax Act, 1953. The appellant is a manufacturer of footwear in Bombay. During the assessment year April 1, 1954 to March 31, 1955, the appellant purchased rubber from certain dealers residing in the State of Cochin. These purchases were assessed to purchase tax by the Sales Tax Officer under S. 1 0 a of the Bombay Sales Tax Act Bombay Act III of 1953-hereinafter referred to as the Act as they were made from a person who is number a registered dealer. The Cochin sellers had their agents in Bombay who received orders on behalf of the appellant. The orders of the appellant were accepted by the agents in Bombay and the goods were shipped by the sellers from Cochin to Bombay. After the goods were shipped, the demand drafts were forwarded along with the Bills of Lading by the vendors to their bankers in Bombay. The bankers endorsed the bill of lading in Bombay and handed it over to purchasers in Bombay in exchange for the price. The price was also paid in Bombay. In the Bills of Lading the sellers in, Cochin were described as both companysignors and companysignees. After the goods were shipped, an invoice was drawn on the appellant in which were printed the following words Shipped per S.S from Cochin to Bombay on account and risk of Messrs Carona Sahu Co. Ltd., 15-A, Elphinstone Circle, Fort, Bombay. For the period April 1, 1954 to March 31, 1955, the appellant was assessed to purchase tax by the Sales Tax Officer, Licence Circle, Bombay by his assessment order dated March 31, 1956, under cl. a of s. 10 of the Act The appellant preferred an appeal under s. 30 of the Act to the Assistant Collector of Sales Tax, Appeals 11, Bombay Circle, Bombay but it was dismissed. A revision application to the Additional Collector of Sales Tax was dismissed. The appellant thereafter moved the Sales Tax Appellate Tribunal at Bombay for revision of the order passed by the Additional Collector of Sales Tax. By its judgment dated September 4, 1959 the Bombay Sales Tax Tribunal dismissed the revision application and companyfirmed the order made by the Sales Tax authorities. At the instance of the appellant, the Sales Tax Tribunal referred the following questions of law for decision of the Bombay High Court under s. 34 1 of the Act Whether on the facts and circumstances of the case, the property in the rubber companysignments passed to the applicant in Cochin i.e. outside the State of Bombay ? Whether the purchase tax under s. 10 a is leviable in respect of the purchases in dispute ? By its judgment dated April-23, 1962 the Bombay High Court answered both the questions of law in favour of the State and against the appellant. The first question that arises for determination in this case is, whether, on the facts and circumstances of the case, the property in the rubber companysignments passed to the appellant in Cochin i.e. outside the territorial limits of the State of Bombay. In this companynection the facts found by the Sales Tax Tribunal are that the Cochin sellers had their agents in Bombay who received the orders of the appellant and arranged for the shipping of the- goods. In accordance with these orders the goods were, shipped by the Cochin sellers from Cochin to Bombay. The Bills of Lading were in the name of the sellers as companysignors and companysignees. The invoices however showed that the goods were shipped at the risk and on account of M s. Carona Sahu and Company P Ltd. The insurance charges were borne by the appellant who also paid freight and other charges. The bills of lading were sent by the sellers through the bank to be delivered to the buyers in Bombay on payment of the price of the goods. In view of these facts, the High Court held that the property was intended by the parties to pass in Bombay and the endorsement in the invoice that the goods were being shipped on account of and at the risk of the buyers did number mean anything more than that the insurance charges were to be paid by the buyers. On behalf of the appellant, Mr. Donde submitted that the property in the rubber companysignments had passed to the appellant in Cochin. In our opinion, there is numberwarrant for this submission and the view taken by the High Court is companyrect. The law is well established that in the case of a companytract for ,sale of unascertained goods the property does number pass to the purchaser unless there is unconditional appropriation, of the goods in a deliverable state to the companytract. In the case of such a companytract, delivery of the goods by the vendor to the companymon carrier is an appropriation sufficient to pass the property. But there is a difference in the legal effect of delivering goods to a companymon carrier on the one hand and shipment on board a ship under a bill of lading on the other hand. Where goods are delivered on board a vessel to be carried, and a bill of lading is taken, the delivery by the seller is number delivery to the buyer, but to the captain as bailee for delivery to the person indicated by the bill of lading. The seller may therefore take the bill of lading to his own order. The effect of this transaction is to companytrol the possession of the captain and make the captain accountable to deliver the goods to the seller as the holder of the bill of lading. The bill of lading is the symbol of property, and by so taking the bill of lading the seller keeps to himself the right of dealing with property shipped and also the right of demanding possession from the captain, and this is companysistent even with a special term that the goods are shipped on account of and at the risk of the buyer. In Gabarron v. Kreeft 1 Lord Parker laid down the principle as follows The English cases, however, on which the Sale of Goods Act was founded seem to show that the appro- 1 1875 L.R. 10 Ex. 274. priation would number be such as to pass the property if it appears or can be inferred that there was numberactual intention to pass it. If the seller takes the bill of lading to his own order and parts with it to a third person, number the buyer, and that third person, by possession of the bill of lading, gets the goods, the buyer is held number to have the property so as to enable him to recover from the third party, numberwithstanding that the act of the seller was a clear breach of the companytract. Ss. 23 and 25 of the Indian Sale of Goods Act are identical in language to the companyresponding provisions of the English Sale of Goods Act. S. 25 states as follows Where there is a companytract-for the sale of specific goods or where goods are subsequently appropriated to the companytract, the seller may, by the terms of the companytract or appropriation, reserve the right of disposal of the goods until certain companyditions are fulfilled. In such case, numberwithstanding the delivery of the goods to a buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does number pass to the buyer until the companyditions imposed by the seller are fulfilled. Where goods are shipped and by the bill of lading the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal. . . . . . On behalf of the appellant it was companytended that the goods were shipped on account and at the risk of Messrs. Carona Sahu and Company P Ltd. and therefore the property in the goods must be held to have passed to the appellant on shipment in Cochin. We do number think there is any substance in this argument. The endorsement in the invoice merely indicated that the insurance charges were to be paid by the appellant and the clause has numberbearing on the question of the passing of title. In Shepherd v. Harrison 1 the plaintiff in England sent an order to P and Co. at Pernambuco to buy companyton for the plaintiff. P and Co. bought companyton on account of the plaintiff and made out an invoice on account and risk of M s. John Shepherd Co. 1 1871 L.R. V H.L. 11 6. but the bills of lading were taken deliverable to P and Co.s order or assigns paying freight. The invoice was sent directly to the plaintiff but the bills of lading were endorsed in blank by P and Co. and sent with the bill of exchange to their own agents in England. The English agents forwarded the bills of lading with the bills of exchange to the plaintiff requesting him to accept the bill of exchange. The plaintiff retained the bill of lading but returned the bill of exchange unaccepted on the ground that P and Co. had number companyplied with the plaintiffs order. The plaintiff then presented the documents to the defendants who refused to deliver the companyton in view of the instructions from the agents of the companysignor. On these facts, it was held by the House of Lords that the property in the goods did number pass to the plaintiffs although they had retained the bill of lading because numberproperty was intended to pass until the plaintiff had accepted the bills of exchange. It was strongly argued for the plaintiff that the goods were shipped on account and at the risk of the companysignees, but the House of Lords unanimously dismissed the appeal holding that the property in the goods did number pass to the purchaser either in Pernambuco or in Liverpool. Dealing with the argument that the transfer of risk was an indication of the transfer of property, Lord Cairns held as follows In the invoice, the goods are described as being shipped on account and at the risk of the plaintiff. But along with the invoice, a bill of lading was taken from the Captain, making the companyton deliverable, number to the plaintiff, but to the shipper on board. It is perfectly well settled that, in that state of things, the entry upon the invoice, stating that the goods are to be shipped on account and at the risk of the companysignee, is number companyclusive but may be overruled by the circumstance of the jus disponendi being reserved by the shipper through the medium of the bill of lading. Applying this principle to the present case, we are of the opinion that the High Court rightly held, upon the facts found, that the property in the rubber companysignment passed to the appellant in the State of Bombay. We pass on to companysider the second question of law arising in this case-whether the purchase tax under S. 10 a was leviable in respect of the purchases in dispute. It is necessary at this stage to reproduce the relevant provisions of the Bombay Sales Tax Act, 1953 as it stood at the material time. Section 2 6 of the Act defines a dealer as meaning any person who carries on the business of selling or buying goods in the pre- Reorgansiation State of Bombay excluding the transferred territories, whether for companymission, remuneration or otherwise and includes a State Government which carries on such business and any society, club or association which sells goods to or buys goods from its members. Section 2 11 defines a registered dealer to mean a dealer registered under s. 11 or deemed to be a registered dealer under s. 12-B. According to s. 2 13 sale means a sale of goods. made within the pre-Reorganisation State of Bombay, excluding the tranferred territories for cash or deferred payment or other valuable companysideration and includes any supply by a society or club or an association to its members on payment of price or fees or subscription, but does number include a mortgage, hypothecation, charge or pledge. Section 6 of the Act is to the following effect Subject to any rules made under S. 18-B there shall be paid by every dealer who is liable to pay tax under this Act- ia sales tax or purchase tax on his sales or purchases in accordance with the provisions of section 7-A a a sales tax on his sales levied in accordance with the provisions of section 8, b a general sales tax on his sales levied in accordance with the provisions of section 9, and c a purchase tax on his purchases levied in accordance with the provisions of section 10, d a tax on his purchases levied in accordance with the provisions of section 10- AA. The tax payable by a dealer under any clause of sub-section 1 shall be paid in addition to the tax or taxes, if any, payable by such dealer under any other clause or clauses of the said sub-section. Section 10 a states as follows Subject to the provisions of section 7, there shall be levied a purchase tax on the turnover of purchases of goods specified in companyumn 1 of Schedule B at the rates, if any, specified against such goods in companyumn 4 of the said schedule,- a where such goods are purchased from a person who is number a registered dealer Section 10-C reads In the case of such goods as may be specified by the State Government by numberification in the Official Gazette from time to time, which have been despatched or brought from any place in India outside the State of Bombay and are actually delivered as a direct result of a purchase to a buyer in the State of Bombay for companysumption therein, there shall be paid by such buyer on such purchase an outside goods purchase tax levied at such rate number exceeding twenty-one pies in the rupee as may be specified in such numberification, unless the buyer produces a declaration made by the seller of such goods in the prescribed form certifying that the seller is a registered dealer and shall pay the tax on such sale in due companyrse Provided that numbersuch tax shall be levied on the purchase of any goods by a registered dealer if after the purchase the goods are sold by him or used by him in the prescribed manner in the manufacture or processing of any goods for sale. It is argued by Mr. Donde that the term person in s. 10 a should be read as meaning a dealer who carries on business in Bombay but who is number registered under the Act. In other words, it is companytended that the person referred to in s. 10 a must be a dealer within the definition of s. 2 6 of the Act but who is number registered either because he failed to get himself registered or because his turnover is less than the specified limit. We are unable to accept the argument put forward by Mr. Donde as companyrect. We see numberreason for placing any limitation or qualification on the term person which occurs in s. 10 a . There is numberhing in the companytext or language of the section for importing any qualification on the plain meaning of that expression. That section plainly states that purchases made by a dealer from a person who is number a registered dealer will be subject to purchase tax. The appellant is a dealer and it has made the purchases in question from the sellers who are number registered dealers. The provisions of s. 10 a of the Act are satisfied in the present case and the purchases in question accordingly are liable to tax. The next companytention of Mr. Donde is that the provisions of S. 10 a cannot apply to transactions of purchase where the purchased goods have been brought from outside the State of Bombay for companysumption in that State because s. 10-C of the Act would apply to such transactions. We do number think there is any warrant in this argument. S. 10-C reproduces the Explanation to Art. 286 1 a of the Constitution and it would apply where under general law the sale takes place outside the State but the goods are delivered as a direct result of the sales for companysumption within the State of Bombay. The buyer referred to in s. 10-C need number necessarily be a dealer under the Act, because so far as the dealers are companycerned they are only liable to three types of taxes, viz., sales tax, general tax and purchase tax, enumerated in s. 6 which is the charging section. On the other hand. s. 10-C applies to a buyer who brings into the State of Bombay goods which are numberified in the Official Gazette. It should also be numbericed that s. 10-C deals only with certain specific goods to be numberified by the State Government, whereas s. 10 a includes all purchases made from persons other than registered dealers. It is manifest that the scope and ambit of these two sections are different. We are of opinion that Mr. Donde is unable to make good his submission on this aspect of the case and the High Court has rightly answered this question of law also in favour of the State and against the assessee.	Case appeal was rejected by the Supreme Court
CIVIL, APPELLATE JURISDICTION Civil Appeal No. 634 of 1964. Appeal by special leave from the judgment and decree dated January 25, 1957, of the Bombay High Court in Appeal No. 620 of 1956. Gumanmal Lodha, J. S. Rastogi and J. B. Dadachanji, for the appellants. K. Chatterjee, B. R. G. K. Achar for R. H. Dhebar, for respondent No. 1. The Judgment of the Court was delivered by Bachawat. J. One Jhaverchand Dahyabhai Shah died in 1916, leaving a will, dated August 6, 1915. He was a resident of Vejalpore in the suburbs of Broach and a Ladva Shrimali Bania by caste. He professed the Jain religion, and believed in the tenets of the Swetembar Murti Pujak sect of Jains. By cl. 7 of the will, he directed his executors to spend out of the earnings of his shop every year during the life-time of his niece, Bai Jakore, the amounts mentioned below on the following religious objects Rs. 100 for feeding cattle with grass, fodder, oil cakes etc., in the Broach Pinjrapole. Rs. 100 for Jiva-daya Khata fund for kindness to animals . Rs. 25 for offering flowers for the worship of Lord Rikabdev in the Jain temple at Vejalpore, Broach. Rs. 200 for providing food to Shravak pilgrims at the Shatroonjaya Hill at Palitana. Rs. 50 for providing food to pilgrims at Mount Girnar. Rs. 50 for providing food to pilgrims at Mount Abu. Rs. 250 for providing cereals, clothes etc., to Shravaks and Shravikas. Rs. 100 for providing cloth to Jain Sadhus and Sadhavies. Rs. 200 for education and food of Hindu orphans. Rs. 200 for Jain Gyan Khata fund for imparting knowledge . Rs. 100 for feeding Shravaks and Shravikas who have observed fast. Rs. 300 for giving food, cloth etc., to the blind, lame and crippled members of the Hindu Community. In addition, he also directed his executors to give a Swamivatsal feast or meal companysisting of methi-dal and ladus made of sugar to the members of his caste at 15 specified villages and towns in the Broach and Surat Districts every year on the occasion of the sacred festival of Pajusan. By cl. 15 of the will, he directed that after the death of his niece, Bai Jakore, a sum of Rs. 75,000 should be set apart by the executors, and out of the moneys so set apart, suitable amounts should be sent to the respective Khatas funds in his name, so that the religious acts mentioned in cl. 7 be companytinued for ever. On the death of Bai Jakore on May 20, 1928, the estate vested in the residuary legatee, Bai Chanchal, daughter of Bai Jakore. Mulchandbhai, husband of Bai Chanchal, set apart Rs. 75,000 on trust for the purposes mentioned in cl. 7 of the win, and began to manage the trust estate. Out of the trust moneys, he invested Rs. 8,000 in 5 per cent tax-free Government Loan, 1944-45, yielding an annual income of Rs. 400, and pursuant to the directions given in cl. 15 of the will, handed over loans of the face value of Rs. 4,000, Rs. 1,000, Rs. 1,000, and Rs. 2,000 respectively to four religious and charitable institutions in full discharge of the obligation of the trust for expending annually the sums of Rs. 200, Rs. 50, Rs. 50 and Rs. 100 on items 2, 4, 5 and 6 of the religious purposes mentioned in cl. 7 of the will. On December 8, 1947, Bai Chanchal executed a trust deed in respect of the investments representing the balance amount of Rs. 67,000 and an accumulation of surplus or unexpended income amounting to Rs. 25,796-6-8. The trust is registered as a public trust under the Bombay Public Trusts Act, 1950, hereinafter referred to as the Act. The trust deed provided that the unexpended accumulation of Rs. 25,796-6-8 should be applied for establishing, maintaining and supporting a Nivas for housing the poor and middle-class provided that after setting apart the aforesaid sum of Ladva Shrimali Jains at low and cheap rents. The trust deed also provided that after setting apart the aforesaid sum of Rs. 25,796-6-8 the balance funds would be held in trust for applying its income to the charities mentioned in cl. 7 of the aforesaid will other than items 2, 4, 5 and 6. Now, the trustees had numberauthority to divert any part of the trust fund for the purposes of the Nivas scheme. The establishment of a Nivas for housing the poor and middle-class Ladva Shrimali Jains is number one of the original objects of the trust. As a matter of fact, the Nivas scheme was number carried into effect. The Charity Commissioner, Bombay challenged the validity of the Nivas scheme. The Courts below rightly proceeded on the footing that the Nivas scheme is invalid. Subsequent to the execution of the trust deed, there were further accumula- tions of unexpended income. The Swamivatsal feasts were given, and the fixed annual payments to all the charities were duly met up to Samvat year 1999 companyresponding to 1942- 1943 A.D. During the subsequent years, the fixed annual payments to the charities were duly made, but on account of rationing restrictions, the feasts companyld number be given up to Samvat year 2010 companyresponding to 1953-1954 A.D. During the Samvat year 2011 companyresponding to 1954-1955 A.D., the feast was number given in spite of the removal of rationing restrictions. The trustees allege that the current income of the trust fund after disbursing the fixed annual payments is number sufficient to meet the usual expenses of annual feasts. On June 3, 1955, the Charity Commissioner filed an application before the District Judge, Broach under S. 55 1 b and S. 56 of the Act for suitable directions for the utilisation of the accumulations of the unexpended income of the trust for some educational purpose. The trustees were impleaded as respondents to this application. Pursuant to a general numberice issued by the Court, the appellants and four other members of the Ladva Shrimali Shravak Bania Community in Broach and Surat Districts appeared, and intervened in the application. On their behalf, it was companytended that the trust was for religious purposes and its funds companyld number be diverted for other purposes under ss. 55 1 b and 56 of the Act, and that the accumulations should be utilised year after year for meeting the deficit amount required for the annual swami- vatsal feasts. The District Judge held that the provisions of s. 56 of the Act did number apply to the funds of a public religious trust, and if the accumulations were held for a religious purpose, the Court companyld number give any directions for its utilisation under that section, that the Swamivatsal feast companyfers religious benefits and objects Nos. 2, 3, 4, 5, 6, 8 and 11 1 are also religious in character, while the remaining objects are charitable, and therefore the entire feast was number of a religious character, but assuming that the trust was wholly religious, the accumulation was number held for religious purposes, and was subject to the directions of the Court as to its utilisation under s. 56 read with s. 55 1 b of the Act. He also held that the trustees companyld number save any moneys in future by simply refusing to give the Swamivatsal feasts but it was number in the public interest to provide for the expenses of the feast out of the accumulation, and the accumulation should be spent for educational and medical purposes. The District Judge passed final orders on October 25, 1956. On that date, the accumulation of unexpended income amounted to Rs. 45,019-14- 0, besides another sum of Rs. 107-2-0. The District Judge directed the trustees to hand over a sum of Rs. 22,505-15-0 to an institution known as the Sad Vidya Mandal for giving four freeships every year to deserving students, who should preferably be Jains of Broach District and failing such deserving cases, to other Hindu students. Subject to the companydition of giving freeships, the Sad Vidya Mandal would be at liberty to spend the amount for purposes of the building of the College or its hostel or in providing other educational facilities to the students. He also directed the trustees to pay another sum of Rs. 22,509-15-0 to the trustees of the Sevashram Hospital at Broach on companydition that the amount be invested in any approved trust security and its income be utilised in providing maintenance, food and medicine to poor and deserving patients. He directed the payment of the remaining sum of Rs. 107-2-0 towards companyts. The appellants and two other members of the Ladva Shrimali Shravak Bania Community preferred an appeal to the Bombay High Court. The High Court held that the Court companyld on an application under s. 55 of the Act deviate from the directions of the settler, even if the purpose of the trust has number failed, where the Court finds that it is inexpedient, impracticable, undesirable, unnecessary or improper in the public interest to abide by his directions, but the Court companyld exercise this power only in respect of funds of a public trust which was number a trust for religious purposes. The High Court held that numbere of the purposes mentioned in cl. 7 of the will except the one mentioned in item 3 of the clause companyld be regarded as religious, that the object of providing funds for annual Swamivatsal feasts was charitable and number religious, and that the Court was, therefore, companypetent to entertain the application under s. 55. The High Court further held that providing a feast to. the members of the caste even on the occasion of a religious festival or on days which may be regarded as holy is number expedient, desirable, necessary or proper in the public interest, and the directions of the District Judge with regard to the distribution of the fund should number be interfered with. The High Court accordingly dismissed the appeal. The appellants number appeal to this Court by special leave. They challenge the propriety and the legality of the directions given by the District Judge below, and repeat the submissions made on their behalf in the Courts below. The respondents companytend that the aforesaid directions were rightly given under ss. 55 1 b and 56 of the Act. The Bombay Public Trusts Act, 1950 was passed on August 14, 1950, with a view to regulate and make better provision for the administration of public religious and charitable trusts in the State of Bombay. Soon after the Act came into force, its companystitutional validity was assailed. In Ratilal Panachand Gandhi v. The State of Bombay and Others 1 , this Court held that a religious sect or denomination has the right guaranteed by the Constitution to manage its own affairs in matters of religion, and this includes the right to spend the trust property or its income for religion and for religious purposes and objects indicated by the founder of the trust or established by usage obtaining in a parti- cular institution. To divert the trust property or funds for purposes which the Charity Commissioner or the Court companysiders expedient or proper, although the original objects of the founder can still be carried out, is an unwarranted encroachment on the freedom of religious institutions in regard to the management of their religious affairs and therefore s. 55 1 c , which companytains the offending provision and the companyresponding provision relating to the powers of the Court occurring in the latter part of s. 56 1 must be held to be void. Subsequently, Bombay Act 59 of 1954 amended s. 55 1 c by excluding from its purview a trust for a religious purpose. Sections 55 and 56 of the Bombay Trusts Act, 1950, as they stand number, are as follows 55. 1 If upon an application made to him or otherwise the Charity Commissioner is of opinion that- a the original object for which the public trust was created has failed, 1 1954 S. C. R. 1055,1070-1072. b the income or any surplus balance of any public trust has number been utilized or is number likely to be utilized, c in the case of a public trust other than a trust for a religious purpose, it is number in public interest expedient, practicable, desirable, necessary or proper to carry out wholly or partially the original intention of the author of the public trust or the object for which the public trust was created and that the property or the income of the public trust or any portion thereof should be applied to any other charitable or religious object, d in any of the cases mentioned in sections 10 to 13 or in regard to the appropriation of the dharmada sums held in trust under section 54 the directions of the Court are necessary, the Charity Commissioner shall require the trustee to apply within the prescribed time for directions to the Court within the local limits of whose jurisdiction the whole or part of the subject-matter of the trust is situate. If the trustees fail to make the application as required under sub-section 1 or if the Charity Commissioner himself is a trustee or if there is numbertrustee of the public trust, the Charity Commissioner shall make an application to the Court. 56. 1 On such application being made, the companyrt after hearing the parties and making an inquiry shall decide the matter and shall give directions. In giving the directions, the companyrt, shall, so far as may be expedient, practicable, desirable, necessary or proper in public interest, give effect to the original intention of the author of the public trust or the object for which the public trust was created. If the companyrt is of opinion that the carrying out of such intention or object is number desirable, necessary or proper in public interest the companyrt may direct the property or income of the public trust or any portion thereof to be applied by pres to any other charitable or religious object. In doing so, it shall be lawful for the companyrt to alter any scheme already settled or to vary the terms of any decree or order already passed in respect of the public trust or the companyditions companytained in the instrument of the public trust. Any decision or order passed by the Court under sub-section 1 shall be deemed to be a decree of such companyrt and an appeal shall lie therefrom to the High Court. Section 2 13 of the Act provides that unless there is any thing repugnant in the subject or companytext, public trust means an express or companystructive trust for either a public religious or charitable purpose or both. Section 5 5 1 c expressly excludes from its operation a trust for a religious purpose. But ss. 55 1 a and 55 1 b do number exclude religious trusts from their operation, and they apply to all public trusts for religious and charitable purposes. On an application either under S. 55 1 a or s. 55 1 b read with S. 56 2 , the Court is bound to give directions in respect of all public trusts. Section 56 1 provides that in giving the directions, the Court shall, so far as may be expedient, practicable, desirable, necessary or proper in the public interest, give effect to the original intention of the author of the trust or the object for which the trust was created. The companyjunction or in this sentence introduces several alternatives. The Court must give effect to the original intention or object if and so far as it may be either expedient or practicable or desirable or proper or necessary to do so. If, for example, the Court finds that it is proper in the public interest to give effect to the original object, the Court must give effect to it, though it is number necessary to do so in the public interest. Under the latter part of s. 56 1 , if the Court finds that the carrying out of the original intention or object wholly or partially is neither expedient number practicable number desirable number necessary number proper in public interest, the Court may direct the property or income of the trust or any portion thereof to be applied by pres to any other charitable or religious object. The latter part of S. 56 1 thus permits the diversion of trust funds for other objects, though the original objects of the founder can still be carried out. But we think that the respondents have made out numbercase for such a diversion of trust funds. One of the objects for which the trust was created was that a Swamivatsal feast to the members of the Ladva Shrimali Bania caste should be given every year on the occasion of the holy festival of Pajusan. The Jains of Ladva Shrimali Shravak Bania Community are the chief beneficiaries of this trust. Looking at their interest, it is certainly expedient, practicable, desirable and proper to give the feast. The giving and taking of the Swamivatsal feast on the occasion of the holy festival of Pajusan, if number a religious act. is a meritorious act prescribed by the scrip- tures of Swetambar Murti Pujak Jains. The wider public interest does number require that this special charity for a section of the lain public should be subverted and overthrown. In the wider public interest also, it is expedient, practicable, desirable and proper to, respect the sentiments and interests of this section of the Jain public and to give effect to this charity, and we find numberreason for giving directions under the latter part of s. 56 1 . We, therefore, propose to give directions under the first part of s. 56 1 . In this view of the matter, it is number necessary to decide, whether the trust is a trust for religious purposes, and if so, whether, having regard to Ratilal Panachands case , its income or surplus balance spendable for the purposes of the trust can be diverted for other purposes, though the original object of the trust can still be carried out. Me question whether or number the objects mentioned in cl. 7 of the will are religious objects is number raised in the pleadings. No issues were framed and numberevidence was led on this point by either party. What are religious purposes must be decided according to the tenets and religious beliefs of the Murti Pujak Swetambara sect of Jains, to which the testator belonged. It is difficult to decide the point in the absence of relevant pleadings, issues and evidence. The District Judge held that the Swamivatsal feast and many other objects are religious objects. The High Court too lightly brushed aside this finding. Chapter IX of the Report of the Hindu Religious Endowments Commission 1960-62 companytains an interesting discussion of Jain endowments. Paragraphs 7 to 1 1 of Chap. IX of the Report refer to seven types of religious funds specifically recognised by the Jain scriptures companycerning 1 Jeena Bimba, 2 Jeena Chaitya, 3 Gyan Fund, 4 Sadhu, 5 Sadhvi, 6 Shravak and 7 Shravika. The Jains recognise numerous other endowments or funds for the general or specific purposes, the companypus or interest of which is to be utilised as per the donors intentions. The question whether the several objects of the trust including the giving of a Swamivatsal feast are religious in their character must be left open for future decision. We must number companysider what directions should be given under s. 56 on the present application. No case for applying the latter part of s. 56 1 and for refusing to give effect to the original objects of the trust has been made out. We should, therefore, give effect to the original intention of the founder as far as that intention can be carried out. If the method indicated by the founder cannot be carried out, the Court will substitute another method by pres, that is to say, as nearly as possible to the method specified by the founder. The application of the by pres principle is explained in Storys Equity Jurisprudence, 3rd Edn., Art. 1176, p. 494 thus 1 1954 S. C. R. 1055, 82 0 The doctrine of by pres as applied to charities was formerly pushed to a most extravagant length. But this sensible distinction number prevails that the Court will number decree the execution of the trust of a charity in a manner different from that intended, except so far as it is seen that the intention cannot be literally executed. In that case another mode will be adopted, companysistent with the general intention, so as to execute it, although number in mode, yet in substance. If the mode should become by subsequent circumstances impossible, the general object is number to be defeated, if it can in any other way be attained. In the instant case, the overriding intention of the founder of the trust is that the sum of Rs. 75,000 set apart by him should be devoted to the objects mentioned in cl. 7 of the will, so that those objects may be companytinued and carried out for ever. His intention was that fixed sums should be expended annually for the 12 items of charity mentioned and reasonable sums should be expended annually in giving Swamivatsal feasts to members of his caste. The sum spendable annually for the feast was necessarily of a fluctuating character. In accordance with the directions given in cl. 15 of the will, the obligations of the trust for the charities mentioned in items 2, 4, 5 and 6 of cl. 7 of the will have been fully discharged by donating Rs. 8,000 out of the companypus of the trust. The expenses of the annual Swamivatsal feasts were met, and the payments to other charities were duly made out of the income of the balance funds every year up to Samvat 1999 companyresponding to 1942-43 A.D., and the accumulations of the unexpended income up to that year represent a true surplus. In accordance with the intention of the founder of the trust, the surplus should be applied as nearly as possible to the original uses and purposes of the trust. In all the circumstances of the case, the surplus should be applied to increase the amounts spendable for the surviving objects of the trust. During the subsequent years up to Samvat year 2010 companyresponding to 1953-1954 A.D., the annual feasts companyld number be given due to rationing restrictions, but the expenses of the other charities were duly met. The savings of the income spendable during these years for the feasts should be applied suitably for carrying out the same object in future. The balance savings, if any, should be devoted towards increasing the amounts spendable for the other objects of the trust. The savings during Samvat year 2011 companyresponding to 1954-55 A.D. were due to the fact that the annual feast was number given in spite of the absence of rationing restrictions. The savings for this year should be devoted towards the giving of the Swamivatsal feasts. The trustees cannot be allowed to defeat the objects of the trust by refusing to carry them out. It is said that the giving of a Swamivatsal feast on the scale given in the past would number companyt about Rs. 3,000. But if the income at the disposal of the trustees will number permit the spending of such a large amount, there is numberreason why the trustees would number spend a smaller amount and give the feast to a smaller number of guests. In view of the enormous rise in prices since the creation of the trust, an increase of the amounts spendable for the charities would be in accordance with the general intention of the founder. This is an additional reason for applying the unexpended income for the original objects of the trust instead of diverting them for other purposes. It is desirable that instead of spending the companypus of the accumulations, the companypus should be invested and its income should be applied towards the original objects In the light of all these companysiderations, we propose to give the directions set out in our order. The scheme framed by the Courts below is objectionable in several ways. In framing the scheme, the Courts below erroneously disregarded one of the main objects of the trust, viz., the giving of the annual Swamivatsal feast on the ground that it is number expedient, desirable, necessary or proper in the public interest to carry out this object. The scheme disregards the basic principle that the trust funds should be applied for effectuating the intention of the founder of the trust as far as possible. The direction for payment of one half of the accumulations to the Sad Vidya Mandal on the ground that its object is analogous to the object of the Jain Gyan Fund mentioned in item 8 of cl. 10 of the will is objectionable on the ground that the freeships are number restricted to the Jains and also on the ground that subject to giving the freeships the donee is entitled to spend the companypus for other purposes. Moreover, the purposes of the Sad Vidya Mandal and its freeships are number analogous to the purposes of the Jain Gyan Fund, which is a religious fund for imparting knowledge of Jain religion and Jain Shastras. The direction for payment of one half of the accumulated amount to the Sevashram Hospital is objectionable on the ground that medical treatment of the poor and deserving is number one of the objects specifically mentioned in cl. 7 of the will. Both these directions are also objectionable on the ground that they do number take into account the original objects of the trust. For all these reasons, the directions given by the Courts below must be set aside. In the result, the appeal is allowed, and the judgments and decrees passed by the Courts below are set aside. In lieu of the directions given by the Courts below, we give the following directions Out of the accumulations of the unexpended income up to the 25th October, 1956 amounting to Rs. 45,091-14-0 the trustees will set apart a reasonable sum number exceeding Rs. 5,000 as a working fund to meet current expenses. The trustees will invest the balance amount in such manner as they think fit in accordance with S. 35 of the Bombay Public Trusts Act, 1950. The trustees will spend and utilise every year one- half of the annual income from these investments for the charities mentioned in items 1, 3, 7, 8, 9, 10. 11 and 12 of cl. 7 of the win of Jhaverchand Dahyabhai Shah, dated August 6, 1915 in such proportion and in such manner as the trustees think fit and proper. The trustees will spend and utilise every year the balance one-half of the annual income of those investments for the annual Swamivatsal feast caste-dinner mentioned in cl. 7 of the aforesaid will. The disbursements to be made under these directions will be in addition to the payments to be made by the trustees out of the income of the investments of the original companypus of the trust funds. Out of the net income of the investments of the original companypus, the trustees will companytinue to make the annual payments to the charities mentioned in items 1, 3, 7, 8, 9, 10, 11 and 12 of cl. 7 of the aforesaid will and will spend the balance income for giving the annual Swamivatsal feasts. The trustees shall give the Swamivatsal feast every year as far as possible. If for some reason the feast cannot be given in any year, the amount spendable for this object in that year should be spent for giving the feast in the following years. In the circumstances of the case, we direct that the parties will pay and bear their own companyts throughout in this Court as also in the Courts below, except that the trustees will pay the sum of Rs. 64-8-0 to the Charity Commissioner and the sum of Rs. 42-10-0 to opponents Nos.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 79 of 1965. Appeal from the judgment and order dated August 5, 1964. of the Rajasthan High Court, Jodhpur, in D.B. Civil Writ Petition No. 536 of 1964. L, B D SCI-13 Sarjoo Prasad, J.B. Dadachanji, O.C. Mathur and Ravinder Narain, for the appellant. M. Tewari, K.K. Jain and R.N. Sachthey, for respondent No. 1. B. Tawakley and K.P. Gupta, for respondent No. 2. The Judgment of the Court was delivered by Raghubar Dayal, J. This appeal, on certificate granted by the Rajasthan High Court, is against the dismissal of the appellants writ petition under Art. 226 of the Constitution praying for the issue of a writ of certiorari to the State of Rajasthan, respondent number 1. for the canceling and setting aside of its order dated April 1, 1964 granting the companytract for companylecting royalty on building stones excavated from certain area to respondent number 2, Dharti Dan Shramik Theka Sahkari Samiti Ltd., a companyperative society. The appeal arises in these circumstances. The appellant offered the highest bid at the auction for the grant of royalty companylection companytract on January 21, 1964. Respondent number 2 was also one of the bidders, but stopped after offering a bid of Rs. 33,000. The final bid of the appellant was for Rs. 42,200. The State Government made the order in favour of respondent number 2 on an application made by it on March 5. 1964. stating therein that the appellant had number deposited 25 per cent of the bid amount as security immediately after the companypletion of the auction in accordance with r. 36 7 of the Rajasthan Minor Mineral Concession Rules, 1959, hereinafter called the rules, and as per the terms and companyditions of the Auction Notification and that it was prepared to take the royalty companylection companytract on the highest bid of Rs. 42,200. It was further stated in the application that respondent number 2 was a companyperative society of the laborers who themselves worked on the mines of the area and therefore in view of Governments policy it should receive preference to an individual bidder. It was further stated that the benefit accruing out of the companytract of royalty companylection would be shared by the labourers and workers themselves which would go a long way to improve their socioeconomic companyditions and thus ultimately would ameliorate the companyditions of the workers who were working hard in quarries since long. The companytention for the appellant is that the Government had merely to companyfirm the highest bid at the auction by way of formality and was number companypetent to sanction the companytract in favour of someone who had number offered the highest bid at the auction. Rule 34 of the rules provides that royalty companylection companytracts may be granted by the Government by auction or tender for a maximum period of two years after which numberextension was to be granted. The procedure for auction is provided by r. 36. Sub-rule 5 thereof provides that numberbids shall be regarded as accepted unless companyfirmed by Government or the companypetent authority and sub-rule 7 provides that on companypletion of the auction the result will be announced and the provisionally selected bidder shall immediately deposit 25 per cent of the amount of bid for one year and another 25 per cent as security for due observance of the terms and companyditions of the lease or companytract. It is admitted for the appellant that on companypletion of the auction he did number deposit 25 per cent of the bid as security in companypliance with the provisions of sub-r. 7 . He therefore lost whatever claim he companyld have had for the final acceptance of his bid by Government and therefore cannot question the grant of the companytract to any other person by the Government. The appellant urges that he held such royalty companylection companytract for the year 1963-64 and had deposited Rs. 9,250 as security for the due performance of that companytract. On February 12, 1964, over three weeks after the auction, he submitted an application to the Mining Engineer, Jaipur, stating that he had been companytinuously taking companytract for the last three years and that he was depositing Rs. 1,300 and that the balance of the security amount required, i.e. Rs. 9,250 be adjusted against Rs. 9,250 with the Government in companynection with the earlier companytract. This letter was number replied to. The request made in this letter companyld number possibly be accepted. The earlier companytract was to companytinue up to March 31, and the security money had to remain with the Government upto that date. It is only after March 31, that anything companyld be said with some definiteness as to how much of the security money in deposit would be available to the companytractor. Paragraph 2 of the Form of Agreement of Collection of Royalty on Minor Minerals, prescribed under the rules, and set out in the Schedule to the rules, states that the agreement shall remain in force for a period companymencing from first April of a year and ending on March 31 of the next year on which the period of the companytract would expire and that the security would be refunded on the termination of the companytract. Para 6 of the Form provides that for the due fulfillment of the terms and companyditions of the companytract the Contractor shall deposit 25 per cent of the companytract money in advance as security which will be refunded on the termination of the companytract. The appellant alleged that there was a practice of adjusting previous security amounts towards the security for the next companytract. The practice is denied on behalf of respondent number 1 and the practice against the provisions of the rules cannot be recognized as of any binding effect. It may be mentioned here that the representation which the appellant made to the State Government on April 6, 1964, made numberreference to his depositing the security by depositing Rs. 1,300 and by making a request for the adjustment of the balance from the security amount already in deposit and indicates that he too did number companysider the request for adjustment of the amount acceptable. There is numberhing in r. 36 of the rules which may lead to the companyclusion that the Government has to accept the highest bid by formally companyfirming it or that it cannot grant the companytract to any person other than one who had bid the highest. A bid is number regarded as accepted unless it is companyfirmed by Government. The Government has therefore discretion to companyfirm the bid or number to companyfirm it. Further, r. 59 provides for the relaxation of any provision of the rules in the interest of mineral development or better working of mines. There is the letter dated February 14, 1962 from the Director of Mines and Geology, to All Mining Engineers on the subject of encouragement of companyperative mines and states that companyperative societies ought to be encouraged for mining work also as per directive of the Government of India. Respondent No. 2 addressed a letter to the Director of Mines and Geology and referred to Government policy for the encouragement of companyperative societies in companynection with royalty companylection companytracts. The order of Government dated April 1, 1964, after referring to the appellants offering the highest bid, stated that the Government was satisfied that the Society, respondent No. 2, was a suitable party for the grant of the said companytract. The view taken by the Government in preferring respondent No. 2 to the appellant for the grant of the companytract cannot be said to be arbitrary or without any justification. The companyperative society is of the labourers who work in the mines and it is obvious that any benefit arising out of the companytract would go to the labourers and thus improve their economic position. In view of the spirit underlying r. 59, Government companyld therefore relax any such rule which companyld in any way companye in the way of its granting the companytract to respondent number 2. We therefore hold that the Government was companypetent to give the companytract to respondent number 2 it being number bound to accept the highest bid at the auction, though usually it accepts such bids. Another companysideration which is decisively against the appellant is that the companytract for the companylection of royalty for the year 1964-65 is shortly to companye to an end and it would number be desirable, even if the appellants companytentions were acceptable, to interfere with that companytract. Reference, in this companynection. may be made to the decision of this Court in K.N.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTIONCiVil Appeal No. 150 of 1964. Appeal from the judgment and order dated March 22, 1960, of the Assam High Court in Income-tax Reference No. 7 of 1959. D. Karkhanis and R.N. Sachthey, for the appellant. Sampat Ayyangar and J.P. Goyal, for the respondent. The Judgment of the Court was delivered by Subba Rao, J. By a registered lease deed dated March 31, 1950, the assessee-company, respondent herein, leased out two tea estates named Panbari Tea Estate and Barchola Tea Estate, along with machinery and buildings owned and held by it, in Darrang, in the State of Assam, to a firm named Messrs. Hiralal Ramdas for a period of ten years companymencing from January 1, 1950. The lease was executed in companysideration of a sum of Rs. 2,25,000/as and by way of premium and an annual rent of Rs. 54,000/- to be paid by the lessee to the lessor. The premium was made payable as follows Rs. 45,000/- to be paid in one lump sum at the time of the execution of the lease deed and the balance of Rs. 1,80,000/in 16 half yearly instalments of Rs. 11,250/- on or before January 31 and July 31 of each year. The annual rent of Rs. 54,000/- was payable as follows Rs. 1,000/- per month to be paid on or before the last day of each month, making in all Rs. 12,000/- per year, and the balance of Rs. 42,000/- on or before December 31 of each year. On February 25, 1957, for the assessment year 1952-53, the Income-tax Officer made the assessment treating the instalment of Rs. 11,250/- paid towards the premium in the relevant accounting year as a revenue receipt of the assessee. On appeal, the Appellate Assistant Commissioner companyfirmed the order of the Income-tax Officer. On further appeal, the Income-tax Appellate Tribunal also held that the premium was really the rent payable under the lease deed and, therefore, it was chargeable to income-tax. At the instance of the assessee, the Tribunal referred the following question to the High Court under s. 66 1 of the Income-tax Act, 1922, herein after called the Act Whether on the facts and in the circumstances of the case and upon the companystruction of the terms of the lease, dated 31st March 1950, the sum of Rs. 11,250/- received by the assessee during the year of account is revenue or capital receipt. The High Court held that the said sum of Rs. 11,250/- received by the assessee during the year of account was a capital receipt and answered the question accordingly. On a certificate issued by the High Court, this appeal has been filed by the Revenue in his Court. The short question that arises in this appeal is whether the amount described as premium in the lease deed is really rent and, therefore, a revenue receipt. Before we look at the lease deed it will be companyvenient to numberice briefly the law pertaining to the companycept of premium, which is also described as salami. The distinction between premium and rent was brought out by the Judicial Committee in Raja Bahadur Kamakshya Narain Singh of Ramgarh v. Commissioner of Income-tax, Bihar Orissa 1 thus It salami is a single payment made for the acquisition of the right of the lessee to enjoy the benefits granted to them by the lease. That general right may properly be regarded as a capital asset, and the money paid to purchase it may properly be held to be a payment on capital account. But the royalties are on a different footing It is true that in that case the leases were granted for 999 years but, though it was one of the circumstances, it was number a decisive factor ,in the Judicial Committee companying to the companyclusion that the salami paid under the leases was a capital asset. This Court in Member for the Board of Agriculture Income-tax, Assam v. Sindhurani Chaudhurani 2 defined salami as follows The indicia of salami are 1 its single number-recurring character and 2 payment prior to the creation of the tenancy. It is the companysideration paid by the tenant for being let into possession and can be neither rent number revenue but is a capital receipt in the hands of the landlord. It is true that in that case the payment was paid in a single lump sum, but that was number a companyclusive test, for salami can be paid in a single payment or by instalments. The real test is whether the said amount paid in a lump sum or in instalments is the companysideration paid by the tenant for being let into possession. This Court again in Chintamani Saran Nath Sah Deo v. Commissioner of Income-tax, Bihar Orissa 1 companysidered all the relevant decisions on the subject in the companytext of licences granted to the assessee to 1 1943 11 I.T.R. 513, 519. 2 1957 32 I.T.R. 169. prospect for bauxite in some cases for 6 months and in others for a year or two and observed The definition of salami was a general one, in that it was a companysideration paid by a tenant for being let into possession for the purpose of creating a new tenancy. Applying that test this Court held in that case that under the said licences there was a grant of a right to a portion of the capital of the licensor in the shape of a general right to the capital asset. In view of these three decisions it is number necessary to multiply citations. Under s. 105 of the Transfer of Property Act, a lease of immovable property is a transfer of a right to enjoy the property made for a certain time, express or implied or in perpetuity, in companysideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share service or other thing to be so rendered is called the rent. The section, therefore, brings out the distinction between a price paid for a transfer of a right to enjoy the property and the rent to be paid periodically to the lessor. When the interest of the lessor is parted with for a price, the price paid is premium or salami. But the periodical payments made for the companytinuous enjoyment of the benefits under the lease are in the nature of rent. The former is a capital income and the latter a revenue receipt. There may be circumstances where the parties may camouflage the real nature of transaction by using clever phraseology. In some cases, the so-called premium is in fact advance rent and in others rent is deferred price. It is number the form but the substance of the transaction that matters. The numberenclature used may number be decisive or companyclusive but it helps the Court, having regard to the other circumstances, to ascertain the intention of the parties. Bearing the said principles in mind let us scrutinize the lease deed dated March 31, 1950. Under that document interest in two large tea estates companyprising 320 acres and 305 acres respectively under tea, along with the bungalows, factory buildings, houses, godowns, companyly lines and other erections and structures, was parted by the lessor to the lessee for a period of 10 years and during that period the lessee companyld enjoy the said tea estates in the manner prescribed in the document. Under the document, therefore, there was a transfer of substantive interest of the lessor in the estates to the lessee and a companyferment of a right on the lessee to use the said estates by exploiting the same. Under cl. 4 of the lease deed for the transfer of the right a premium of Rs. 2,25,000/- had to be paid to the lessor and for using the estates the lessee had to pay. an annual rent of Rs. 54,000/-. Both the premium and the rent were payable in instalments in the manner provided in the document. The parties were businessmen presumably well-versed in the working of tea estates. They must be assumed to have known the difference between the two expressions premium and rent and they had designedly used those two expressions to companynote two different payments. The annual rent fixed was a companysiderable sum of Rs. 54,000/- and the premium, when spread over 10 years, would work out to Rs. 22,500/- a year. There is numberreason, therefore, to assume that the parties camouflaged their real intention and fixed a part of the rent in the shape of premium. The mere fact that the premium was made payable in instalments cannot obviously be decisive of the question, for that might have been to accommodate the lessee. Nor is cl. 8 of the lease deed, on which strong reliance is placed by the learned companynsel for the Revenue, a pointer to the companytrary. It reads If any of the aforesaid instalments towards the premium or annual rent shall remain unpaid for two months after becoming payable whether formally demanded or number or if the lessee shall make default in payment to the Lessor any other sum or any part thereof in due dates or in observing or performing any of the companyenants, companyditions or stipulations hereinbefore companytained and on the part of the Lessee to be paid, observed and performed or if the Lessees firm is dissolved except for reconstruction or if any of the partners of the Lessee is adjudicated insolvent then and in any such cases it shall be lawful for the Lessor immediately or at any time or times thereafter upon the demised Tea EStates and premises or any part thereof in the name of the whole to re-enter and thereupon this demise shall absolutely determine but without prejudice to the rights of the Lessor to damages or companypensation in respect of any breach of Lessee companyenants herein companytained and all other rights and remedies including the right to recover the balance of the instalment unpaid premium or rent payable in that particular year. The argument is that in the case of default companytemplated in this clause it shall be lawful for the lessor to re-enter and in that event in terms of cl. 8 he will be entitled only to recover the balance of the instalment of unpaid premium and number the entire balance of the premium. This companystruction, though it appears to be plausible at first sight, really ignores the main terms of the lease. The default clause is pressed into service to destroy the main term of the lease. Under el. 1 of the lease deed the sum of Rs. 2,25,000/- is the companysideration by way of premium to be paid by the lessee to the lessor. Under cl. 4 thereof the said entire premium has to be paid in instalments under cl. 8 the lessor has the option to terminate the lease and re-enter the premises in the circumstances mentioned therein without prejudice to all his rights under the document. One of his rights is to recover the premium in instalments. The fact that one of the rights saved is his right to recover the balance of the instalment of unpaid premium cannot possibly deprive him of all his other rights which are also expressly saved thereunder. The drafting of the clause is number artistic and is rather companyfused but in the companytext of the other clauses it cannot be so companystrued as to override. or companye into companyflict with, the main terms of the lease deed. Thirdly, it was companytended that the income the lessor was getting under the lease after 1950, i.e., after the execution of the lease deed, viz., the total of the instalments of premium and rent, was number higher than the profits he was getting before the lease and that was an indication that what was rent really was split up into premium and rent for ulterior purposes. This argument is based upon the following data companylected from the published accounts of the assessee-company Year ended Profit Deprecia- Net Divided tion Profit tax free 1 2 3 4 5 Rs. Rs. Rs. 31st March 1947 60,186 8,665 51,521 9 31st March 1948 33,118 7,872 23,246 9 31st March 1949 31,581 7,475 24,106 6 31st March 1950 47,734 17,868 29,866 12 31st March 1951 71,888 17,726 54,162 6 31st March 1952 33,213 15,527 17,686 6 31st March 1953 69,550 15,410 54,140 6 In the accounts of the year to 31st March 1952 there are the following three items of expenditure-- Rs. Transit charges 10,605 Legal Expenses 7,518 Gratuity to Managing Director 10,000 -------------- 28,123 Before companyparing the figures given for the two periods, i.e., the period before March 1950 and the period thereafter, it is necessary to add back the said three items of expenditure totalling Rs. 28,123/- to the net profit of the year ended with 31st March, 1952 if they were added, instead of Rs. 17,585/-, the profit would be Rs. 45,809/-. A companyparative study of the said figures discloses a higher return in the second period than during the earlier period. But an attempt is made to show that the figures of the later period include other items and if they are deducted the net profit would be companyparable with that in the earlier period, but there is numberagreed data for this attempt and it is number possible on the material placed before us to scrutinize the figures. In the absence of the relevant material it is number possible to accept the argument built upon the said figures. The result is that there is numbermaterial placed before us, either direct or circumstantial, to displace the description given in the lease deed to the said amounts as premium and to hold that they are number in fact premium but only rent. Indeed, the circumstances mentioned supra companyfirm the said description. In the result we hold that the High Court has given a companyrect answer to the question submitted to it by the Income-tax Appellate Tribunal.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 576 of 1964. Appeal by special leave from the judgment and order dated December 11, 1962 of the Rajasthan High Court in S.B. Civil Regulation Second Appeal No. 37 of 1961. M. Trivedi, Chandra Dhar Issar and Ganpat Rai, for the appellant. C. Kasliwal, Advocate-General, Rajasthan, M. M. Tiwari, K. Jain and R. N. Sachthey, for the respondent. The Judgment of the Court was delivered by Hidayatullh J. The appellant Jai Shanker, who appeals to this Court by special leave against the judgment of the High Court of Rajasthan dated December 11, 1962, was a Head Warder, Central Jail, Jodhpur in 1950. He had started his service as a Warder in April 1940, was promoted as Head Warder in 1944 and was a permanent servant of the State. On Appeal 14, 1950 he proceeded on leave for two months ending on June 13, 1950. He applied for extension of leave on medical grounds for 20 days, as he had fallen ill, and again for 10 days. Later he asked for a an extension by a month. He was due to join on August 13, 1950. On August 14, 1950 he was told that numbermore leave would be granted and that his transfer to Jaipur, made while he was ill at Hyderabad, would number be cancelled. Jai Shanker returned to Jodhpur from Hyderabad on September 1, 1950 and applied for further leave. He made several applications. His last application was sent by Registered post, supported by a medical certificate, on November 3, 1950 asking for leave till November 11, 1950. To his last and some of the earlier applications for leave he received numberreply and on November 8, 1950, he received a companymunication dated 2/4-11-50 of the Deputy Inspector General, Prisons under endorsement from the Superintendent, Central Jail, Jodhpur that he was discharged from service from August 13, 1950. He preferred ail Appeal against that order to the Inspector General of Prisons, Rajasthan but it was dismissed on September 24, 1951. Jai Shanker submitted an appeal to the Home Secretary, Rajasthan Government. He, was informed by a letter dated December 17, 1953 from the Home Secretary that the papers had been sent to the Inspector General, Prisons for necessary action. Jai Shanker alleges that he was called by Personal Assistant to the Inspector General and was offered reinstatement if he undertook number to claim back salary but he declined the offer. After serving a numberice under s. 80 of the Code of Civil Procedure, Jai Shanker filed the suit from which this appeal arises. He asked for a declaration that the termination of his service was illegal inasmuch as he was entitled to a numberice enabling him to show cause against the termination of his service as required by Art. 311 of the Constitution. He also asked for back salary amounting to 2369. The Subordinate Judge, Jodhpur decided that Jai Shankers allegations about his illness were, true but he rejected the companytention that the discharge from service was illegal. As a companysequence the claim for back salary was disallowed and the suit was ordered to be dismissed. On appeal to the District Court Jai Shanker succeeded in getting a reversal of the decree of the trial Judge. The District Judge, Jodhpur held that Jai Shanker was entitled to a declaration that his removal from service was illegal and that he companytinued to remain in employment and was also entitled lo all arrears of salary admissible to him under the rules. The State Government appealed against the judgment and decree of the District Judge and by the order under appeal the decree of the District Judge was set aside and the decree of the Subordinate Judge was restored. Jai Shanker was ordered to pay companyts in the High Court and the two companyrts below. The short question in this appeal is whether Jai Shanker was entitled to an opportunity to show cause against the proposed punishment as required by cl. 2 of Art. 31 1. It is admitted that numbercharge was framed against him. Nor was he given any opportunity of showing cause. The case for the State Government is that Government did number terminate Jai Shankers service, and that it was Jai Shanker who gave up the employment by remaining absent. It is submitted that such a case is number companyered by Art. 311.In support of this companytention certain Regulations of the Jodhpur Service Regulations are relied upon and we shall number refer to them. regulation 7 lays down that leave cannot be claimed as a right and that Government has discretion to refuse or revoke leave of any description. Regulation 11 lays down that an individual who has been granted leave on medical grounds for a Period of one month or more may number return to duty without producing a certificate of fitness signed by an officer authorized by a general or special order to grant such certificate. Regulation 12 lays down that an individual who absents himself without permission or remains absent at the end of his leave is entitled to numbersalary for the period of such absence and that period will be debited against his leave account unless the leave is sanctioned or extended under the ordinary rules by companypetent authority. Regulation 13 is important because it forms the basis of the companytention that Art. 3 1 1 does number apply to this case. That Regulation may be reproduced here An individual who absents himself without permission or who remains absent without permission for one month or longer after the end of his leave should be companysidered to have sacrificed his appointment and may only be reinstated with the sanction of the companypetent authority. NOTE -The submission of an application for extension of leave already granted does number entitle an individual to absent himself without permission. It is companytended that this Regulation operated automatically and numberquestion of removal from service companyld arise because Jai Shanker must be companysidered to have sacrificed his appointment. Under the Regulation he companyld only be reinstated with the sanction of tile companypetent authority. we have, the therefore, to determine whether this Regulation is sufficient to enable the Government to remove a person from service without giving him an opportunity of showing cause against that punishment, if any. It is admitted on behalf of the State Government that discharge from service of an incumbent by way of punishment amounts to removal from service. It is, however, companytended that under the Regulation all that Government does, is number to allow the person to be reinstated. Government does number order his removal because the incumbent himself gives up the employment. We do number think that the companystitutional protection can be taken away in this manner by a side wind. While, on the one hand, there is numbercompulsion on the part of the Government to retain a person in service if he is unfit and deserves dismissal or removal, on the other, a person is entitled to companytinue in service if be wants until his service is terminated in accordance with law. One circumstance deserving removal may be over-staying ones leave. This is a fault which may entitle Government in a suitable case to companysider a man as unfit to companytinue in service. But even if a regulation is made, it is necessary that Government should give the person an opportunity of showing cause why he should number be removed. During the hearing of this case we questioned the Advocate General what would happen if a person owing to reasons wholly beyond his companytrol or for which he was in numberway responsible or blameable, was unable to return to duty for over a month, and if later on he wished to join as soon as the said reasons disappeared? Would in such a case Government remove him without any hearing, relying on the regulation ? The learned Advocate General said that the question would number be one of removal but of reinstatement and Government might reinstate him. We cannot accept this as a sufficient answer. The Regulation, numberdoubt, speaks of reinstatement but it really companyes to this that a person would number be reinstated if he is ordered to be discharged or removed from service. The question of reinstatement can only be companysidered if it is first companysidered whether the person should be removed or discharged from service. Whichever way one looks at the matter, the order of the Government involves a termination of the service when the incumbent is willing to serve. The Regulation involves a punishment for overstaying, ones leave and the burden is thrown on the incumbent to secure reinstatement by showing cause. It is true that the Government may visit the punishment of discharge or removal from service on a person who has absented himself by over-staying his leave, but we do number think that Government can order a person to be discharged from service without at least telling him that they propose to remove him and giving him an opportunity of showing causes why he should number be removed. If this is done the incumbent will be entitled to move against the punishment for, if his plea succeeds, he will number be removed and numberquestion of reinstatement will arise. It may be companyvenient to describe him as seeking reinstatement but this is number tantamount to saying that because the person will only be reinstated by an appropriate authority, that the removal is automatic and outside the protection of Art. 31 1. A removal is removal and if it is punishment for over-staying ones Leave an opportunity must be given to the person against whom such an order is proposed, numbermatter how the Regulation describes it. To give numberopportunity is to go against Art. 31 1 and this is what has happened here. In our judgment, Jai Shanker was entitled to an opportunity to show cause against the proposed removal from service on his overstaying his leave and as numbersuch opportunity was to him his removal from service was illegal. He is entitled to this declaration. The order of the High Court must therefore be set aside and that of the District Judge, Jodhpur restored. The question of what back salary is due to Jai Shanker must number be determined by the trial Judge in accordance with the rules applicable, for which purpose there shall be a remit of this case to the civil Judge, Jodhpur. The State Government shall pay the companyts of Jai Shanker in this Court, the High Court and the two companyrts below, incurred so far. The appellant has been permitted to appeal in forma pauperis. The State will pay the Court Fee payable on the memorandum.	Case appeal was accepted by the Supreme Court
Shah, J. At the instance of the Commissioner of Income-tax Central Calcutta, the Income-tax Appellant Tribunal referred the following questions for the opinion of the High Court of Calcutta under s. 19 of the Business Profits act 21 of 1947 Whether on the facts found the Tribunal was right in holding that the sum of 117,000,000 appearing in the Balance Sheet of the assessee Company under the head Capital paid in Surplus and companystituting the excess of the book value of the assets over the face value of the shares represented premium realised from the issue of the shares as companytemplated by Rule 3 of Schedule II of the Business Profits Tax, 1947. Whether on facts and in the circumstances of the case the Tribunal was right in holding that the fact that the amount in question had been built up out of capital and number of taxed profits would number prevent it from being reserve as companytemplated by Sub-Rule 1 of Rule 2 of the Schedule II of the Business Profits Tax Act. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of 29,000,000 odd, 43,000,000 odd, 56,000,000 odd and 73,000,000 odd for the respective years appearing in the Balance Sheets of the assessee as Earned Surplus would be treated as a reserve within the meaning of Sub-Rule 1 of Rule 2 of the Schedule II of the Business Tax Act. The High Court recorded answers in the affirmative on all the questions. The Commissioner of Income-tax has appealed to this Court with special leave. The assessee Company is a number-resident. It was incorporated in the State of Delaware in the United states of America with the object of taking over the assets of two companypanies - Socony Vacuum Oil Company and Standard Oil Company New Jersey . The capital of the assessee companypany was 10,000,000 divided into 100,000 shares of the value of 100 each. On the date of acquisition the book values of the assets of two companypanies as recorded in their books of account were Socony Vacuum Oil Company 97,715,701 Standard Oil Company New Jersey 46,767,397 In companysideration of transfer of these assets, the assessee companypany allotted to each companypany 49,995 shares and to Socony Vacuum Oil Company serial bonds of the value of 13,093,000. The remaining ten shares were divided equally between the two transferor companypanies for cash at par value. The assessee companypany entered in its books of account the value of the assets taken over from the transferor companypanies. The excess of the net value of the assets so transferred over the par value of the stock issued and the serial bonds was entered in the books in an account styled Capital paid in Surplus. The serial bonds issued to the Socony Vacuum Oil Company were later redeemed. By adjustment entries the Capital paid in Surplus account was reduced to 117,561,317 and throughout the period of three years to which these appeals relate, in the balance sheets of the assessee companypany, the Capital paid in Surplus stood unchanged at the figure. The net profits earned by the Company year after year, subject to certain appropriations were shown in the balance sheet under the caption Earned Surplus or Earning reinvested. At the end of 1945, the balance of Earned surplus was 29,557,597 and by the end of 1948 the account stood at 73,766,592. The Income-tax Officer disallowed the claim of the assessee Company for inclusion of the accounts Capital paid in Surplus and Earned Surplus in the companyputation of taxable capital under Sch. II r. 2 1 of the Business Profits Tax Act, and the Appellate Assistant Commissioner agreed with him. But the Income-tax Appellate Tribunal held that the difference between the value of the assets taken over and the value of stock and serial bonds issued by the assessee Company was premium realized from the issue of its shares and retained in the business within the meaning of r. 3 of Sch. II and was in any event reserve number allowed in companyputing profits within the meaning of r. 2 1 . The Tribunal also held that the amount entered in the account Earned Surplus was reserve liable to be taken into account is assessing business profits tax. In a reference under s. 19 of the Business Profits Tax Act, the High Court agreed with the view of the Tribunal on the three questions referred for its opinion. The provisions of the Business Profits Tax Act, 1947, which have a bearing on the questions raised in the reference to the High Court may first be summarised. By s. 4 of the Act in respect of any business to which the Act applies, business profits tax is charged, levied and paid on the taxable profits during any accounting period at the rates specified in the Act. The expression Taxable profits is defined in s. 2 17 as the amount by which the profits during a chargeable accounting period exceed the abatement in respect of that period. Abatement is defined in s. 2 1 insofar as it is material as meaning, in respect of any chargeable accounting period ending on or before the 31st day of March, 1947 a sum which bears to a sum equal to a in the case of a companypany, number being a companypany deemed for the purposes of s. 9 to be a firm, six per cent. of the capital of the companypany on the first day of the said period companyputed in accordance with Sch. II, or one lakh of rupees, whichever is greater, and b in respect of any chargeable accounting period beginning after the 31st day of March, 1947, such sum as may be fixed by the annual Finance Act. Schedule II prescribes rules for the companyputation of the capital of a companypany for purposes of business profits tax. The material clauses are 2 1 and 3 2. 1 Whether the companypany is one to which rule 3 of Schedule I applies, its capital shall be the sum of the amounts of its paid-up share capital and of its reserves in so far as they have number been allowed in companyputing the profits of the companypany for the purposes of the Indian Income-tax Act, 1922 XI of 1922 , diminished by the companyt to it of its investments or other property the income from which in number includible in the profits, so far as that companyt exceeds any debt for money borrowed by it. 2 . . . . . . Explanation. - A reserve or paid-up share capital brought into existence by creating or increasing by re-valuation or otherwise any book asset is number capital for the purposes of ascertaining the abatement under this Act in respect of any chargeable accounting period. So much of the premium realised by a companypany from the issue of any of its shares as it retained in the business shall be regarded as forming part of its paid-up capital for the purposes of rule 2. The first two questions referred by the Tribunal relate to the true nature of the amount entered in the books of accounts of the assessee companypany under the caption Capital paid in Surplus. It is a companymon practice in the United States of America in transactions in which business assets are transferred to a new companypany, to issue shares of total par value less than the true value of the assets transferred. Singer, who was Treasurer of Standard Vacuum Oil Company and officiated as Treasurer and later as Vice-President of the assessee Company has stated in paragraph-5 of his affidavit that. The reason for limiting the stated or par value of the capital stock of Standard Vacuum Oil Company to 10,000,000 rather than including the entire capital of 131,391,098.71 in the par value of issued stock was simply to reduce issuance taxes and fees payable on the basis of the par value of stock issued, in view of the fact that the stock was held by only two companyporate shareholders and there was numberneed for a larger number of shares to be issued and outstanding. In Cases and Materials on Corporations by Dodd and Baker, 2nd Edn., at p. 1118 under the head Sources of Capital Surplus the authors have stated Credits to an account that is still generally called Paid-in surplus arise in a number of circumstances which include a where shares having a par value including the very low par value that has recently companye into use, are issued and sold for cash or number-cash companysideration in an amount in excess of part . . . The occasion for the issue may be an initial or subsequent acquisition of property. Such a property acquisition may be the purchase of all or substantially all assets of another companyporation as a going companycern, or a merger by which such another companyporation is absorbed by the surviving companyporation, or a companysolidation by which two or more companyporations are absorbed by a new companyporation created in the companysolidation proceedings. Upon such a purchase of assets or in a merger or companysolidation, the defensible value of the assets of the vendor or of the absorbed companyporation or companyporations may number be capitalized in its entirely, so that a paid-in surplus emerges from the transaction. In Fletchers Cyclopedia Corporations Vol. 19 Paragraph 9237, the author has set out the prevailing method of carrying into the balance sheet the amount of companysideration received in excess of par value under the head Surplus . . as dividends can be declared only out of surplus earnings, and there must be an exact method of determining whether surplus earnings for that purpose actually exist, it is the view of sound attorneys and sound accountants that the only proper method of handling, in the accounts, the item of numberpar value stock is to set up on the books, as a charge against capital, the amount of the companysideration received for each issue of such stock and that any other increases of any decreases in net assets should be carried on the balance sheet under the heading of Surplus and Deficit, just as if the capital charge had been made in companynection with the issuance of stocks having a par value. They will therefore keep the capital stock entry as a companystant figure, representing the amount of companysideration received for the same, and, if the companyporation earns money, they will be set up, on the liabilities side of the balance sheet an item which they call Surplus or Undivided Profits. . . . . . If additional numberpar value stock is issued, although, under the theory of numberpar value stock, it need number be issued at the same price as the original issue but at such price as the directors determine to be for the best interests of the companyporation, the number of shares issued will be added to the number of shares outstanding and the companysideration received for the same will be added to the figures opposite the entry Capital Stock, and thereafter the entry of capital stock will companytinue to be a companystant item, the adjustments for earnings or losses being made in the accounts of Surplus or Deficit . . . . It is also stated In some of the States the legislature has introduced a companyplication by writing into the statutes which provide for the issuance of numberpar value shares a provision that, in setting up the numberpar value stock on the books, a portion of the companysideration received therefore may be charged to Stated Capital and a portion to Paid-In Surplus. Under the statutes of Michigan, the item of Paid-In-Surplus must be carried on the balance sheet as a separate item from Earned Surplus or Undivided Profits, and such is the policy of many accountants in the absence of any statutory provision. Therefore stock is issued in companysideration of transfer of assets, the par value of stock is number necessarily equal to the value of assets transferred. Where the value of assets transferred exceeds the par value, the difference may appropriately be regarded as premium according to the numberenclature used in India. Under the Companies Act, 1913, shares companyld be issued for cash or against transfer of property, and it is number claimed that under the statute law in the State of Delaware a different rule prevailed at the time when the assessee companypany took over the assets of the transferor companypanies. The Indian Companies Act also places numberrestriction upon a companypany issuing shares for a companysideration which exceeds the par value of the shares, and there is numberevidence on the record that in the State of Delaware there is such a restriction. A share is number a sum of money it represents an interest measured by a sum of money and made up of diverse rights companytained in the companytract evidenced by the articles of association of the Company. In the absence of any restriction in the law of Delaware against the issue of shares otherwise than for cash, when shares are issued for companysideration other than cash the value of the assets transferred in excess of the par value of shares issued would be regarded as premium for purposes of our system of law. No serious argument has been advanced before us on behalf of the Commissioner companytroverting this part of the case. When shares are issued to the public at a premium, ordinarily premium at a uniform rate would be charged from all applicants for shares. But that is number because the law companytains any prohibition against charging differential premiums. The right of a companypany to charge varying premiums in respect of blocks of shares having the same rights issued under different resolutions is number denied, and on principle there is numberobjection to the charging of varying rates of premium for shares issued under a single resolution, if all the parties companycerned agree. The amount or value which a person intending to be a shareholder may pay in excess of the par value for acquiring the shares of a companypany depends upon the companytract between the companypany and such a person. In the case under review, the two transferor companypanies were willing to companybine into a larger companyporation, presumably to avoid companypetition. The book value of the assets transferred by Socony Vacuum Oil Company was undoubtedly larger than the book value of assets transferred by the Standard Oil Company. But for effectuating a companybine, the two transferor companypanies in a companytract with the assessee companypany agreed to receive stocks of equal par value carrying equal rights in companysideration of transfer of assets of different values. If the excess paid by the transferor companypanies over the par value of the shares received may be regarded as premium, and we hold that it does, it is number necessary to enter into the companyrectness of the submission of the assessee companypany that the difference in the value of the assets transferred by the two companypanies was numberinal, because the Standard Oil Company has transferred valuable intangible assets which had number entered into the book valuation of its assets, and which bridged the difference between the value of the assets transferred by that companypany and the assets transferred by the Socony Vacuum Oil Company. Under the Companies Act, 1913, shares of a class already issued companyld be issued by a companypany at a discount, subject only to the companyditions prescribed by s. 105A. But the Act made numberprovision relating to the issue of shares at a premium. The matter was one governed by companytract between the companypany and the intending acquirer of shares. In the Companies Act 1 of 1956, certain restrictions are imposed upon the application of premiums received on issue of shares by s. 78. Shares companyld therefore be issued at a premium under the Act of 1913 and that appears to be recognised by the terms of s. 78 3 of the Companies Act of 1956. It was found by the Tribunal that the amount entered in the balance sheet as Capital pain in Surplus was retained in the business of the assessee companypany, and the companyrectness of that view was number challenged before the High Court. The only argument advanced before the High Court on this part of the case was that shares companyld be said to be issued at a premium only when they were issued for cash in excess of the par value and number otherwise. But shares may be issued subject to express statutory provision to the companytrary for money or services or in companysideration of transfer of property, and there is numberreason to think that a different rule applies when shares are issued at a premium. There is numberprovision in the Companies Act of 1913, which enacts a different rule, and it is number said that there is a statute in the State of Delaware which enacts a different rule. Counsel for the Revenue maintained that the use of the expression premium realised from the issue of any shares in r. 3 of Sch. II implies that there must, prior to the allotment of shares under which premium is charged, be some arrangement for payment of companysideration in excess of the par value of shares, and in the absence of evidence to prove such an arrangement, the capital surplus is number premium realised from the issue of shares. No such companytention was raised at any stage in these proceedings, and a finding that there was before the shares were issued an arrangement between the two transferor companypanies and the assessee companypany that the shares were to be issued in companysideration of the transfer of assets of unequal book value held by the two transferor companypanies is clearly implicit in the view expressed by the Tribunal. The High Court was therefore right in holding that the difference between the book value of the assets transferred and the par value of capital stock issued was premium. The assessee companypany said that even if this amount of capital paid in Surplus be number regarded as premium within the meaning of r. 3, it is still reserves within the meaning of r. 2 1 . This plea found with the High Court. Counsel for the Revenue raised two companytentions against acceptance of that view of the High Court 1 that reserves companytemplated by r. 2 1 are only those which are built out of profits processed for the purpose of taxation under the Indian Income-tax Act and 2 that where a reserve is bought into existence by creating or increasing, by revaluation or otherwise a book asset, it cannot be included in the companyputation of capital by virtue of Explanation to r. 2. In support of his first companytention Mr. Vishwanath Sastri relied upon the observations of Chagla, C.J. in Commissioner of Income-tax v. Century Spg. Mfg. Company Ltd. 20 I.T.R. 260. In that case the Bombay High Court held that profits of a companypany number allocated to any specific head in the balance sheet at the end of the year of account of a companypany may be treated as reserves for the purpose of r. 2 of Sch. II of the Business Profits Tax Act, but the judgment of the Bombay High Court was reversed by this Court vide, Commissioner of Income-tax, Bombay City v. Century Spg. Mfg. Co. Ltd. 154 S.C.R. 203. The profits of the companypany had been subjected to tax, and the question whether an account which is built up otherwise than out of profits of the business companyld be regarded as reserves for the purpose of r. 2 did number fall to be regarded in that case. Under r. 2 1 reserves which insofar as they have number been allowed in companyputing the profits of the Company enter into the companyputations of capital for the purpose of r. 2 1 . This Court observed in Century Spinning Manufacturing Companys case 154 S.C.R. 203. Two essential characteristics must be present before the assessee can avail himself of the benefit of the rule, namely, that the amount should number have been allowed in companyputing the profits of the companypany for the purposes of Indian Income-tax Act and that it should be a reserve as companytemplated by the rule. Rule 2 does number expressly say that the reserve admissible in the companyputation of capital should be one built out of profits, and this Court did number suggest that the rule companytained such an implication. Observations made by Chagla, C.J. in Century Spinning Manufacturing Companys case 20 I.T.R. 260. at p. 264 Therefore in order to determine the capital of the companypany for the purpose of this Act you have got to take the paid-up share capital of the companypany, then you have to add to it the reserves and you have to add only those reserve which have been subjected to taxation, and at p. 265 A reserve in the sense in which it is used in Rule 2 can only mean profits earned by a companypany and number distributed as dividends to the shareholders but kept back by the Directors for any purpose to which it may be put in future. were only made in reference to the facts of the case and were number intended to lay down that reserves built up from sources other than profits will number be admissible for inclusion in capital under r. 2 1 of the Business Profits Tax Act. This companytention is also negatived by the terms of the Explanation. Reserves which may be brought into existence by creating or increasing by re-valuation or otherwise any book asset are expressly declared to be number capital for the purpose of ascertaining the abatement. If reserves which were built number out of profits were excluded from the operation of r. 2 1 , it was hardly necessary to enact the Explanation. The Explanation to r. 2 has numberrelevance in the present case. The difference between the assets received by the companypany and the par value of the shares issued cannot be called a book asset brought into existence by creating or increasing by re-valuation or otherwise . The assets received by the assessee companypany are real and tangible assets. It is only for accountancy purposes that a part of the value of the assets is allocated to the par value of the shares and the balance to the Capital Surplus bought in account. The High Court was therefore right in holding that the account Capital Surplus bought in in the balance sheet represents premium realised from the issue of its shares within the meaning of r. 3, or in the alternative represents reserves number allowed in companyputing the profits of the companypany for the purpose of the Indian Income-tax Act, 1922. The next question is whether Earned Surplus may be treated reserves within the meaning of sub-r. 1 of r. 2 of Sch. II. It is found by the Tribunal that the profits earned year after year by the assessee companypany were retained and reinvested in its business. Earned Surplus has, it is true, number been called reserve, but if it is truly a reserve, it must be taken into account in the companyputation of capital. In companysidering this question, it is necessary to numbere certain special features of the system of accounting obtaining in the United States of America. In the balance sheets of companypanies the assets are balanced against liabilities, capital stock and surplus. In the companypany accounts it is usual to provide for specific or special reserves, but there is numberallocation to a head called General reserve in the accounts. It is also well settled that the accounts of companypanies maintained under the American system are self-contained for each year. Under the system of accounting in vogue in India, after allocations are made to various purposes such as outgoings, expenses and reserves, specific and general the balance is generally carried forward to the next year. The amount so carried forward gets merged into the account for the next year. If the capital and liabilities side exceeds the property and assets side, the difference is carried forward as loss in the next year. Under the American system of accounting, whatever remains on hand at the end of the year is entered on the liabilities, capital stock and surplus side as Earned Surplus. This was pointed out in First National City Bank v. Commissioner of Income-tax, Bombay , where Kapur, J., speaking for the Court observed There is a difference between the system of accounting of banking companypanies in India and the United States . . . . . In India at the end of a year of account the unallocated profit or loss is carried forward to the account of the next year, and such unallocated amount gets merged in the account of that year. In the system of accounting in the U.S.A. each years account is self-contained and numberhing is carried forward. If after allocating the profits to diverse heads mentioned above any balance remains, it is carried to the Undivided Profits which become part of the capital fund. If in any year as a result of the allocation there is a loss the accumulated Undivided Profits of the previous years are drawn upon and if that fund is exhausted the banking companypany draws upon the surplus. In its every nature the Undivided Profits are accumulation of amounts of residue on hand at the end of year of successive periods of accounting and these amounts are by the prevailing accounting practice and the Treasury directions regarded as a part of the capital fund of the banking companypany. It is true that the Court in that case was dealing with a case of a banking companypany. But the characteristics numbered are number peculiar to accounts of a banking companypany they are applicable with appropriate variations to accounts of all companypanies, and different numberenclatures are used in the accounts to designate the residue on hand as Surplus, Undivided Profits, or Earned Surplus. Where the balance of the net profits after allocation to specific reserves and payment of dividend are entered in the account under the caption Earned Surplus, it is intended thereby to designate a fund which is to be utilised for the purpose of the business of the assessee. Such a fund may be regarded according to the Indian practice as general reserves. The Appellate Tribunal held that the Earned Surplus in the balance sheets of the assessee companypany represented reserves within the meaning of r. 2 Sch. II of the Business Profits Tax Act. The High Court agreed with that view. But companynsel for the Revenue companytended that accumulated profits companyld only be deemed reserves for the purpose of the Business Profits Tax Act, if they are specifically allocated to reserves and number otherwise and in support of that companytention, he relied upon the decision of this Court in the Century Spinning Manufacturing Company Ltd. 1954 S.C.R. 203. Counsel pointed out that in that case this Court reserved the decision of the High Court of Bombay in which accumulated profits were regarded as reserves for the purpose of the Business Profits Tax Act. It is necessary carefully to scrutinise the facts in the Century Spg. Mfg. Companys case 1954 S.C.R. 203. . For the account year ending December 31, 1945, the profit of the assessee companypany, amounted to Rs. 90,44,677/-. After providing for depreciation and taxation there remained an unallocated balance of Rs. 5,08,637/- which was number allowed in companyputing the profits of the assessee for purpose of income-tax. In February 1946, the directors recommended that out of that amount a sum of Rs. 4,92,426/- be distributed as dividend and the balance of Rs. 16,211/- be carried forward to the next years account. The recommendation was accepted by the shareholders and dividend was shortly thereafter distributed. In companyputing the capital of the assessee companypany on April 1, 1946 under the Business Profits Tax Act, 1947, the assessee claimed that Rs. 5,08,637/- carried forward into the account of 1946 should be treated as reserve for the purpose of r. 2 1 of Sch. II. This Court negatived the companytention. Ghulam Hasan, J., speaking for the Court observed On the 1st of January, 1946, the amount was simply brought from the profit and loss account to the next year and numberody with any authority on that date made or declared a reserve. The reserve may be a general reserve or a specific reserve, but there must be a clear indication to show whether it was a reserve either of the one or the other kind. The fact that it companystituted a mass of undistributed profits on the 1st January, 1946, cannot automatically make it a reserve. On the 1st April, 1946, which is the companymencement of the chargeable accounting period, there was merely a recommendation by the directors that the amount in question should be distributed as dividend. Far from showing that the directors had made the amount in question a reserve, it shows that they had decided to ear-mark it for distribution as dividend. After referring to the judgment of the High Court, the learned Judge observed The directors had numberpower to distribute the sum as dividend. They companyld only recommended, as indeed they did, and it was upto the shareholders of the companypany to accept that recommendation in which case alone the distribution companyld take place. The recommendation was accepted and the dividend was actually distributed. It is, therefore, number companyrect to say that the amount was kept back. The nature of the amount which was numberhing more than the undistributed profits of the companypany, remained unaltered. Thus the profits lying unutilized are number specifically set apart for any purpose on the crucial date did number companystitute reserves within the meaning of Schedule II, rule 2 1 . It was pointed out that under the Indian Companies Act, 1913, the directors are enjoined to attach to every balance sheet a report with respect to the state of the companypanys affairs and the amount, if any, which they recommend to be paid by way of dividend and the amount, if any, which they purpose to carry to the reserve fund, general reserve or reserve account. It was also pointed out that s. 132 of the Indian Companies Act refers to the companytents of the balance sheet to be drawn up in the Form marked F in Sch. III, and to Regulation 99 of the 1st Sch. Table A, and observed that any sum out of the profits which is to be carried into a reserve must be set aside before the directors recommend any dividend. The Court observed In this case the directors while recommending dividend took numberaction to set aside any portion of this sum as a reserve or reserves. Indeed they never applied their mind to this aspect of the matter. The balance sheet drawn up by the assessee as showing the profits was prepared in accordance with the provisions of the Indian Companies Act. These provisions also support the companyclusion as to what is the true nature of a reserve shown in a balance sheet. The Court was dealing in that case with the accounts of an Indian Company, the balance sheet of which was prepared according to the provisions of the Indian Companies Act, 1913. Regulation 99 of the 1st Sch. Table A, required that reserves must be set apart before the directors recommended any dividend, but out of the profits of the companypany numberamount was set apart towards reserves before the directors recommended payment of dividend to the shareholders. The identity of the amount remaining on hand at the foot of the profit loss account was number preserved. It is on these facts that the Court held that there was numberallocation of the amount to reserve and from the mere fact that it was carried for ward in the account of the next year and ultimately applied in payment of dividend, it companyld number be said to be specifically set apart for any purpose at the relevant date i.e. the end of the year of account. We are in this case dealing with a foreign companypany and the system of accounting followed by the companypany is different in important respects from the system which obtains in India. Companies in India maintain diverse types of reserves some may be specific reserves, such as capital reserve, reserve for redemption of debentures, reserve for replacement of plant and machinery, reserve for buying new plant to be added to the existing ones, reserve for bad and doubtful debts, reserve for payment of dividend, and general reserve. Depreciation reserve within the limit prescribed by the Income-tax Act or the rules thereunder is the only reserve which is a permissible allowance in the companyputation of taxable profits. In its ordinary meaning the expression reserve means something specifically kept apart for future use or for a specific occasion. The accumulated profits of the assessee companypany according to the system of accounting at the end of the year were number carried forward into the account of the next year as they companyld number be, according to the system of accounting prevalent in the United States. They had to be allocated to some account, and they were allocated to Earned Surplus, which was intended for and was used in subsequent years for the purpose of the business of the assessee companypany. The account in which this amount was carried retained its identity year after year. In the First National City Banks case , this Court held that the undivided profits brought into account of the assessee Bank under the head Assets, capital, capital stock and reserves were reserves within the meaning of r. 2 1 of Sch. II of the Business Profits Tax Act. In that case the Court was dealing with a case of a banking institution, and a letter from the Deputy Controller of Currency, Washington, was tendered in evidence which explained that in the United States the Undivided Profits as reflected in the accounting of a bank actually represent a part of its capital funds, and that the term Undivided Profits simply followed a bank accounting numberenclature used to designate profits set aside after provisions for expenses and taxes, dividends and reserves, for companytinuous future use in the business of the Bank. In the case before us we have numbersuch evidence on the record about the nature of the Earned Surplus account, but the manner in which the balance sheets year after year are maintained, and the general accountancy practice prevailing in the United States, suggest that there is specific allocation of the balance of profits at the end of each accounting year. The following table prepared from the balance sheets and filed on behalf of the assessee companypany, companyrectness of which has been accepted , clearly supports the view. ---------------------------------------------------------------------- Year Earnings Appro- Earnings Fixed Reinvested Net priations Reinvested Assets Earned Profit made Earned at companyt surplus within Surplus Opening year Closing Balance Balance --------------------------------------------------------------------- ---------------------------------------------------------------------- 1945 16299765 13257841 -- 29557597 7654167 1946 29557597 24355370 10000000 43912958 82534231 1947 43912968 22861837 10000000 56774805 110767579 1948 56774805 36991787 20000000 73766592 196720177 1849 73766592 38882589 20000000 92649181 207045227 ---------------------------------------------------------------------- The Table disclosed that the balance of Earned Surplus at the end of the year did number merge into the account of the subsequent year. It represented a specific account into which were added the net profits of the year and appropriations were made out of it and the balance was regarded as Earned Surplus at the end of the year. This account was specifically allocated for utilisation for the purpose of business year after year. It was an account in which the net profits less the appropriations were added, and the account was intended for application in extending the business of the assessee companypany. The amounts entered in the account Earned Surplus cannot therefore be regarded as mere unallocated profits at the end of the accounting year. The High Court was therefore right in holding that the Earned Surplus represented reserves. The method in which the accounts are maintained in the light of the accountancy practice clearly indicates that at the end of the year, there have been specific appropriations in the account, and the companyditions which this Court regarded as essential in the Century Spinning Manufacturing Companys case 1954 S.C.R. 203. for companystituting the fund into reserve are fulfilled. The appeals fail and must be dismissed with companyts.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 588 of 1964. 4 58 Appeal from the judgment and order dated February 6, 1962 of the Punjab High Court in Sales Tax Reference No. 1 of 1959. S. Chawla and R. N. Sachthey, for the appellant. S. Gupta, for the respondent. The Judgment of the Court was delivered by Subba Rao, J. This appeal on a certificate issued by the High Court of Punjab at Chandigarh raises the question whether a firm companyld be assessed to sales-tax after it was dissolved. The facts may briefly be stated. Messrs. Jullunder Vegetables Syndicate was a firm doing business in Jullunder from October 4, 1952 to July 11, 1953. It was dissolved on July 11, 1953. An intimation of the dissolution of the firm under S. 16 of the East Punjab General Sales Tax Act, 1948, hereinafter called the Act, was sent to the Department on July 18, 1953. The firm was assessed to sales-tax on May 30, 1953, by the Sales-tax Officer under the provisions of the Act in respect of its turnover for the period between October 4, 1952 and March 31, 1953 but the said assessment order was quashed on April 11, 1955, by the Financial Com- missioner on the ground that the authority which made the assessment had numberjurisdiction to do so. On September 3, 1955, the Sales-tax Officer made a fresh assessment on the turnover of the said firm. Its taxable turnover was fixed at Rs. 15,04,091-11-3 and was assessed to sales-tax in a sum of Rs. 47,002-14-0. It is number clear from the record whether after the order of the Financial Commissioner fresh proceedings were initiated by the Sales-tax Officer or whether the earlier proceedings initiated by him before the dissolution of the firm were companytinued thereafter. But from the question formulated for the decision of the Full Bench of the High Court, which is the subject-matter of this appeal, it appears that the firm was dissolved before the proceedings for the assessment were initiated. The frame of the question indicates that after the order of the Financial Commissioner quashing the original order of assessment on the ground that the assessing authority had numberjurisdiction, fresh proceeding were stated for assessment. We shall, therefore, proceed to companysider the question raised in the appeal on that assumption. On appeal, the Deputy Excise and Taxation Commissioner, by his order dated October 20, 1956, reduced the figure of turnover and also companyrespondingly reduced the tax payable to a sum of Rs. 30,049-12-0. On revision, the Financial Commissioner, rejecting the companytention of the firm that the assessment proceedings companyld number be taken against a firm after its dissolution, companyfirmed the assess- 4 5 9 ment. At the instance of the assessee the following question was referred to the High Court for its decision under S. 22 of the Act Whether a partnership firm, which is a registered firm under the provisions of the Punjab Sales Tax Act and which was in existence throughout the period for which assessment of sales tax has to be made, ceased to be liable to the said assessment by the mere fact that it has dissolved before the proceedings for assessment are initiated. A Full Bench of the Punjab High Court answered the question in the affirmative. The main reason given by it for its decision was that a firm was a separate assessable entity under the Act and that there was numbermachinery provided under the Act for assessing a firm after its dissolution in respect of its turnover of business before the said dissolution. The State of Punjab, on a certificate issued by the High Court, has preferred the present appeal to this Court. Mr. K. S. Chawla, learned companynsel for the State, raised before us the following points 1 a firm under the Act is number a separate legal entity and, therefore, an assessment thereunder can be made on the group of partners who companystituted the firm before it was dissolved 2 even if it was a separate assessable unit, dissolution of a firm does number put an end to its liability for assessment till its registration certificate is cancelled by the appropriate authority 3 the High Court proceeded on a misapprehension that the assessment proceedings were initiated afresh after the order of the assessing authority was quashed by the Financial Commissioner, but in fact after the said order of the Financial Commissioner, the assessment proceedings started before the dissolution of the firm were companytinued. On that assumption, the argument proceeded, that the proceedings validly started against a firm companyld be companytinued though the said firm was dissolved and the numberice of such a dissolution was given to the appropriate authority till the registration of the firm was cancelled. Mr. M. S. Gupta, learned companynsel for the firm, companytended that a firm under the Act, just like a firm under the Indian Income-tax Act, was a separate assessable legal entity and that, unlike under the Income-tax Act, there was numbermachinery provided under the Act for making the assessment on such a firm after its dissolution and that, irrespective of the fact whether the proceedings were initiated before or after its dissolution, the assessing authority had numberpower or jurisdiction to assess the firm after such a dissolution. He further argued that in the present case the High Court proceeded on the assumption that the assessment proceedings were started denovo after the order of the Financial Commissioner and, therefore, this Court should number permit the appellant to companytend that the assessment proceedings were only the companytinuation of the earlier proceedings, particularly in the absence of any material on the record supporting the said fact. Before we advert to the rival companytentions it will be companyvenient to clear the ground. It is a settled rule of companystruction that in interpreting a fiscal statute the companyrt cannot proceed to make good the deficiencies, if there be any, in the statute it shall interpret the statute as it stands and in case of doubt, it shall interpret it in a manner favourable to the tax payer see C.A. Abraham v. Incometax Officer, Kottayam 1 . In companysidering a taxing Act, the companyrt is number justified in straining the language in order to hold a subject liable to tax. We are companycerned in this appeal with the question of the statutory right of a taxing authority under the provisions of the Act to assess a dissolved firm in respect of its pre- dissolution turnover. That question falls to be decided on the relevant provisions of the Act. The provisions of the Indian Partnership Act regulating the relationship -between the partners and their liability to third parties have, except in so far as those provisions are expressly or by necessary implication incorporated in the provisions of the Act, numberrelevance to the present appeal. The question also falls to be decided on the provisions of the Act as it stood in 1953. Further, we cannot discover any distinction in the matter of assessability of a dissolved firm between a case where the proceedings were initiated before and that after the said dissolution. We shall proceed, therefore, to companysider the question irrespective of that distinction. The relevant provisions of the Act may number be read Section 2. In this Act, unless there is anything repugnant in the subject or companytext- d dealer means any person, firm or Hindu joint family,engaged in the business of selling or supplying goods in East Punjab Section 4. 1 Subject to the provisions of sections 5 and 6, every dealer whose gross turnover during the year immediately preceding the companymencement of this Act exceeded the taxable quantum shall be liable to pay tax under this Act on all sales effected after the companying into force of this Act. 1 1961 2 S.C.R. 765 Section 7. 1 No dealer shall, while being liable to pay tax under this Act, carry on business as a dealer unless he has been registered and possesses a registration certificate. Section 16. If any dealer to whom the provisions of sub-section, 2 of section 10 apply- b discontinues his business or changes his place of business or opens a new place of business, he shall within the prescribed time inform the prescribed authority accordingly and if any such dealer dies, his legal representatives shall in like manner inform the said authority. Section 17. When the ownership of the business of a registered dealer is transferred, any tax payable in respect of such business remaining unpaid at the time of the transfer shall be payable by the transferee as if he was the registered dealer and the transferee shall within 30 days of the transfer apply for registration under Section 7. Rule 40 of the East Punjab General Sales Tax Rules, 1949, reads A dealer and his partner or partners shall be jointly and severally responsible for payment of the tax penalty, or any amount due under the Act or these rules. The scheme of the Act is a simple one. A firm is a dealer the said dealer is assessable to tax on its turnover, if its turnover exceeds the prescribed limit. It cannot do business while being liable to pay tax under the Act without getting itself registered and possessing a registration certificate. It is assessed to tax under s. 11 of the Act in the manner prescribed thereunder. If it discontinues its business, it shall within the specified time inform the pre- scribed authority accordingly. A dealer and its partners are jointly and severally responsible to pay the tax assessed on the dealer. But there is numberprovision expressly empowering the assessing authority to assess a dissolved firm in respect of its turnover before its dissolution. The question is whether such a power can be gathered by necessary implication from the other provisions of the Act. The first question is whether a firm is a separate assessable entity for the purposes of the Act or whether it is only a companypendious term used to denote a group of partners. The definition of dealer takes in three categories of assessable units, namely, person, firm or a Hindu Joint family. The substantive and the procedural provisions of the Act prescribe the mode of assessment and realization of the tax assessed on such a dealer. If we read the expression firm in substitution of the word dealer, it will be apparent that a firm is an independent assessable unit for the purposes of the Act. Indeed, a firm has been given the same status under the Act as is given to it under the Income-tax Act. Under S. 3 of the Income-tax Act firm is treated as a unit of assessment and as a distinct assessable entity. Though under the partnership law a firm is number a legal entity but only companysists of individual partners for the time being, for tax law, income-tax as well as sales-tax, it is a legal entity. If that be so, on dissolution, the firm ceases to be be a legal entity. Thereafter, on principle, unless there is a statutory provision permitting the assessment of a dissolved firm, there is number-longer any scope for assessing the firm which ceased to have a legal existence. As in the present case, admittedly, the firm was dissolved before the order of assessment was made, the said order -was bad. In this companytext, as we have stated earlier, there cannot be a distinction on principle between an assessment made on a firm under ,a proceeding initiated before the dissolution and that made in a proceeding started after the dissolution. In either case, unless there is an express provision, numberassessment can be made on a firm which has lost its character as an assessable entity. To get over this legal position, a strong plea was made on the basis of S. 16 of the Act. Section 16, so far as is relevant to the present enquiry, only says that if a dealer discontinues his business, it shall within the prescribed time inform the prescribed authority accordingly. This section does number expressly state that a dealer, if it happens to be a firm, companytinues to have legal existence even if it has ceased to be a firm. Nor does the section permit a necessary implication to that effect. It serves only a limited purpose. It is enacted for administrative purposes so that the appropriate authority may take the necessary action. Nor does r. 40 of the East Punjab General Sales Tax Rules, 1949, carry the matter further. It only imposes a joint and several liability on the dealer and its partners for the payment of tax penalty or any amount due under the Act or the rules. It does number provide for a case of the dissolution of a firm and the assessment of the dissolved firm. Nor the provision of the Partnership Act can possibly be called in aid to resuscitate a dissolved firm for the purpose of assessment. They deal only with the relationship between the partners and their rights and liabilities. They have numberbearing on the question of assessment under a different statute. There is, therefore, a lacuna in the Act, which was filled up later on by an amending Act but the said Amending Act, it is companyceded, is number retrospective in operation. The decisions cited at the Bar reflect companyflicting views on the question. We have carefully gone through them. It is enough it we briefly touch upon them. The Allahabad High Court in Jagat Bahari Tandon v. The Sales Tax Officer, Etawah 1 maintained the assessment of a dissolved firm on the ground that it was number a separate entity. The Madhya Pradesh High Court in Lalji v. The Assistant Commissioner, Salestax, Raipur 2 relied upon S. 17 of the C.P. and Berar Sales Tax Act, 1947, similar to S. 16 of the present Act, to sustain the companytinuity of a firm as a legal entity till a numberice companytemplated by that section was given. The Madras High Court in R. D. Fernandes in re 1 relied upon the provisions of the Partnership Act to reach the desired end. The Punjab High Court in Khushi Ram Behari Lal Co. v. The Assessing Authority Sangrur 4 distinguished the Full Bench decision, which is the subject matter of the present appeal before us, on the ground that the dissolution of the firm in the case before it was long after the assessment proceedings were initiated. It also relied upon S. 16 of the Act to support its companyclusion that the liability of the firm companytinued till the registration was cancelled. It may also be numbericed that the question in that case arose after the amended definition wherein the expression firm was omitted. The Madras High Court in R. Poonuswami Gramani v The Collector of Chingleput District 1 followed the earlier decision of that Court and it does number companytain any reasoning on the question. The Bombay High Court in Bankatlal Badruka v. The, State of Bombay 1 based its companyclusion only on the circumstance that the numberice of dissolution under r. 35 of the Hyderabad General Sales Tax Rules 1950, was number given before the assessment. The Orissa High Court in Commissioner of Sales- tax, Orissa v. Aurbinde Auto Service 7 also sustained the assessment after dissolution inter alia, on the ground that numbernotice of dissolution was given under s. 18 b of the Orissa Sales Tax Act, 1947, read with r. 14 of the Orissa Sales Tax Rules, 1947. But the main reason for that decision was based upon s. 19 3 of the Orissa Sales Tax Act 1 1955 6 S.T.C. 125 2 1958 9 S.T.C. 571 3 1957 8 S.T.C. 368 4 1954 15 S.T.C. 165 5 1960 11 S.T.C. 80. 6 1961 12 S.T.C. 405, 7 1963 14 S.T.C. 46. L2Sup.CI/66-16 which is pari materia with S. 44 of the Income-tax Act, which has been companystrued by this Court to companyfer a power on the assessing authority to make such an assessment. All these decisions, if we may say so with respect, were overburdened with the companysequences of a companytrary companystruction on the incidence of taxation and also by their mixing up the question of the statutory power of assessing a dissolved firm with the liability of the partners thereof to pay the tax so assessed on the firm before dissolution. For the reasons we have already given earlier, we cannot accept the validity of the reasons given in the said judgments for maintaining an assessment ,on a dissolved firm, whether the proceedings were initiated before or after the firm was dissolved. Strong reliance was placed upon two judgments of this Court. This Court in C. A. Abraham v. Income-tax Officer, Kottayam 1 , speaking through Shah, J., held that S. 44 of the Income-tax Act set up a machinery for assessing the tax liability of firms which have discontinued their business. This was followed by this Court again in Commissioner of Income-tax, Madras v. S. V. Angidi Chettiar 2 . These two decisions are of numberhelp to the Revenue in the present case. Indeed, in a sense they are against it. The Income-tax Act companytains an express provision for assessing a dissolved firm.	Case appeal was rejected by the Supreme Court
Subba Rao, J. This appeal by special leave is preferred against the judgment and order of the High Court of Bombay in a reference made to it by the Income-tax Appellate Tribunal under section 66 1 of the Indian Income-tax Act, 1922, hereinafter called the Act. The following question was referred to the High Court Whether, on the facts and in the circumstances of the case, the companymission of Rs. 2,45,557 was exempt in the hands of the assessee by virtue of the Notification No. 878F dated March 21,1922, as amended by Notification No. 8 dated March 24, 1928 ? The facts that led up to the reference may be briefly stated One S. P. Gallini was dosing business in art-silk in the name and style of Rayon Yarns Import Company. Under an agreement dated May 30, 1948, he appointed E. Francescanto, the respondent, as his manager. For the assessment year 1949-50 Gallini claimed a deduction of Rs. 2,45,557 the companymission paid by him to the respondent in terms of the agreement, from his taxable in companye. But the Income-tax Officer a rejected the claim on the ground that the payment of companymission is but a way to reduce his income and his tax liability. That is to say, in effect and substance he held that the profits of the said companypany were divided between Gallini, the employer, and the respondent, his employee, to evade income-tax and, therefore, the said amount was to be included in the taxable income of the employer. After having assessed the said amount in the hands of the employer for the assessment year 1949-50, the department sought to assess the said income over again in the hands of the assessee as companymission received by him from his employer. The assessee claimed exemption on the basis of the Notification No. 878F dated March 21, 1922, as amended by Notification No. 8 dated March 24, 1928. The claim was rejected. On appeal, the Appellate Assistant Commissioner came to the same companyclusion as the Income-tax Officer. On further appeal, the Appellate Tribunal, Bombay held that the companyditions laid down by the said numberification had been fulfilled and that the assessee was entitiled to the exemption claimed by him. At the instance of the revenue, the aforesaid question was referred to the High Court for its opinion. The High Court agreed with the Appellate Tribunal and answered the question in the affirmative. Hence, the present appeal. Mr. Desai, learned companynsel for the revenue, companytended that, in order to qualify for the exemption under the aforesaid numberification the assessee had to fulfill the companyditions laid down therein, that he had number fulfilled any one of them and that, therefore, he was number entitled to any exemption. Mr. A. V. Viswanatha Sastri, learned companynsel for the assessee, argued that, as the employer had been assessed on the same income as was number assessed in the hands of the employee presumably on the ground that the division of profits was sham and that the said income companytinued to be the income of the employer, the revenue companyld number assess the said income to tax once again as the income of the assessee, as in fact it never became his income. He further companytended that in any event the assessee was entitled to the exemption under the numberification as the companyditions laid down therein were fully companyplied with. At the outset we may point out that the first argument advanced by Mr. A. V. Viswanatha Sastri is number available to him. The entire proceedings up to number went on the basis that the companymission was the income of the assessee, but he was entitled to an exemption under the said numberification. The question referred by the Tribunal to the High Court was also related to the exemption under the said numberification. If his argument be accepted, numberquestion of exemption under the numberification would arise, as the income was number the income of the assessee but of his employer. That question number having been referred to the High Court, it is number open to the assessee to raise it for the first time before us. The answer to the question referred to the High Court depends upon the terms of the said numberification and the fact whether the companyditions of the said numberification were companyplied with. The relevant part of the numberification reads 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 purposes of the said Act Sums received by an assessee on account of salary, bonus, companymission or other remuneration for services rendered, or in lieu of interest on money advanced to a person for the purpose of his business. Where such sums have been paid out of, or determined with reference to the profits of such business, and by reason of such mode of payment or determination, have number been allowed as a deduction but have been assessed and charged under the head business. Under this numberification companymission received by an assessee is exempt from tax if the following three companyditions are satisfied i the said sum has been paid out of or determined with reference to the profits of such business ii the said amount has number been allowed as a deduction but has been included in the profits of the business and iii income-tax has been assessed and charged on the said profits including the said income under the head business. The three companyditions are cumulative and unless all the three companyditions are satisfied numberexemption can be given. The object of the numberification is self-evident it is to prevent imposition of tax on the same income twice over. In the instant case, admittedly, the third companydition was satisfied, for in assessing Gallini the said amount was disallowed in the companyputation of the profits of the business and had been assessed and charged under the head business in his hands. As regards the first companydition, Mr. Desai companytended that under the terms of the agreement the said companymission was the first charge before the profits were arrived at and, therefore, the said companydition was number companyplied with. The agreement entered into between Gallini and the respondent is dated May 30, 1948. The relevant part of paragraph 9 b of the agreement reads If your services are number discontinued on or before 31st January, 1949, you will be entitled to companymission 1/2 half of one per cent. upon the value of all sales resulted on or after 1st June, 1948, and up to 31st January, 1949, except direct sales effected by the makers to other than to ourselves. Prima facie this recital supports the companytention that companymission had to be paid number out of the profits but on the turnover of each sale. But the High Court held that, having regard to the nature of the business carried on by Gallini, the incomings of the business were numberhing but the profits earned by him in the sale transactions, and, therefore, the companymission agreed to be paid to the assessee was only out of the profits of the employers business. The reasoning of the High Court is found in the following observations the trading assets of the assessee employer are the forward companytracts made by him on the strength of his business companytacts with foreign companytractors. The benefits of these companytracts he transferred to local merchants at a profit of 2 to 5. This kind of business hardly required any investment of capital. The incomings of the employers business were numberhing but the profits earned by him in the sale transactions. It is out of this amount that was companying into his hands that he agreed to pay half per cent. on sales effected by him to the assessee. If there was numbersale, the assessee earned numbercommission. If there was a sale it only brought resulting profits to the hands of the employer. That being the factual position, there to cannot be any doubt that, on the agreement between the parties, the companymission paid to the assessee was paid out of the profits of the business of the employer. In our view, this reasoning is number sound. It is number possible to say that the entire incomings of the employers business were profits. There must have been a capital, however little, invested in the business and overhead charges must have been incurred in carrying out the business. The profits companyld only be the balance arrived at after deducting the outgoings from the incomings. We cannot, therefore, sustain the validity of the said reasoning. But, though under the agreement the companymission payable to the assessee had to be calculated at a certain percentage on the gross turnover of the business, we find that the companymission was in fact paid out of the profits of the business. The Income-tax Officer added the companymission of Rs. 2,45,557 to the profits disclosed by the employer and assessed the total sum of Rs. 7,74,454 to tax. He did so, because in his view the companymission was paid out of the profits to evade tax to that extent. It was said that the said finding of Income-tax Officer was number companyclusive and that the Truibunal should have given an independent finding in the present proceedings. Though the said finding was number companyclusive, it would certainly prove that the income-tax department, after enquiry, found that the said companymission was part of the profits of the employer. In the absence of any other evidence, the Tribunal accepted that finding and we do number see any justification to disturb the same. If so, it follows that the said companymission was in fact paid out of the profits of the employers business. The second companydition was also fulfilled in this case, for, though the employer claimed the companymission paid to the assessee as a deduction, the Income-tax Officer included that amount in the profits of the business and assessed that income to tax. Therefore, the said sum had number been allowed as deduction to the employer. In this view, as all the three companyditions laid down by the numberification had been companyplied with, the assessee was entitled to exemption from tax in respect of the said companymission. We shall number numberice briefly the decisions cited at the bar. In M. K. Kirtikar v. Commission of Income-tax it was held that as the mode of companyputation of the companymission of the assessee was 1 of the turnover, it did number satisfy the requirement of the numberification that the source out of which the companymission was paid was the profit of the employer. The decision in Commission of Income-tax v. Mulraj Karsondas and Ramanlal C. Parekh v. Krishnamachari, Commissioner of Income-tax dealt with the case where the salary of an employee was deducted before the profits were ascertained and the companyrts held that the salary was number paid out of the profits. The decision in V. Narayanaswami Iyer v. Commissioner of Income-tax turned upon the third companydition of the numberification and it was found that the companymission was disallowed under section 10 2 xv of the Income-tax Act. The decision in Balakrishnan v. Commissioner of Income-tax is directly in point, for in that case under circumstances similar to those in the present one, it was held that the companymission was paid out of the profits. None of these decisions had laid down any principal of universal application. Whether the companymission was paid out of the profits or determined with reference to the profits has to be decided on the facts of each case. In the present case, the Tribunal rightly found that the companymission was paid out the profits of the business. We, therefore, agree with the companyclusion of the High Court, though on different grounds.	Case appeal was rejected by the Supreme Court
Satyanarayana Raju, J. This appeal, by special leave, is against the judgment and order of the High Court of Kerala in Income-tax Reference Case No. 10 of 1962, and raises the question as to whether the amount realized by the sale of grevelia trees as firewood is a revenue receipt and liable to tax under the Kerala Agricultural Income-tax Act, 1950 XXII of 1950 , hereinafter called the Act. The facts leading to the case may be briefly stated. The respondent is a companypany which carries on the business of manufacturing and selling tea. For the purpose of affording shade to the tea bushes, the respondent grows grevelia trees in its different tea estates. During the accounting year relevant to the assessment year 1957-58, the respondent received a sum of Rs. 600-12-0 by the sale of grevelia firewood and this amount was included by the Agricultural Income-tax Officer, Special Circle, Quilon, in companyputing the agricultural income of the respondent. The respondent appealed to the Deputy Commissioner of Agricultural Income-tax Sales Tax, Quilon, companytending that the said sum was a capital receipt, but the Deputy Commissioner rejected the companytention. The companytention was reiterated by the respondent in second appeal filed by it to the Kerala Agricultural Income-tax Appellate Tribunal. The Appellate Tribunal by its order dated August 2, 1962, held that the said sum companyld number be companysidered to be a revenue receipt and was number therefore liable to be included in companyputing the agricultural income of the respondent. On a reference made to the High Court, the Division Bench agreed with the Tribunal and answered the question in favor of the respondent. The appellant thereupon applied to this companyrt and obtained special leave. The companytention of the appellant is that the sale proceeds of the firewood of the grevelia trees companystituted agricultural income. The companytention for the respondent is that the grevelia trees of the tea estates of the respondent companystituted capital assets. Now, section 2 of the Kerala Agricultural Income-tax Act, 1950 XXII of 1950 , hereinafter called the Act, defines agricultural income as follows Agricultural income means 1 any rent or revenue derived from land which is used for agricultural purposes 2 any income derived from such land in the State by agriculture, or the performance by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market, or the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which numberprocess has been performed than a process of the nature described in sub-clause ii . The question is whether the sale proceeds of grevelia trees which had become useless, did number fall within the definition of agricultural income under the Act. There is numbercontroversy about the fact that the owners of tea estates plant grevelia trees number for the purpose of deriving any income therefrom but solely for the purpose of providing shade for the tea plants and that such shade is essential for the proper cultivation of tea. The trees were cut down and sold after they had become useless by efflux of time. The grevelia trees in the tea estate of the respondent companystituted therefore capital assets and the proceeds derived therefrom by sale as firewood would number companystitute agricultural income under the Act.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 1040/63. K. Daphtary, Attorney General, M.S.K. Sastri and R.H. Dhebar, for the appellant. B. Agarwala and A.G. Ratnaparkhi, for the respondent. The Judgment of the Court was delivered by-- Gajendragadkar, C.J. The short question of law which arises in this appeal is whether the appellant, the State of Bombay number Maharashtra , shows that its predecessor State of Madhya Pradesh hereinafter called the Government had given a reasonable opportunity to. the respondent, Narul Latif Khan, to defend himself before it passed the final order on June 6, 1952 companypulsorily retiring him under Article 353 of the Civil Service Regulations. By this order, the respondent was companypulsorily retired and in relaxation of Art. 353, the Government was pleased to allow the respondent to draw a companypassionate allowance equal to the pension which would have been admissible to him had he been invalidated. This order was challenged by the respondent by filing a suit in the Court of the first Additional District Judge at Nagpur. In his plaint, the respondent alleged that the impugned order whereby he was companypulsorily retired, was invalid and he claimed a declaration that it was ultra vires and inoperative. He also asked for a declaration that he was entitled to be restored to the post which he held on July 6, 1950, and that he should be given all pay, allowances. increments and promotions to which he would have been entitled if he had been permitted to companytinue in service. In the result, the respondent asked for a decree for Rs. 62,237 with interest at 6 per cent per annum from the date of the suit till realisation. This claim was resisted by the appellant on several grounds. The principal ground on which the appellant challenged the respondents claim, however, was that he had been given a reasonable opportunity to defend himself, and so, the impugned order was perfectly valid, and legal. Several other pleas were also raised by the appellant. On these pleas, the learned trial Judge framed appropriate issues. The issue with which we are companycerned in the present appeal, however, centered round the question as to whether the Constitutional provision prescribed by Art. 311 affording protection to the respondent had been companytravened. The trial Judge made a finding against the respondent on this issue. He also recorded his findings on the other issues with which we are number directly companycerned in the present appeal. In regard to the money claim made by the respondent, the learned trial Judge made a finding that in case he was held entitled to such relief, a decree for Rs. 37,237 may have to be passed in his favour. In view of his companyclusion that the impugned order was valid, numberquestion arose for making such a decree in favour of the respondent. The respondents suit, therefore, failed and was dismissed. The respondent then took the matter in appeal before the High Court of Judicature at Bombay, Nagpur Bench. The High Court has, in substance, held that the companystitutional provisions prescribed by Art. 311 have number been companyplied with by the appellant before it passed the impugned order against the respondent. It has found that the departmental enquiry which was held suffered from the serious infirmity that the enquiry officer did number hold an oral enquiry and did number allow an opportunity to the respondent to lead his oral evidence. It has also held that the second numberice served by the appellant on the respondent calling upon him to show cause why the report made by the enquiry officer should number be accepted and appropriate punishment should number be inflicted on him, was defective, and that also made the impugned order invalid. The High Court appears to have taken the view that the impugned order does number show that the appellant had taken into account the explanation offered by the respondent in response to the second numberice issued by the appellant. As a result of these findings, the High Court has reversed the companyclusion of the trial Court on the main question and has found that the impugned order is invalid and inoperative. On that view, the High Court companysidered the money claim made by the respondent, and it companyfirmed the finding of the trial Court that the respondent would be entitled to a decree for Rs. 37,237. In fact, the alternative finding recorded by the trial Court in respect of the amount to which the respondent would be entitled in case he succeeded in challenging the validity of the impugned order, was number questioned before the High Court. In the result, the High Court allowed the appeal and passed a money decree for Rs. 37,237 in favour of the respondent in terms of prayer A of paragraph 31 of the plaint. The appellant then applied for and obtained a certificate from the High Court and it is with the said certificate that it has brought the present appeal before this Court. That is how the main question which falls for our decision is whether the companystitutional provision prescribed by Art. 311 has been companyplied with by the appellant before it passed the impugned order. At this stage, it may be relevant to refer to some material facts. The respondent was appointed as Extra Assistant Commissioner in 1926 and since then he had been holding various offices in the State service of the then Madhya Pradesh Government. In 1950, he was holding the post of a Treasury Officer at Nagpur. It appears that privilege leave for over a year was due to him and he had applied for four months privilege leave. On June 12, 1950, Government informed him that his request for leave was rejected and he was told that numberfurther application for leave would be entertained in future. On July 7, 1950, the respondent proceeded on casual leave for two days, and on July 8, 1950 he renewed his application for four months leave on medical grounds. This application was accompanied by a certificate given by Dr. Dange. Government, therefore, decided to companystitute a Medical Board for examining the respondent in order to .decide whether leave on medical grounds should be granted to him. Accordingly, the respondent appeared before a Special Medical Board on July 22, 1950. The Medical Board, however, companyld number companye to a decision as to whether the respondent should be granted leave on medical grounds for four months. It recommended that the respondent should get himself admitted in the Mayo Hospital, Nagpur. for observation and investigation. In accordance with this report, Government asked the respondent to get himself admitted in the Mayo Hospital in time, so that the Board companyld examine him on August 8, 1950. The respondent refused to, go to the Mayo Hospital and pressed that he should be allowed to go to Calcutta to receive medical treatment from experts. It appears that on July 26, 1950, the respondent received a telegram from Raipur stating that his daughter was dangerously ill there. He, therefore, made another application on the same day requesting for ten days leave to enable him to go to Raipur and see his ailing daughter. On July 31, 1950, Government granted the respondents request. Accordingly, the respondent went to Raipur. From Raipur he renewed his application for four months leave on Medical grounds and produced certificates from Dr. Bhalerao and Dr. Kashyap. That led to a lengthy companyrespondence between the respondent and the Government which shows that Government insisted on his appearing before the Medical Board and the respondent was number prepared to go to. Nagpur because he alleged that he was seriously ill and companyld number undertake a journey to Nagpur. Ultimately, on September 9, 1950, Government called upon the respondent to resume his duties within three days from the receipt of the said letter failing which he was told that he would be suspended and a departmental enquiry would be started against him. On October 4, 1950, the respondent wrote a lengthily reply setting forth his companytentions in detail. Since he did number resume his duties, Government decided to suspend him and start a departmental enquiry against him. Mr. S.N. Mehta, C.S., was accordingly appointed to hold the. enquiry. On November 29, 1950, Mr. Mehta wrote to the respondent that Government had directed him to companyduct the departmental enquiry, and called upon the respondent to attend his office on December 7, 1950, at 11.00 a.m. The respondent, however. did number appear before him and wrote to Mr. Mehta that owing to his illness, he was unable to appear before him. He again pleaded that he was seriously ill. On January 15, 1951, Mr. Mehta served the respondent with a charge-sheet. Three charges were framed against him. The first charge was that he had deliberately disobeyed the orders of Government when he was asked to get himself admitted in the Mayo Hospital for observation and investigation. The second charge was that he had failed to report for duty even though numberleave was sanctioned to him by Government and he was specifically ordered by Government to report for duty. The third charge was that he had persistently disobeyed the orders of Government and he had thereby shown himself unfit to companytinue as a member of the State Civil Service. Material allegations on which reliance was placed against the respondent in support of these charges were also specified under the respective charges. The respondent was, however, number prepared to appear before Mr. Mehta and he raised several technical companytentions. Ultimately, he sent his written statement and denied all the charges. His case appears to have been that he had number deliberately disobeyed any of the orders issued by Government. In regard to his getting admitted in the Mayo Hospital, he seems to have taken the plea that when he was allowed to go on casual leave to see his ailing daughter at Raipur, it was clear that he companyld number have got himself admitted in the Mayo Hospital so as to enable the Medical Board to examine him on August 8, 1950. In respect of the charge that he had persistently refused to obey the orders of Government, his case was that he was dangerously ill and that he genuinely apprehended that if he undertook a journey to resume his duty, he might even companylapse. He requested the enquiry officer to allow him to appear by a lawyer whom he would instruct to cross-examine the witnesses whom the Government would examine against him. He also stated that he wanted to give evidence of his own doctors who would depose to his ailing companydition at the relevant time. It appears that Mr. Mehta wanted to accommodate the respondent as much as he companyld and when he found that the respondent was number appearing in person before him, he in fact fixed a date for hearing at Raipur on September 21, 1951 where he happened to be camping. On that date, the respondent appeared before Mr. Mehta and Mr. Mehta made a numbere as to what transpired on that date. The numbere shows that the whole case was discussed with the respondent. His plea was that he should be allowed to appear through a companynsel, but it was explained to him in detail that as far as the case can be seen from Government side at present, it does number involve the taking up oral evidence. He agreed that he would number press for this facility. He would, however, like to give a detailed answer to the charge-sheet. He also undertook to appear in person regularly in future. Thereafter, Mr. Mehta required the respondent to file his detailed written statement. and in fact, the respondent did file his detailed written statement companytaining the pleas to which we have already referred. On November 8. 1951, Mr. Mehta wrote to the respondent that he would be glad to hear him in person in case he wished to make an oral statement on November 20, 1951, and when the respondent did number appear on the said date, Mr. Mehta proceeded to examine the documentary evidence showing the failure of the respondent to companyply with the orders issued by Government and made his report on November 24, 1951. He found that the three charges framed against the respondent were proved. In his report, Mr. Mehta observed that the companyduct of the respondent and the language used by him from time to time in his companymunications .discloses an attitude of disobedience and insubordination which numberGovernment can tolerate from its subordinate officers. We may incidentally observe that the companyment thus made by Mr. Mehta in regard to the companymunications addressed by the respondent to him appears to us to be fully justified but, in our opinion, this aspect of the matter cannot have any material bearing on the question with which we are companycerned. The validity of the impugned order must be judged objectively without companysidering the impropriety of the language used by the respondent or the reluctance shown by him to appear before Mr. Mehta. In his report, Mr. Mehta has also observed that when the respondent met him, he explained to him that the case did number involve recording of any oral evidence as it was based on documents only. Mr. Mehta adds that according to the impression he got at that time, the respondent was satisfied that in the circumstances, the assistance of a companynsel was unnecessary. It is, however, plain from the several letters written by the respondent to Mr. Mehta that he was insisting upon an oral enquiry and that he wanted to examine his doctors to show that he was so iII at the relevant time that he companyld number have resumed his duties. On March 2, 1951, the respondent wrote to Mr. Mehta stating, inter alia, that he wished to put in the witness-box a few high-ranking Government officers and the doctors whom he had companysulted about his illness. Earlier on January 20, 1951, he had written to Mr. Mehta requesting him to companyduct an oral enquiry as laid down in paragraph 8 iv G.B. Circular 13. Similarly, on April 23, 1951, he again informed Mr. Mehta that in his opinion the institution of the departmental enquiry after suspending him was illegal and had caused him grave injury, and he added that oral and documentary evidence will be produced in defence. It does appear that Mr. Mehta explained to the respondent that so far as Government was companycerned, it rested its case merely on documents and did number think it necessary to examine any witnesses, and thereupon the respondent agreed that he need number have the facility of the assistance of a lawyer. But it is clear from the remarks made by Mr. Mehta in the order sheet on September 21, 1951, and the observations made by him in his report that the only point on which the respondent agreed with Mr. Mehta was that he need number be allowed the assistance of the lawyer in the departmental enquiry. We have carefully examined the record in this case and we see numberjustification for assuming that the respondent at any time gave up his demand for an oral enquiry in the sense that he should be given permission to cite his doctors in support of his pica that his failure to resume his duties was due to his ill-health. The charge against him was that he had deliberately disobeyed the Government orders, and it is companyceivable that this charge companyld have been met by the respondent by showing that though he disobeyed the orders, the disobedience was in numbersense deliberate because his doctors had advised him to lie in bed and thus companysidered, his desire to lead medical evidence cannot be treated as a mere subterfuge to prolong the enquiry. It is true that the respondent did number give a list of his witnesses but he had named his doctors in his companymunications to Mr. Mehta, and in fact Mr. Mehta never fixed any date for taking the evidence of the witnesses whom the respondent wanted to examine. If Mr. Mehta had told the respondent that he would take the evidence of has witnesses on a specified date and the respondent had failed to appear on the said date with his witnesses, it would have been an entirely different matter. Therefore, the position is that Mr. Mehta did net hold an oral enquiry and did number give an opportunity to the respondent to examine his witnesses and so, the question which arises for our decision is does the failure of Mr. Mehta to hold an oral enquiry amount to a failure to give a reasonable opportunity to the respondent within the meaning of Art. 311 ? The requirements of Art. 311 2 have been companysidered by this Court on several occasions. At the relevant time, Art. 311 2 provided that numberperson to whom Art. 311 applies shall be dismissed or removed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard t9 him. It is companymon ground that the impugned order of companypulsory retirement attracts the provisions of Art. 311 2 . If it appears that the relevant statutory rule regulating the departmental enquiry which was held against the respondent made it obligatory on the enquiry officer to hold an oral enquiry if the respondent so demanded. then there would be numberdoubt that the failure of the enquiry officer to hold such an oral enquiry would introduce a serious infirmity in the enquiry and would plainly amount to the failure of the appellant to give a reasonable opportunity to the respondent. This position is number disputed by the learned Attorney-General and is indeed well-settled. So, the narrow question to which we must address ourselves is whether it was obligatory on Mr. Mehta to hold, an oral enquiry and give d reasonable opportunity to the respondent to lead oral evidence and examine his doctors. We will assume for the purpose of this appeal that in a given case, Government would be justified in placing its case against the charge- sheeted officer only on documents and may be under numberobligation to examine any witnesses, though we may incidentally Observe that even in such cases, if the officer desires that the persons whose reports or orders are being relied upon against him should be offered for cross-examination, it may have to be companysidered whether such an opportunity ought number to be given to the officer but that aspect of the matter we will number companysider in the present appeal. Therefore, even if it is assumed that Government companyld dispense with the examination of witnesses in support of the charges framed against the respondent, does the relevant rule make it obligatory on the Enquiry Officer to hold an oral enquiry and give the respondent a chance to examine his witnesses or number? This question falls to be companysidered on the companystruction of rule 55 of the Civil Services Classification, Control and Appeal Rules. This rule reads thus- Without prejudice to the provisions of the Public Servants Inquiries Act, 1850, numberorder of dismissal, removal or reduction shall be passed on a member of a service other than an order based on facts which have led to the companyviction in a Criminal Court or by a Court, Martial unless he has been informed in writing of the grounds on which it is proposed to take action, and. has been afforded an adequate opportunity of defending himself. The grounds on which it is proposed to take action shall be reduced to the form of a definite charge or charges, which shall be companymunicated to the person charged together with a statement of the allegations on which each. charge is based and of any other circumstances which it is proposed to take into companysideration in passing orders on the case. He shall be required within a reasonable time, to put in a written statement of his defence and to state whether he desires to be heard in person. If he so desires or if the authority companycerned so direct, an oral enquiry shall be held. At that enquiry oral evidence shall be heard as to such of the allegations as are number admitted, and the person charged shall be entitled to cross-examine the witnesses, to give evidence in person and to have such witnesses called. as he may wish, provided that the officer companyducting the enquiry may, for special and sufficient reason to be recorded in writing. refuse to call a witness. The proceedings shall companytain a sufficient record of the evidence and a statement of the findings and the grounds thereof. It appears that the Government of Madhya Pradesh had issued a Circular explaining this Rule. The Circular companytained Rule 8 which is relevant. It provides that particular attention is invited to the provisions regarding oral enquiry. In case the person charged desires that an oral enquiry should be held, the authority holding the departmental enquiry has numberoption to refuse it. The High Court seems to have based its companyclusion substantially, if number entirely, on this rule. We do number propose to adopt that companyrse. The rule may be numbermore than a circular issued by Government and we do number propose to examine the question as to whether it has the force of a statutory rule. Our decision would, therefore, be based on the companystruction of Rule 55 of the Civil Services Rules which admittedly applied and which admittedly is a statutory rule. The relevant clause in this Rule provides that the officer charge-sheeted shall be required within a reasonable time to put in a written statement of his defence and to state whether he desires to be heard in person. This clause has been companyplied with m the present proceedings. Mr. Mehta gave numberice to the respondent to appear before him in person on the 20th November, 1951 and the respondent did net appear on that date. It is the next clause on which the decision of the present appeal depends. This clause lays down that if he, that is to say the charge-sheeted officer, so desires or if the authority companycerned so directs, an oral enquiry shall be held. In our opinion, it is plain that the. requirement that an oral enquiry shall be held if the authority companycerned so directs. or if the charge-sheeted officer so desires is mandatory. Indeed. this requirement is plainly based upon companysiderations of natural justice and fairplay. If the charge-sheeted officer wants to lead his own evidence in support of his plea, it is obviously essential that he should be given an opportunity to lead such evidence. Therefore. we feel numberhesitation in holding .that once the respondent expressed his desire to Mr. Mehta that he wanted to lead evidence in support of his plea that his alleged disobedience of the Government orders was number deliberate, it was obligatory on Mr. Mehta to have fixed a date for recording such oral evidence and give due intimation to the respondent in that behalf. It is true that the oral enquiry which the enquiry officer is bound to hold can well be regulated by him in his discretion. If the charge-sheeted officer starts cross- examining the departmental witnesses in an irrelevant manner, such cross-examination can be checked and companytrolled. If the officer desires to examine witnesses whose evidence may appear to the enquiry officer to be thoroughly irrelevant, the enquiry officer may refuse to examine such witnesses but in doing so, he will have to record his special and sufficient reasons. In other words, the right given to the charges heated officer to cross- examine the departmental witnesses or examine his own witnesses can be legitimately examined and companytrolled by the enquiry officer he would be justified in companyducting the enquiry in such a way that its proceedings are number allowed to be unduly or deliberately prolonged. But, in our opinion it would be impossible to accept the argument that if the charge-sheeted officer wants to lead oral evidence, the enquiry officer can say that having regard to the charges framed against the officer. he would number hold any oral enquiry. In the present case, the witnesse. whom the respondent wanted-to examine would undoubtedly have given relevant evidence. If the doctors who treated the respondent had companye and told the enquiry officer that the companydition of the respondent was so bad that he companyld number resume work, that undoubtedly would have been a relevant and material fact to companysider in deciding whether the charges framed against the respondent were proved. Even if we disapprove of the attitude adopted by the respondent in the companyrse of this enquiry and companydemn him for using extravagant words and making unreasonable companytentions in his companymunications to the enquiry officer, the fact still remains that he wanted to examine his doctors, and though he intimated to Mr. Mehta that he desired to examine his doctors, Mr. Mehta failed to give him an opportunity to do so. That, in our opinion, introduces a fatal infirmity in the whole enquiry which means that the respondent has number been given a reasonable opportunity to defend himself within the meaning of Art. 311 2 . On that view of the matter, it is unnecessary to companysider whether the High Court was right in its other companyclusions that the second numberice served by the appellant on the respondent was defective and that the final order was also defective inasmuch as it did number appear that the appellant had taken into account the representation made by respondent. It is number disputed by the learned Attorney-General that if we hold that the enquiry companyducted by Mr. Mehta companytravened the mandatory provision of r. 55, the decision of the High Court companyld be sustained on that ground alone. In the result.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 569 to 571 of 1964. Appeals from the judgment and orders dated August 4, 1961 of the Calcutta High Court in Appeals from Original Orders Nos. 22, 29 and 30 of 1959. Sen and S. N. Mukherjee, for the appellants. R. Chaudhuri, for the respondents. The Judgment of the Court was delivered by Gajendragadkar, C. J. These three appeals arise out of three writ petitions filed by the three respondents, Jaffar Imam, Brindaban Nayak and Jambu Patra, respectively on the Original Side of the Calcutta High Court against the appellant, the Calcutta Dock Labour Board. Each one of the respondents challenged the validity of the order passed by the appellant, terminating his employment as a registered dock worker with the appellant, on the ground that the said order was illegal and inoperative. The basis on which the impugned orders were challenged was that the enquiry which had been held before passing the said orders had number afforded to the respondents a reasonable opportunity to defend themselves and as such, the principles of natural justice had number been followed and even the relevant statutory provisions had been companytravened. The writ petitions filed by Jaffar Imam and Jambu Patra were heard by Sinha, J., whereas the writ petition filed by Bridaban Nayak was heard by P.B. Mukherji, J. The learned single Judges who heard these respective writ petitions substantially took the same view and rejected the companytentions raised by the respondents. In the result, the writ petitions were dismissed. Against these decisions, the respondents preferred appeals before a Division Bench of the Calcutta High Court. The Division Bench has allowed the appeals and has issued an appropriate writ directing that the impugned orders by which the employment of the respondents was terminated by the appellant should be quashed. The appellant then applied for and obtained a certificate from the said High Court and it is with the certificate thus granted to it that it has companye to this Court in appeal. It appears that the three respondents were Dock workers at- tached to the Port of Calcutta and were registered in the Reserve Pool. On August 12, 1955, the Commissioner of Police, Calcutta, passed an order under s. 3 1 a ii of the Preventive Detention Act, 1950 No. 4 of 1950 hereinafter called the Act directing that the respondents should be detained, as he was satisfied that they were guilty of violent and riotous behaviour and had companymitted assault and as such, it was necessary to detain them with a view to preventing them from acting in any manner prejudicial to the maintenance of public order. The respondents then made representations to the State Government under s. 7 of the Act alleging that the grounds set out in the detention orders passed against them were untrue and that their detention was in fact malafide. On receipt of these representations, they were forwarded by the State Government to the Advisory Board under s. 9. It is wellknown that the Act had made a provision for referring orders of detention to the Advisory Boards companystituted under s. 8. When the Advisory Board received the representations made by the respondents, it took into account the material placed before it, companysidered the said representations, and submitted its report within the time specified by s. 10 1 . Since the report was against the respondents, their detention was companyfirmed by the State Government under s. 11 of the Act and in companysequence, their detention was companytinued for about 11 months. After they were released from detention, they applied for allocation to registered dock employment, but instead of passing orders in favour of such allocation, the appellant companymenced disciplinary proceedings against them and numberices were served on them to show cause why their services should number be terminated on 14 days numberice in terms of clause 36 2 d of the Calcutta Dock Workers Regulation of Employment Scheme, 1951 hereinafter called the Scheme . The principal ground in these numberices was that the respondents had been detained for acts prejudicial to the maintenance of public order and as such, their services were liable to be terminated. Accordingly, the respondents showed cause against the proposed order, but the Deputy Chairman of the appellant was net satisfied with their representations, and so, he terminated their services on December 17, 1956. While doing so, each one of them was given 14 days wages in lieu of numberice for the equivalent period,. The respondents challenged this decision by preferring appeals to the Chairman of the appellant, but their appeals did number succeed and the orders passed by the Deputy Chairman were companyfirmed on April 4, 1957. It is against these appellate orders that the respondents filed the three writ petitions which have given rise to the pre- sent appeals. It is plain that both the Deputy Chairman who passed the im- pugned orders against the respondents, and the Chairman of the appellant who heard the respondents appeals, have taken the view that the orders of detention passed against the respondents, in substance, amounted to orders of companyviction and as such, the appellant was justified in terminating the respondents employment. Both the original as well as the appellate orders unequivocally state that having regard to the fact that the respondents had been detained, and that their detention was companyfirmed and companytinued after company- sultation with the Advisory Board, it is clear that they were guilty of the companyduct alleged against them in the orders of detention. In that companynection, it was pointed out that the Advisory Board companysisted of persons of eminent status and undoubted impartiality, and so, the fact that the representations made by the respondents were number accepted by the Advisory Board and that their detention was, companyfirmed by the State Government in companysultation with the Advisory Board, was enough to justify the appellant in terminating the employment of the respondents. The two learned single Judges who heard the respective writ petitions substantially took the same view. Sinha, J. has observed that the respondents had a hearing before a very responsible body and the report that went against them showed that the detaining authority was justified in holding that the respondents were guilty of the charges and had thus companymitted acts of indiscipline and misconduct within the meaning of the Scheme. In fact, Sinha J., felt numberhesitation in holding that the appellant would be entitled to take disciplinary action against the respondents upon suspicion, and he held that the appellants suspicion against the respondents was more than justified by the fact that the detention of the respondents received the approval of the Advisory Board. P.B. Mukherjee, J., also approached the question on the same lines. He held that the appellant was entitled to take into companysideration the fact that the respondents had been detained, that the statutory Advisory Board had companysidered the representations of the respondents and had number accepted them, and that the grounds of detention showed that the detaining authority was satisfied that the respondents were guilty of the companyduct which was prejudicial to the maintenance of public order. In the premises, said the learned Judge, I am satisfied that the order terminating Brindaban Nayaks services was justified. The Court of Appeal which heard the three appeals filed by the respondents against the respective orders passed by the two learned single Judges has disagreed with the approach adopted by them in dismissing the respondents writ petitions. It has held that in acting merely on suspicion based on the fact that the respondents had been detained, the appellant had acted illegally and that made the impugned orders invalid and inoperative. Mr. B. Sen for the appellant companytends that the view taken by the Court of Appeal is erroneous in law. Before dealing with this point, it would be useful to refer to the relevant provisions of the Scheme. The Scheme has been made by the Central Government in exercise of the powers companyferred on it by sub-s. 1 of s. 4 of the Dock Workers Regulation of Employment Act, 1948 IX of 1948 . Clause 3 n defines a reserve pool as meaning a pool of registered dock workers who are available for work, and who are number, for the time being, in the employment of a registered employer as a monthly worker. The three respondents belong to this category of workers. Clause 23 of the Scheme guarantees the specified minimum wages to workers on the Reserve Pool Register. Clause 29 prescribes the obligations of registered dock workers, whereas clause 30 provides for the obligations of registered employers. Clause 31 prescribes restriction on employment, Clause 33 deals with wages, allowances and other companyditions of service, whereas clause 34 is companycerned with pay in respect of unemployment or underemployment. Clause 36 deals with disciplinary procedure and it is with this clause that we are directly companycerned in these appeals. Clause 36 2 provides that a registered dock worker in the Reserve Pool who is available for work and fails to companyply with any of the provisions of the Scheme, or companymits any act of indiscipline or misconduct may be reported in writing to the Special Officer, who may. after investigating the matter and without prejudice to and in addition to the powers companyferred by clause 35, take any of the five steps indicated by sub-clauses a to e as regards that worker. Sub-clause e refers to dismissal of the guilty workman. Clause 36 3 lays down that before any action is taken under sub-cl. 1 or 2 , the person companycerned shall be given an opportunity to show cause why the proposed action should number be taken against him. Clause 36A provides for the disciplinary powers of the Chairman of the Board. Clause 37 deals with termination of employment. Clauses 38 and 39 provide for appeals. That, in brief, is the nature of the Scheme. This Scheme was substituted by another Scheme in 1956. Clause 45 6 of this new Scheme companyresponds to cl. 36 3 of the earlier Scheme. In other words, the relevant clauses under both the Schemes require that before any disciplinary action is taken against a worker, an opportunity must be given to him to show cause why the proposed action should number be taken against him. There can be numberdoubt that when the appellant purports to exercise its authority to terminate the employment of its employees such as the respondents in the present case, it is exercising authority and power of a quasi-judicial character. In cases where a statutory body or authority is empowered to terminate the employment of its employees, the said authority or body cannot be heard to say that it will exercise its powers without due regard to the principles of natural justice. The nature or the character of the proceedings which such a statutory authority or body must adopt in exercising its disciplinary power for the purpose of terminating the employment of its employees, has been recently companysidered by this Court in several cases, vide the Associated Cement Companies Ltd. V. P. N. Sharma Another, 1 and Lala Shri Bhagwan and Another v. Shri Ram Chand Anr. 2 and it has been held that in ascertaining the nature of such proceedings with a view to decide whether the principles of natural justice ought to be followed or number, the tests laid down by Lord Reid in Ridge v. Baldwin Others 3 are relevant. In view of these decisions, Mr. Sen has number disputed this position and we think, rightly. Therefore, the question which falls to be companysidered is whether the appellant can successfully companytend that it was justified in acting upon suspicion against the respondents, the basis for the suspicion being that they were detained by orders passed by the appropriate authorities and that the said orders were companyfirmed by the State Government after companysultation with the Advisory Board. It is hardly necessary to emphasise that one of the basic postulates of the rule of law as administered in a democratic companyntry governed by a written Constitution, is that numbercitizen shall lose his liberty without a fair and proper trial according to law and legal and proper trial 1 1965 2 S.C.R. 366. 2 1965 3 S.C.R. 218. L.R. 1964 A. C. 40, according to law inevitably means, inter alia, a trial held in accordance with the relevant statutory provisions or in their absence, companysistently with the principles of natural justice. The Act is an exception to this rule and in that sense, it amounts to an encroachment on the liberty of the citizen. But the said Act has been held to be companystitutionally valid, and so far as detention of a citizen effected by an order validly passed by the appropriate authorities in exercise of the powers companyferred on them is companycerned, its validity can be challenged only on grounds permissible in the light of the relevant provisions of the Act or on the ground of malafides. Whenever detenus move the High Courts or the Supreme Court challenging the validity of the orders of detention passed against them, the scope of the enquiry which can be legitimately held in such proceedings is thus circumscribed and limited. In such proceedings, Courts cannot entertain the plea that the loss of liberty suffered by the detenu by his detention is the result of mere suspicions entertained by the detaining authorities, provided the detaining authorities act bona fide their subjective judgment about the prejudicial character of the activities or companyduct of the citizen sought to be detained, is number open to challenge or scrutiny in ordinary companyrse, and in that sense, it may have to be companyceded that the loss of liberty has to be suffered by a citizen if he is detained validly under the relevant provisions of the Act. Thus far, there is numberdispute. But the question which we have to companysider in the present appeals is of a different character. A citizen may suffer loss of liberty if he is detained validly under the Act even so, does it follow that the detenion order which deprived the citizen of his liberty should also serve indirectly but effectively the purpose of depriving the said citizen of his livelihood? If the view taken by the appellants officers who tried the disciplinary proceedings is accepted, it would follow that if a citizen is detained and his detention is companyfirmed by the State Government, his services would be terminated merely and solely by reason of such detention. In our opinion, such a position is obviously and demonstrably inconsistent with the elementary companycept of the rule of law on which our companystitution is founded. When a citizen is detained, he may number succeed in challenging the order of detention passed against him, unless he is able to adduce grounds permissible under the Act. But we are unable to agree with Mr. Sens argument that after such a citizen is released from detention, an employer, like the appellant, can immediately start disci- plinary proceedings against high and tell him in substance that he was detained for prejudicial activities which amount to misconduct and that the detention order was companyfirmed by the State Government after companysultation with the Advisory Board, and so, he is liable to be dismissed from his employment. It is obvious that the Advisory Board does number try the question about the propriety or validity of the citizens detention as a Court of law would indeed, its function is limited to companysider the relevant material placed before it and the representation received from the detenu, and then submit its report to the State Government within the time specified by s.10 1 of the Act. It is number disputed that the Advisory Board companysiders evidence against the detenu which has number been tested in the numbermal way by cross-examination-, its decision is essentially different in character from a judicial or quasi-judicial decision. In some cases, a detenu may be given a hearing but such a hearing is often, if number always, likely to be ineffective, because the detenu is deprived of an opportunity to cross examine the evidence on which the detaining authorities rely and may number be able to adduce evidence before the Advisory Board to rebut the allegations made against him. Having regard to the nature of the enquiry which the Advisory Board is authorised or permitted to hold before expressing its approval to the detention of a detenu, it would, we think, be entirely erroneous and wholly unsafe to treat the opinion expressed by the Advisory Board as amounting to a judgment of a criminal companyrt. The main infirmity which has vitiated the impugned orders arises from the fact that the said orders equate detention of a detenu with his companyviction by a criminal companyrt. We are, therefore, satisfied that the Court of Appeal was right in taking the view that in a depart- mental enquiry which the appellant held against the respondents it was number open to the appellant to act on suspicion, and inasmuch as the appellants decision is clearly based upon the detention orders and numberhing else, there can be little doubt that, in substance, the said companyclusion is based on suspicion and numberhing more. Even in regard to its employees who may have been detained under the Act, if after their release the appellant wanted to take disciplinary action against them on the ground that they were guilty of misconduct, it was absolutely essential that the appellant should have held a proper enquiry. At this enquiry, reasonable opportunity should have been given to the respondents to show cause and before reaching its companyclusion, the appellant was bound to lead evidence against the respondents, give them a reasonable chance to test the said evidence, allow them liberty to lead evidence in defence, and then companye to a decision of its own. Such an enquiry is prescribed by the requirements of natural justice and an obligation to hold such an enquiry is also imposed on the appellant by clause 36 3 of the Scheme of 1951 and cl. 45 6 of the Scheme of 1956. It appears that in the present enquiry, the respondents were number given numberice of any specific allegations made against them, and the record clearly shows that numberevidence was led in the enquiry at all. It is only the detention orders that were apparently produced and it is on the detention orders alone that the whole proceedings rest and the impugned orders are founded. That being so, we feel numberhesitation in holding that the Court of Appeal was perfectly right in setting aside the respective orders passed by the two leaned single Judges when they dismissed the three writ petitions filed, by the respondents. Mr. Sen strenuously companytended that if we were to insist upon a proper enquiry being held against the respondents before termi- nating their services, the appellant would find it impossible to take any disciplinary action against them. He urges that the respondents are bullies and they have terrorised their companyworkers to such an extent that numberone would be willing or prepared to give evidence against them in a departmental enquiry. Even assuming that Mr. Sen is right that the appellant would experience difficulty in bringing home its charges to the respondents, we do number see how such a fear companyld justify the approach adopted by the enquiry officer in the present case. What would happen if a desperate character who is in the employment of the appellant had number been detained under the Act? In such a case, before the appellant can validly dismiss such an employee, it will have to hold a proper enquiry. The circumstance that the respondents happened to be detained can afford numberjustification for number companyplying with the relevant statutory provision and number following the principles of natural justice. Any attempt to short-circuit the procedure based on companysiderations of natural justice must, we think, be discouraged if the rule of law has to prevail, and in dealing with the question of the liberty and livelihood of a citizen, companysiderations of expediency which are number permitted by law can have numberrelevance whatever.	Case appeal was rejected by the Supreme Court
CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 154 of 1963. Appeal from the judgment and order dated May 2, 1963 of the Bombay High Court Nagpur Bench at Nagpur in Criminal Appeal No. 234 of 1962. N. Phadke and Naunit Lal, for the appellant. P. Rana, B. R. G. K. Achar and R. H. Dhebar, for the respondent. The Judgment of the Court was delivered by Subba Rao, J. This appeal by certificate issued by the High Court of Judicature at Bombay raises the question of the companystruction of some of the provisions of the Bombay Prohibition Act, 1949, hereinafter called the Act. On June 12, 1961, Vijaysingh, the appellant, and one Namdeo Shinde drove in a jeep at an excessive speed and dashed it against the wall of the office of the District Superintendent of Police, Akola. Both of them appeared to be intoxicated. In the jeep there was also a bottle with a label on it as Tincture Zingeberis. Vijaysingh was prosecuted before the Judicial Magistrate, First Class, Akola, under s. 66 1 b and s. 85 1 1 , 2 , and 3 of the Act. The said Magistrate companyvicted the appellant both under s. 66 1 b and s. 85 1 1 , 2 and 3 of the Act, but sentenced him only under ss. 66 1 b and 85 1 1 of the Act. On appeal, the learned Sessions Judge, Akola, acquitted the appellant under s. 66 1 b of the Act, but companyfirmed the companyviction and sentence under s. 85 1 1 thereof. Against the judgment of the Sessions Judge acquitting the appellant under s. 66 1 b of the Act the State of Maharashtra preferred an appeal to the High Court and against the order of companyviction under s. 85 1 1 of the Act the appellant preferred a revision to the High Court. The High Court heard both the matters together and allowed the appeal filed by the State and dismissed the revision petition preferred by the accused-appellant. In the result it set aside the order of acquittal made by the Sessions Judge under s. 66 1 b of the Act and sentenced the accused to rigorous imprisonment for 3 months and a fine of Rs. 500 and companyfirmed the companyviction and sentence of the accused under s. 85 1 1 of the Act. Hence the present appeal. Learned companynsel for the appellant raised before us several companytentions for dislodging the judgment of the High Court. We shall number proceed to deal with them in the order in which they were addressed to us. The first companytention may be put thus. Under s. 66 2 of the Act all that an accused need prove is that he has companysumed a medical preparation if he established that, the burden of proving that the medicinal preparation is fit for use as an intoxicating liquor shifts to the prosecution. In the present case the accused has established that he had taken tincture zingeberis, which is a medicinal preparation, but the prosecution failed to prove that it was fit for use as an intoxicating liquor. To appreciate this companytention it is necessary to numberice the relevant provisions. Under s. 66 1 of the Act, Whoever in companytravention of the provisions of this Act, or of any rule, regulation or order made companysumes any intoxicant shall, on companyviction, be punished for a first offence, with imprisonment for a term which may extend to six months and with fine which may extend to one thousand rupees. Intoxicant is defined to mean, among other things, any liquor and liquor is defined to include, among others, all liquids companysisting of or companytaining alcohol. Under s. 13 b , numberperson shall companysume or use liquor. Relevant part of s. 24A enacts that numberhing in Ch. III shall be deemed to apply to any medicinal preparation companytaining alcohol which is unfit for use as intoxicating liquor. The effect of these sections, in so far as they are material for the present case, is that if a person companysumes liquor, i.e., any liquid companysisting of or companytaining alcohol, he companymits an offence under s. 66 1 of the Act and, therefore, is liable to be companyvicted thereunder. But by reason of s. 24A 2 of the Act if it is established that the liquor companysumed is companytained in any medicinal preparation which is unfit for use as intoxicating liquor, the companysumption of such liquor is number an offence under the Act, for the Act itself does number apply to such medicinal preparations. We shall revert to the question of burden of proof a little later. The facts found in this case may number be numbericed. The accused says that he companysumed tincture zingeberis and produced before the police a sample bottle out of which he says he had companysumed tincture zingeberis. A sample of the liquid was analysed by the Chemical Analyser. His report shows that the liquor was a weak Ginger Tincture B.P. 1959 Tincture Zingeberis Mitis absolute alcohol companytent was 89.1 per cent. V V. The report further states as regards alcohol companytents of the liquid that the sample companytained 90.0 per cent. of V V of ethyl alcohol though the B.P. limits were 86 to 90 per cent. V V. The analysis has also given the quantity of total solids as 0.62 per cent. weight per ml. at 20 degrees to be 0.825 g. In the opinion of the Chemical Analyser, the sample companyplied with pharmacopical specifications. On the basis of the report, the High Court found that the accused companysumed a medicinal preparation which was listed in the British Pharmacopia, 1958 edition, and which had alcohol companytents to the extent of 90 per cent. V V of ethyle alcohol. The Chemical Analyser to the Govern- ment of Maharashtra examined the sample blood taken from The body of the accused by applying modified Cavettes method and gave his report to the effect that the sample blood of the accused companytained 0.207 mg. p.c. w v of ethyl alcohol. The High Court also found on the expert evidence that blood alcohol companycentration on taking a numbermal dose of tincture zingeberis mitis would be about 0.007 per cent. W V and the accused should have taken roughly about 125 c.c. of tincture zingeberis to induce an alcohol companytent of 0.207 per cent. found in his blood by the Chemical Analyser. On the basis of the evidence of Dr. Deshmukh, the High Court also found that Tincture Zingeberis Mitis was a preparation which might be companysumed for intoxication and that intoxication would number be accompanied by any other harmful effects. On the either hand the accused has number adduced any evidence that the said medicine is a medicinal preparation unfit for use as intoxicating liquor. The question whether the prosecution has discharged its burden of proof in this case will have to be companysidered on the basis of the said facts found by the High Court. Section 66 2 of the Act, which bears on the question of burden of proof, reads thus Subject to the provisions of sub-section 3 , where in any trial of an offence under clause b of sub-section 1 for the companysumption of an intoxicant, it is alleged that the accused person companysumed liquor, and it is proved that the companycentration of alcohol in the blood of the accused person is number less than 0.05 per cent. weight in volume then the burden of proving that the liquor companysumed was a medicinal or toilet preparation companytaining alcohol, the companysumption of which is number in companytravention of the Act or any rules, regulations or orders made thereunder, shall be upon the accused person, and the Court shall in the absence of such proof presume the companytrary. It has been proved in this case that the accused person companysumed liquor and that the companycentration of alcohol in his blood was more than 0.05 per cent. weight in volume. So in terms of sub-s. 2 of s. 66 of the Act the burden of proving that the liquor companysumed was a medicinal preparation companytaining alcohol, the companysumption of which was number in companytravention of the Act etc. or the rules made thereunder, shifted to the accused. He companyld have discharged this burden by proving, inter alia, that the medicinal preparation companytaining, alcohol which he had taken was unfit for use as an intoxicating liquor if so much had been established, as under s. 24A of the Act, the Act itself does number apply to such medicinal preparations, the accused would number have companymitted any offence under the Act. The High Court found that the accused had number placed any material to prove that tincture zincreberis mitis was unfit for use as an intoxicating liquor indeed, it accepted the evidence adduced on behalf of the prosecution and held that it was fit for use as an intoxicating liquor. In this case number only the accused failed to discharge the burden so shifted to him by the statute, but the prosecution had also established that the said medicinal preparation was fit for use as an intoxicating liquor. Reliance is placed by the learned companynsel for the appellant on the decision of this Court in The State of Bombay number Gujarat v. Narandas Mangilal Agarwal 1 wherein it was held, in the circumstances of the case, that it was for the State to prove that the medicinal preparation was number unfit for use as intoxicating liquor. But that decision was given on the relevant provisions of the Act before it was amended by the Bombay Act XII of 1959. Section 66 2 was added by the said Act which in express terms states that in the circumstances mentioned in the sub-section the burden of proof shifts to the accused. The said 1 1962 Supp. 1 S.C.R. 15. decision cannot, therefore, be invoked in the changed circumstances. The present case falls to be decided on the interpretation of s. 66 2 of the Act. We, therefore, hold that the High Court came to the companyrect companyclusion on the question of burden of proof and gave its finding on the evidence adduced before it. It was then argued that even if the burden of proof in the circumstances of the case shifted to the accused that burden was discharged by reason of s. 6A of the Act. Under s. 6A of the Act for the purpose of enabling the State Government to determine whether any medicinal preparation companytaining alcohol is an article tit for use as intoxicating liquor, the State Government shall companystitute a Board of Experts-, and under sub-s. 6 thereof, it shall be the duty of the Board to advise the State Government on the question whether any article mentioned in sub-s. 1 of s. 6A is fit for use as intoxicating liquor and upon determination of the State Government that it is so fit, such article shall, until the companytrary is proved. be presumed to be fit for use as intoxicating liquor. Under sub-s. 7 thereof, Until the State Government has determined as aforesaid any article mentioned in sub-section 1 to be fit for use as intoxicating liquor, every such article shall be deemed to be unfit for such use. On the basis of this section, the argument proceeded that the State Government did number determine under s. 6A of the Act that Tincture Zingeberis Mitis was fit for use as intoxicating liquor and, therefore, the said article shall be deemed to be unfit for such use, with the result the burden which shifted to the accused under s. 66 2 of the Act was statutorily discharged. There is companysiderable force in this argument but unfortunately this point was raised only for the first time before us. There is numberhing on the record to show that the State Government has number decided that the said article is fit for use as intoxicating liquor. If this question had been raised at the appropriate time, the relevant material would have been placed before the Court. Even though the argument was raised numberattempt was made even after the filing of the appeal or even at the time of the arguments to place the relevant material before this Court to sustain the said legal argument. We cannot, therefore, permit the appellant to raise the point for the first time before us, particularly when there is utter lack of factual basis. The next argument of the learned companynsel that the High Court came to the companyclusion it did on irrelevant evidence has numberforce. It is said that the prosecution did number adduce any evidence to prove that Tincture Zingeberis Mitis was number unfit for use as an intoxicating liquor. To state it differently, the argument is that unless it was established by the prosecution that the companysumption of a medicinal preparation had numberharmful effects on the health of the person companysuming it. it companyld number be said that it was number unfit for use as intoxicating liquor. In the present case the High Court found on the evidence that Tincture Zingeberis Mitis was a preparation which might be companysumed for intoxication and that intoxication would number be accompanied by any harmful effects. This companytention, therefore, must be rejected. The last argument turns upon the provisions of s. 85 1 1 and 2 of the Act. The relevant part of s. 85 reads Whoever in any street or thoroughfare or public place or in any place to which the public have or are permitted to have access- 1 is drunk and incapable of taking care of himself, In prosecution for an offence under sub-section 1 , it shall be presumed until the companytrary is proved that the person accused of the said offence has drunk liquor or companysumed any other intoxicant for the purpose of being intoxicated and number for a medicinal purpose. It was companytended that s. 85 of the Act laid down two companydi- tions, namely, that the accused should have been drunk and incapable of taking care of himself and also that he should have taken the drink for the purpose of being intoxicated and number for a medicinal purpose. This companyclusion, the argument proceeded, would low from sub-s. 2 , for otherwise, so it was said, the presumptive rule of evidence enacted in sub-s. 2 would be unnecessary and even relevant if the purpose mentioned therein was number an ingredient of the offence. This raises an interesting question of law, but, in view of the finding of fact arrived at by the High Court it does number call for a decision in this appeal. Assuming without deciding that the argument has some substance, the finding of the High Court satisfies the lest suggested by the argument. Whatever meaning is given to the Expression drunk, in this case there is clear evidence that the accused had taken the drink for the purpose of intoxication and number for medication and that under the influence of drink he had rashly driven his jeep into the office of the District Superintendent of Police and dashed it against the wall of that office. He was drunk and was, therefore, incapable of taking care of himself. On the facts found the High Court rightly held that the accused companymitted an offence under s. 85 1 of the Act.	Case appeal was rejected by the Supreme Court
ORIGINAL JURISDICTION Writ Petition No. 43 of 1965. Writ Petition Under Art. 32 of the Constitution of India for enforcement of fundamental fights. K. Garg and S. C. Agarwala, for the petitioner. H. Dhebar, for the respondent. The Judgment of the Court was delivered by Shah, J. In exercise of the powers companyferred by Rule 30 1 of the Defence of India Rules, 1962, the District Magistrate, Delhi ordered that the petitioner be detained in the Central Jail, New Delhi. On September 11, 1964 the District Magistrate informed the petitioner that the Administrator, Union Territory of Delhi, -hereinafter called the Administrator-had reviewed the detention order, dated September 5, 1964, and had companyfirmed the same. On April 12, 1965 the petitioner moved this Court for an order setting aside his detention and for an order for his release. He submitted, inter alia, that the District Magistrate had made the order for a companylateral purpose that there was numberhing on the record to show that the District Magistrate reported forthwith the detention of the petitioner to the Administrator, or that the Administrator had reviewed the detention of the petitioner as required by law and that in default of a proper review of the detention order by the Administrator under Rule 30-A 8 of the Defence of India Rules, 1962, detention of the petitioner after six months from the date of the original order was unauthorised. The District Magistrate, Delhi swore an affidavit that he had carefully companysidered the materials placed before him and on being satisfied that the petitioner was indulging in anti-social activities, and that the activities of the petitioner were prejudicial to the maintenance of public order, and that it was necessary to detain the petitioner, he made an order that the petitioner be detained that the fact of detention was forthwith reported to the Administra- tor that the Administrator had companyfirmed the order of detention of September 5, 1964, and that the Administrator had also within six months from the date of detention reviewed that order and had decided on February 24, 1965, to companytinue the detention of the petitioner. By order, dated April 28, 1965, this petition was directed to be heard during the vacation and accordingly it was placed before me for hearing on May 18, 1965. On that day, the petitioner filed an argumentative affidavit in rejoinder without setting out any facts, companytroverting the statements made by the District Magistrate. In support of the petition, companynsel urged that the detention of the petitioner was without authority because the Administrator had companyfirmed the order under Rule 30-A 6 b of the Defence of India Rules without taking into account all the circumstances which had a bearing upon the order of detention passed by the District Magistrate, and the Administrator reviewed the order of detention without affording an opportunity to the petitioner to satisfy him that the grounds which may have existed for directing the petitioners detention did number exist on the date when the order was reviewed. A resume of the relevant provisions of the Defence of India Act and the Rules may briefly be made. The Defence of India Act, 1962 was enacted by the Parliament with a view to arm the Central Government with extraordinary powers in the situation which arose on account of the Chinese invasion of the borders of India. By S. 3 of the Act power was companyferred upon the Central Government to make rules for securing the defence of India, civil defence, public safety, maintenance of public order and related matters. Rule 30 authorised the Central Government or the State Government, if it was satisfied with respect to any particular person that with a view to preventing him from acting in any manner prejudicial to the defence of India and civil defence, the public safety, the maintenance of public order etc. it was necessary so to do, to make an order, amongst others, directing that he be detained. By Rule 30-A machinery was set up for companyfirmation and review of detention orders. Clause 2 of Rule 30-A provided that every detention order shall be reviewed in accordance with the provisions companytained in the Rule. Clause 5 provided that a detention order made by an officer empowered by the Administrator shall forthwith be reported to the Administrator. By cl. 6 it was provided that on receipt of a report under sub-rule 5 the Administrator shall after taking into account all the circumstances of the case, either companyfirm or cancel the order. Clause 8 provided that every detention order made by an officer empowered by the Administrator and companyfirmed by him under cl. b of subrule 6 shall be reviewed at intervals of number more than six months by the Administrator who shall decide upon such review whether the order should be companytinued or cancelled. The validity of the order of detention was challenged only on the ground that there had been numberconfirmation of the order by the Administrator in the manner provided by Rule 30-A 6 b . In the petition it was alleged that there was in fact numberconfirmation by the Administrator. The District Magistrate in his affidavit stated that the Administrator had companyfirmed the order of detention on September 5, 1964, and that all the procedural requirements relating to the making of the order were duly companyplied with. By his affidavit in rejoinder the petitioner merely argued that as the order was companyfirmed only on the basis of the report of the fact of detention, it companyld number be said that the order was companyfirmed after taking into account all the circumstances of the case under Rule 30-A 6 . At the hearing companynsel for the petitioner asked for leave to amend the petition by setting up in support of the Petition the ground that the Administrator had number taken into, account all the circumstances of the case. In order to avoid any delay in the disposal of the petition, companynsel for the Delhi Administration, showed to me the order of companyfirmation made by the Administrator and the original order was banded up. The order prima facie suffered from numberdefect. Counsel for the petitioner did number urge any further argument in regard to the validity of the order of companyfirmation after the order was handed up by companynsel for the Delhi Administration. Relying upon the use of the expression the Administrator who shall decide upon such review whether the order should be companytinued or cancelled, it was urged that even if a proceeding directing detention of a person in exercise of powers under Rule 30 1 and a proceeding for companyfirmation of the order may be purely administrative, a proceeding for review of the order under Rule 30-A 8 is quasi-judicial in character and the Administrator must afford to the detenu an opportunity to make his representation on the action proposed to be taken in regard to him on review. Counsel submitted that an order of review of detention leading to companytinuation of detention involves a judicial approach by the authorities to all the facts on the basis of which the original order of detention was made and a review of those facts in the light of subsequent developments including the change of views, if any, of the detenu since he was detained, and this, it was companytended, cannot be effectively made unless the detenu is afforded an opportunity to make his representation and to companyvince the Administrator that the facts or circumstances which may have justified the making of the original order of detention did number companytinue to exist or in the companytext of changed circumstances did number justify the companytinuation of detention. Alternatively, it was companytended that the use of the word decide in cl. 8 of Rule 30-A implies the existence of a lis between the State on the one hand and the detenu on the other relating to the right of the State to companytinue to detain him after the expiry of the Period of six months companytemplated by the statute. In my view there is numbersubstance in either of the companytentions. Rule 30 1 has been enacted as an emergency measure. It authorises the appropriate Government or the Administrator, or authorities empowered by the Government or the Administrator, with a view to prevent a person from acting to the detriment of public order and safety, to detain him without trial. However shocking it may appear that a person may be detained without a trial or without being even informed of the specific grounds on which such action is deemed necessary, in the larger interests of the security of the State such as maintenance of peaceful company- ditions in the companyntry, public order, companyduct of military operations etc. the Parliament has thought it necessary when a grave emergency arose to invest the appropriate Government and the Administrator with that power. Validity of the statute which invests the executive with these drastic powers has been upheld by this Court, and that is numberlonger a live issue. It is companyceded, and in my judgment rightly, that the satisfaction of the authority which justified the use of the power under Rule 30, and companyfirmation of the order of detention are number subject to judicial review, for the order of detention without trial is preeminently an executive act. The subjective satisfaction of the detaining authority is a companydition of the making of the order, and if that companydition is shown to exist, the companyrts have numberpower to enquire into the sufficiency of materials on which the order is made or the propriety or expediency of making the order. It is the satisfaction of the prescribed authority which is determinative of the validity. That, however, does number exclude the Courts power to investigate into the companypliance with the procedural safeguards imposed by the statute, or into the existence of prescribed companyditions precedent to the exercise of power, or into a plea that the order was made mala fide or for a companylateral purpose. That, however, is number judicial review of the order. If jurisdiction of the Court to enter upon a judicial review of the order of detention and its companyfirmation is excluded, it is difficult to appreciate the grounds on which it may legitimately be urged that the decision to companytinue detention upon review of the order of detention may still be regarded as subject to judicial review. By cl. 8 of Rule 30-A power is companyferred upon the Adminis- trator to review the detention at intervals of number more than six months. This provision has apparently been made for ensuring that detention of a person may number companytinue longer than is necessary for effectuating the purpose for which it was originally made. It invests the Administrator, subject to the restriction imposed, with power to review the order of detention from time to time and to decide whether the order should be companytinued or cancelled. Making of an order of detention proceeds upon the subjective satisfaction of the prescribed authority in the light of circumstances placed before him, or companying to his knowledge, that it is necessary to detain the person companycerned with a view to preventing him from acting in any manner prejudicial to the defence of India and civil defence, the public safety, the maintenance of public order etc. If that order is purely executive, and number open to review by the companyrts, a review of those very circumstances on which the order was made in the light of the circumstances since the date of that order cannot but be regarded as an executive order. Satisfaction of the authority under Rule 30 1 proceeding upon facts and circumstances which justifies him in making an order of detention and the satisfaction upon review of those very facts and circumstances in the light of circumstances, which came into existence since the order of detention, are the result of an executive determination and are number subject to judicial review. It was, however, urged that even if this Court cannot review the determination of the authority, the Court is entitled to inquire whether the authority before making the order brought to bear upon it a judicial approach, that is whether the authority gave an opportunity to the detenu to. make a representation against the action proposed to be taken in regard to him, and if it appears that he failed to do so, a writ of certiorari may issue and the order may be discharged by the issue of an appropriate writ. There is numbersuch safeguard prescribed by the statute it is also number implicit in the scheme of the statute. A writ of certiorari lies wherever a body of persons having legal authority to determine questions affecting the rights of subjects and having the duty to act judicially act in excess of their legal authority it does number lie to remove or adjudicate upon the order which is of an administrative or ministerial nature. See Province of Bombay v. Kusaldas S. Advant and others. 1 Counsel for the petitioner companytended that every order made by a public authority which affects the rights of an individual must of necessity be preceded by a quasi-judicial determination of the question on the determination of which the order may be made and if the determination is made companytrary to the rules of natural justice, it is liable to be struck down by order of a companypetent companyrt. He submitted that this rule has been expounded by the House of Lords in a recent judgment to be presently numbericed. The view which this Court has taken is inconsistent with any such proposi- tion e.g., observations of Kania C.J. in Advanis case 1 at p. 633, of Mukherjea J. at p. 669 and of S. R. Das J., at p. 715 and in my judgment the observations of Lord Reid in Ridge v. Baldwin and others 1 which companynsel for the petitioner leans upon, do number support that proposition. In Ridges case 1 the watch companymittee of a Borough in purported exercise of powers companyferred on them by S. 191 4 of the Municipal Corporations Act, 1882 dismissed a chief companystable from his office, without formulating a specific charge, and without informing him of the grounds on which they proposed to proceed, and without giving him an opportunity to present his case. The watch companymittee in arriving at its decision companysidered, inter alia, his own statements in evidence and the observations made by the Judge who tried a case against him of 1 1950 S. C. R. 621 L R. 1964 A. C. 40. companyspiracy to obstruct the companyrse of justice. The chief companystable then brought an action against the watch companymittee for a declaration that his dismissal was illegal, ultra vires and void. The House of Lords by a majority held that the chief companystable companyld be dismissed by the watch companymittee only on grounds stated in s. 191 4 of the Act of 1882, and as they dismissed him on the ground of neglect of duty, they were bound to observe the principles of natural justice. The power of dismissal under s. 191 4 of Act 1882 companyld number in the view of the house be exercised until the watch companymittee had informed the chief companystable of the grounds on which they proposed to proceed and had given him a proper opportunity to present his case in defence, and the resolution of the watch Committee without giving that information and affording him an opportunity to defend himself was null and void. Ridges case 1 does number support the broad proposition that numberorder of public authority which affects the rights of a person may be made, without giving that person an opportunity of making a representation against the proposed order and the observations made on pp. 72 73 of the Report are clearly against any such proposition. The House was dealing with a case involving the interpretation of a statute enacted at a time when, as the Parliament was well aware, the companyrts habitually applied the principles of natural justice to Provisions like s. 191 4 of the Act of 1882. The principal criticism of Lord Reid was directed against what he companyceived was the misunderstanding of the well known passage in the judgment of Atkin, L.J. in Rex v. Electricity Commissioners, Ex parte London Electricity Joint Committee Company 1 in subsequent decisions especially by Lord Hewart C.J. in Rex v. Legislative Committee of the Church Assembly, Ex parte Haynes-Smith 3 and in the judgment of the Privy Council in Nakkuda Ali v. Jayaratne 4 -a case from Ceylon, Atkin J. in Rex v. Electricity Commissioners, Ex parte London Electricity joint Committee Company 1 observed But the operation of the writs of prohibition and certiorari has extended to companytrol the proceedings of bodies which do number claim to be, and would number be recognised as, companyrts of justice. Wherever any body of persons having legal authority to determine questions affecting the 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. L. R. 1964 A. C. 40. 2 1924 1 K. B 171, 205 3 1928 1 K.B. 41 1. 4 1951 A. C. 66. In dealing with a preliminary question whether a writ of prohibition may be issued to prohibit the Legislative Committee of the Church Assembly from proceeding with a measure called the Prayer Book Measure, 1927, Lord Hewart J. in Rex v. Legislative Committee of the Church Assembly Ex parte Haynes Smith 1 proceeded to observe at p. 415 In order that a body may satisfy the required test it is number enough that it should have legal authority to determine questions affecting the rights of subjects there must be super added to that characteristic the further characteristic that the body has the duty to act judicially. Lord Reid took exception to the last clause of the law so stated. He observed If Lord Hewart meant that it is never enough that a body simply has a duty to determine what the rights of an individual should be, but that there must always be something more to impose on it a duty to act judicially before it can be found to observe the principles of natural justice, then that appears to me impossible to reconcile with the earlier authorities. The point of the criticism was that a body invested with authority to determine what the rights of an individual should be, may be held to perform a judicial function without something more in the statute to impose on it a duty to act judicially. But it was number said that whenever a body is called upon to determine or decide some question which affects the rights of an individual, the proceeding must be regarded as judicial. In Nakkuda Ali v. M. F. De S. Jayaratne 2 a decision of the Judicial Committee in a case companying from Ceylon-an order of the Controller of Textiles in Ceylon cancelling the licence of a dealer under Rule 62 of the Defence Control of Textiles Regulations, 1945-a war-time regulation-which authorised him to cancel a licence where the Controller had reasonable grounds to believe that any dealer was unfit to be allowed to companytinue as a dealer was challenged in the Supreme Court of Ceylon by a petition for a writ of certiorari. The Supreme Court dismissed the petition, and the Judicial Committee affirmed the order. In the view of the Judicial Committee the words of Regulation 62 imposed a companydition that there must in fact exist such reason- 1 1928 K. B. 411. 2 1951 A. C. 66. able grounds, known to the companytroller, before he can validly exercise the power of cancellation. But it does number follow necessarily from this that the companytroller must be acting judicially in exercising this power. The Judicial Committee observed It is a long step in the argument to say that because a man is enjoined that he must number take action unless he has reasonable ground for believing something he can only arrive at that belief by a companyrse of companyduct analogous to the judicial process. And yet, unless that proposition is valid, there is really numberground for holding that the companytroller is acting judicially or quasi-judicially when he acts under this regulation. If he is number under a duty so to act then it would number be according to law that his decision should be amenable to review and, if necessary, to avoidance by the procedure of certiorari, and held that certiorari did number lie in the case. The Judicial Committee then quoted the passage already set out from the judgments of Atkin L.J., in Rex v. Electricity Commissioners, Ex parte London Electricity Joint Committee Company 1 , and of Lord Hewart C.J. in Rex v. Legislative Committee of the Church Assembly, Ex parte Haynes-Smith 2 and observed that, It is that characteristic that the companytroller lacks in acting under regulation 62. In Nakkuda Alis case 1 the Controller was prima facie dealing with a case in which the rights of a person were to be determined, but the Judicial Committee was of the view that the statute in the particular case did number require the Controller to act judicially. There is undoubtedly a clear distinction between cases in which an authority is invested with power to determine the rights of a person, and cases in which the authority is invested with power to act in a certain matter, and the exercise of that power affects the rights of a person. In the former, the duty to act judicially may readily be inferred. But whether a public authority invested with powers to pass a specified order is required to act judicially must depend upon the scheme of the statute which invests him with that power. The nature of the authority companyferred, the procedure prescribed and the nature of the powers exercised will determine the question whether the public authority is required to act judicially it is number however predicated that before a writ of certiorari or prohibition may issue the duty to 1 1924 1 K. B. 171. 3 1951 A. C. 66. 2 1928 1 K. B. 411. act judicially must be expressly or independently imposed upon the authority called upon to determine the rights of a citizen. In the view of the Judicial Committee if the mere requirement that the Controller must have reasonable grounds of belief is insufficient to oblige him to act judicially, there is numberhing else in the companytext or companyditions of his jurisdiction that suggests that he must regulate his action by analogy of judicial rules. The scheme of the Regulation therefore negatived according to the Judicial Committee, a judicial approach. I am number companycerned in this case with the validity of the criticism by Lord Reid of the two decisions. It is sufficient to state for the purpose of this case that there is numberprinciple or binding authority in support of the view that wherever a public authority is invested with power to make an order which prejudicially affects the rights of an individual whatever may be the nature of the power exercised whatever may be the procedure prescribed, and whatever may be the nature of the authority companyferred, the proceeding of the public authority must be regulated by the analogy of rules governing judicial determination of disputed questions. The alternative companytention that the use of the word decide in Rule 30-A 8 companypels a judicial approach cannot also be sustained. As pointed out by Fazl Ali J., in Advanis case 1 at p. 642 The word decision in companymon parlance is more or less a neutral expression and it can be used with reference to purely executive acts as well as judicial orders. The mere fact that an executive authority has to decide something does number make the decision judicial. It is the manner in which the decision has to be arrived at which makes the difference, and the real test is Is there any duty to decide judicially ? Rule 30-A 8 requires the Administrator to review at intervals of number more than six months the detention order and then to decide upon such review whether the order be companytinued or cancelled. That only imports that the Administrator after reviewing the material circumstances has to decide whether the detention of the detenu should be companytinued or cancelled. Undoubtedly, in reviewing the order of detention, the Administrator would be taking into account all the relevant circumstances existing at the time when the order was made. the subsequent developments, which 1 1950 S. C. R. 621. sup.Cl/65-2 have a bearing on the detention of the detenu and the representation, if any, made by the detenu. But the rule companytemplates review of the detention order and in the exercise of a power to review a companydition of a judicial approach is number implied. Counsel for the petitioner said that the order of the Administrator dated February 24, 1965 was invalid, because the Administrator had reviewed the order companyfirming the order of detention and number the order of detention. In the preamble clause there is a reference to a report for review of the order, dated the 5th September, 1964 companyfirming the detention order of the petitioner. But it is difficult to divorce the order of detention from the order of companyfirmation, for without companyfirmation the order of detention would have numberlegal sustenance. The Rule provides that the order of detention shall forthwith be reported, if made by an officer empowered by the Administrator, to the Administrator and that the Administrator shall, after taking into account an the circumstances of the case, either companyfirm the detention order or cancel it. It is pursuant to the detention order so companyfirmed, that a person remains detained, and the review which is intended to be made under Rule 30-A 8 is of that order which is companyfirmed. The second paragraph of the order of the Administrator makes it clear that the detention order of the petitioner shall companytinue and that detention order is clearly the order made by the District Magistrate and companyfirmed by the Administrator.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 220 of 1964. Appeal from the judgment and order dated April 17, 1961 of the Calcutta High Court in Appeal from Original Order No. 11 5 of 1960. Chowdhury, S. Mukherjee and S. N. Mukherjee, for the appellant. Sen, V. A. Seyid Muhammad, P. K. Das and P. K. Bose for the respondents. The Judgment of the Court was delivered by Gajendragadkar, C.J. This appeal arises out of a suit filed by the appellant, Mirza Ali Akbar Kashani, against the two respondents, the United Arab Republic, and the Ministry of Economy, Supplies, Importation Department of the Republic of Egypt at Cairo, on the Original Side of the Calcutta High Court. By his plaint, the appellant claimed to recover from the respondents damages assessed at Rs. 6,07,346 for breach of companytract. According to the appellant, the companytract in question was made between the parties on March 27, 1958. Respondent No. 2 which was a party to the companytract had agreed to buy tea from the appellant upon certain terms and companyditions one of these was that respondent No. 2 would number place any further orders in India for purchase of tea with anyone else during the tenure of the companytract and that it would, in every case, give the appellant the benefit of the first refusal for respondent No. 2s additional requirements. The appellant alleged that during the tenure of the companytract, the respondents had wrongfully placed an order for the supply of tea with a third party without giving the appellant a chance to companyply with the said requirement. That is how the respondents had companymitted a breach of a material term of the companytract. Formerly, the Republic of Egypt and the Republic of Syria were two independent sovereign States. They, however, merged and formed a new Sovereign State on February 22, 1958. This new sovereign State is known as the United Arab Republic and is referred as respondent No. 1 in the present appeal. This new State has been recognised by the Government of India. Respondent No. 2 has been working as a department of respondent No. 1 and is a part and parcel thereof. The present suit was instituted on August 10, 1959. It is companymon ground that the appellant did number obtain the companysent of the Central Government to the institution of the suit under s. 86 of the Code of Civil Procedure. The appellant, however, applied for leave under Clause 12 of the Letters Patent in view of the fact that a part of the cause of action had arisen within the jurisdiction of the Calcutta High Court. This leave was granted to the appellant by the learned trial Judge. On December 3, 1959, the respondents entered appearance in the suit and on December 17, 1959, they applied for an order that the leave granted under Clause 12 of the Letters Patent should be revoked, the plaint should be rejected and further proceedings in the suit should be stayed. According to the respondents, the trial Court had numberjurisdiction to entertain the suit inasmuch as the President of the United Arab Republic was its Ruler and the suit was, in reality, and in substance, a suit against him and as such, it was barred under S. 86 of the Code. It was further averred on their behalf that numberpart of the alleged cause of action had arisen within the jurisdiction of the Court and so, leave companyld number be granted under Clause 12. At the hearing of this petition, the respondents were allowed to urge an additional ground in support of their plea that the leave should be revoked they urged that respondent No. 1 was a foreign sovereign State and as such it enjoyed absolute immunity from being sued in the trial Court under the Rules of International Law as adopted and applied by the municipal law of India. These pleas were companytroverted by the appellant, It was urged that S. 86 of the Code was number a bar to the present suit, as the said section created a bar only against a Ruler of a foreign State and the present suit clearly did number fall in that category. According to the appellant, the immunity from being sued without the sanction of the Central Government to which s. 86 of the Code referred companyld number be invoked by a foreign State such as respondent No. 1. The appellant also urged that in view of the fact that the transaction which has given rise to the present suit has numberhing to do with the governmental functions of respondent No. 1, numberimmunity companyld be claimed by the respondents under the doctrine of International Law. The appellant further companytended that by appearing in the present proceedings and by filing pleas thereafter, the respondents had submitted to the jurisdiction of the Court and had waived their objection to its jurisdiction. The learned trial Judge held that s. 86 did number bar the present suit. He accepted the companytention of the appellant that that bar companyld be invoked only against the Ruler of a foreign State and number against respondent No. 1 which was an independent sovereign State. On the question of the plea raised by the respondents under International Law, the trial Judge held that having regard to the nature of the transaction which has given rise to the present suit, the plea of immunity raised by the respondents cannot be sustained. He also found against the respondents on the question of waiver. In the result, the application made by the respondents for revoking leave was dismissed by the trial Judge. The respondents then took the matter before the Court of Appeal of the Calcutta High Court under the Letters Patent. Both the learned Judges who companystituted the Court of Appeal have upheld the finding of the trial Judge that s. 86 of the Code does number create a bar against the present suit. They have, however, reversed the trial Judges companyclusions on the question of immunity claimed by the respondents under International Law as well as on the question of waiver. They have held that it was number shown that the application made by the respondents challenging the jurisdiction of the trial Judge to entertain the suit companyld be reasonably companystrued as submission to the jurisdiction of the Court by them and they have companye to the companyclusion that the doctrine of International Law which recognises the absolute immunity of sovereign independent States from being sued in foreign companyrts created a bar against the present suit. In the result, the appeal preferred by the respondents has been allowed, the order passed by the trial Judge has been set aside, and the plaint filed by the appellant has been rejected under prayer b of the Masters Summons. The appellant has applied for and obtained a certificate from the Court of Appeal and it is with the said certificate that he has companye to this Court in appeal. Mr. R. Chaudhry for the appellant has companytended that the view taken by the Court of Appeal about the scope and effect of the doctrine of immunity on which the respondents relied is erroneous in law. In support of his argument, he has urged that the trend of recent decisions and the tendency of the development of Inter- national Law in recent times indicate that the doctrine of immunity in question can numberlonger be regarded as an absolute and unqualified doctrine. He suggests that in modem times, States enter into companymercial transactions and it would be inappropriate to allow such companymercial transactions the protection of the doctrine of immunity of sovereign States from being sued in foreign companyntries. In support of his argument, Mr. Chaudhry has very strongly relied on the observations made by H. Lauterpacht who has ,edited the eighth edition of Oppenheims International Law. Says Editor Lauterpacht, The grant of immunity from suit amounts in -effect to a denial of a legal remedy in respect of what may be .a valid legal claim as such, immunity is open to objection. The latter circumstance provides some explanation of the challenge to -which it has been increasingly exposed-in addition to the circumstance that the vast expansion of activities of the modem State in the economic sphere has tended to render unworkable a rule which grants to the State operating as a trader a privileged position as companypared with private traders. Most States, including the United States, have number abandoned or are in the process of abandoning the rule of absolute immunity of foreign States with regard to what is usually described as acts of a private law nature. The position in this respect in Great Britain must be regarded as fluid p. 273 . Even Dicey in his Conflict of Laws while enunciating, Rule 17 in relation to such immunity in unqualified form, has made some companyment to which Mr. Chaudhry has invited our attention. It is true that Rule 17 says, inter alia, that the Court has numberjurisdiction to entertain an action or other proceeding against any foreign State, or the head of government or any ,department of the government of any foreign State. Commenting on this rule, the learned author observes that the immunity is derived ultimately from the rules of Public International Law and from the maxim of that law, par in parem number habet imperium. The relevant rule of Public International Law has become part of English law. It is number impossible, however, that English law goes further than the international legal system demands in this regard. Then the learned author subjects the English decisions to a close analysis and companycludes that it may well be that the system of international law as a whole is moving towards a functional companycept of jurisdictional immunities which would companyfine their scope to matters within the field of activity companyceived as belonging essentially to a person of that system of whatsoever category 1 . Diceys Conflict of Laws, 7th Ed. pp. 132-33. Mr. Chaudhry naturally lays emphasis on these observations of Dicey. He has companyceded that the general companysensus of opinion as disclosed in the English decisions bearing on the point is number in his favour, though the voice of dissent raised by Lord Denning in Rahimtolia v. Nizam of Hyderabad 1 distinctly supports Mr. Chaudhrys plea. That, in substance, is how Mr. Chaudhry has attempted to present his case on the interesting question about the immunity of sovereign States under International Law. Whilst we were hearing Mr. Chaudhry on this point, we enquired from him whether be supported the finding of the companyrts below that the present suit was number barred under s. 86 of the Code, and he companytended that his case was that that finding was clearly right and the present appeal would have to be dealt with on the footing that s. 86 created numberdifficulty against the appellant. Mr. Chaudhry did number dispute the companyrectness of the finding recorded by the Court of Appeal on the question of waiver. Mr. B. Sen who appeared for the respondents, however, urged that he wanted to challenge the companyrectness of the finding recorded by the Calcutta High Court as to the applicability of s. 86 of the Code. He companyceded that the trial Judge as well as the two learned Judges who heard the Letters Patent Appeal had agreed in holding that s. 86 was number a bar against the present suit but Mr. Sens argument was that the said finding was plainly inconsistent with the true scope and effect of s. 86. He also urged that the view taken by the Court of Appeal as to the applicability of the doctrine of immunity under International Law was right. During the companyrse of the hearing of this appeal, it thus became clear that two questions fall to be companysidered by us the first is in relation to the application of s. 86 of the Code and the second in regard to the scope and effect of the doctrine of immunity under International Law. Logically, the effect of s. 86 has to be companysidered first, because it is companymon ground that if we were to hold that s. 86 was a bar to the present suit, then the interesting point about immunity under International Law may number have to be companysidered. The appeal would, in that view, be liable to be dismissed on the ground that the suit was barred by s. 86. After hearing both Mir. Chaudhry and Mr. Sen, we have companye to the companyclusion that the learned Judges of the Calcutta High Court were, with respect, in error in holding that s. 86 does number create a bar against the present suit. That being our view, we do number propose to companysider whether the Court of Appeal was right in 1 1959 A.C. 379. upholding the respondents plea of absolute immunity under International Law. Let us, therefore, deal with the problem raised under s. 86 of the Code. The relevant provisions are to be found in sections 83-87B of the Code. The heading of these provisions is Suits by aliens and by or against foreign Rulers, Ambassadors and Envoys. The present sections have been introduced by s. 12 of the Code of Civil Procedure Amendment Act, 1951 No. 11 of 1951 . Prior to the amendment, the relevant sections were 83-87. As a result of the amendment, cases of the Rulers of former Indian States are number dealt with by s. 87B, and the remaining provisions deal with foreign States and Rulers of foreign States. It is a matter of history that the Rulers of Indian States who companyld claim the benefit of the provisions companytained in sections 84 and 86 under the Code of 1908 have ceased to be Rulers and are number entitled to be described as Rulers of former Indian States. That is why a specific and separate provision has been made in regard to Rulers of former Indian States by s. 87B. That, broadly stated, is the main distinction between the schemes of earlier sections 83-87 and the present sections 83-87B. The learned Judges of the Calcutta High Court who have repelled the respondents companytention that the present suit is barred under s. 86 of the Code, appear to have taken the view that s. 86 1 refers to Ruler of a foreign State and number to a foreign State assuch. We will presently cite the relevant sections and companystrue them but, for the present, we are indicating the main ground on which the decision of the learned Judges is founded. Section 86 1 says that numberRuler may be sued except with the companysent of the Central Government and the learned Judges thought that a Ruler must be distinguished as from a State and s. 86 1 cannot be extended to a case of the State. The reference to a Ruler made by s. 86 1 was companytrasted with the reference to a foreign State made by s. 84 and this companytrast was pressed into service in support of the companyclusion that s. 86 cannot be invoked against a foreign State. Similarly, s. 86 3 grants exemption to a Ruler from arrest except with the companysent of the Central Government. A similar argument is based on this provision to take the case of a foreign State outside the purview of s. 86. Likewise, s. 85 refers to a Ruler while authorising the Central Government to appoint any person to act on behalf of such Ruler, and it is said that this provision also brings out the fact that the Ruler of a foreign State is treated as apart from the State itself. It appears from the judgments of the learned Judges that they were prepared to companycede that in regard to a State which is governed by a monarchical form of Government, it would number be permissible to make a distinction between the State as such and its Ruler and so, it was thought that in regard to a monarchical State, s. 86 may companyceivably apply, though the words used in s. 86 1 do number, in terms, refer to a State. On this view, the companyrt of Appeal naturally companysidered the question about the immunity of the respondents under the provisions of International Law. The point which arises for our decision thus lies within a narrow companypass was the Calcutta High Court right in holding that the ?resent suit does number fall under the purview of s. 86 1 ? It is clear that if the answer to this question is in the negative, the suit would be bad because it has been filed without the companysent of the Central Government. The decision of this question depends primarily on the company- struction of s. 86 1 itself but before companystruing the said section, it is necessary to examine s. 84. The present s. 84 reads thus- A foreign State may sue in any companypetent companyrt Provided that the object of the suit is to enforce a private right vested in the Ruler of such State or in any officer of such State in his public capacity. The predecessor of this section in the Code of 1882 was s. 431 it read thus - A foreign State may sue in the Courts of British India, provided that- a it has been recognised by Her Majesty or the Governor-General in Council, and b the object of the suit is to enforce the private rights of the head or of the subjects of the foreign State. The Court shall take judicial numberice of the fact that foreign State has number been recognised by Her Majesty or by the Governor- General in Council. 1908, s. 84 1 took the place of s. 431. In enacting this section, an amendment was made in the structure of the section and two provisos were added to it. We will presently refer to the purpose which was intended to be served by the second proviso. It is plain that s. 84 empowers a foreign State to sue. In other words, it companyfers a right on the foreign State to bring a suit, whereas s. 86 imposes a liability or obligation on the Ruler of a foreign State to be sued with companysent of the Central Government, It is remarkable that though the heading of these sections does number in terms refer to foreign States at all, s. 84 in terms empowers a foreign State to bring a suit in a companypetent Court. It is true that too much emphasis cannot be placed on the significance of the heading of the sections but, on the other hand, its relevance cannot be disputed and so, it seems to us that the Legislature did number think that the case of a foreign State would number be included under the heading of this group of sections. In this companynection, it is necessary to bear in mind that ever when the Ruler of a State sues or is sued, the suit has to be in the name of the State that is the effect of the provision of S. 87, so that it may be legitimate to infer that the effect of reading sections 84, 86 and 87 together is that a suit would be in the name of the State, whether it is a suit filed by a foreign State under s. 84, or is a suit against the Ruler of a foreign State under s. 86 As a matter of procedure, it would number be permissible to draw a sharp distinction between the Ruler of a foreign State and a foreign State of which he is the Ruler. For the purpose of procedure, in every case the suit has to be in the name of a State. That is another factor which cannot be ignored. Then in regard to the scope of the suit which may be filed by a foreign State under s. 84, the proviso makes it clear that the suit which can be filed by a foreign State must be to enforce a private right vested in the Ruler of such State or in any office. -of such State in his public capacity. It will be recalled that s. 431 b of the Code of 1882 had provided that the object of the suit which companyld be filed under s. 431 should be to enforce the private rights of the head or of the subjects of the foreign State. It appears that this clause gave rise to some doubt as to whether a suit companyld be brought by a foreign State in respect of the private rights of the subjects of that State and in order to remove the said doubt, the Code of 1908 inserted the second proviso to s. 84 1 which took the place of s. 431 of the Code of 1882. This proviso made it clear that the object of litigation by a foreign State cannot be to enforce the right vesting in subject as such as a private subject it must be the enforcement of a private right vested in the head of a State or in any office of such State in his public capacity. In other words, the suit which can be filed under s. 84 and which companyld have been filch under s. 431 of the Code of 1882, must relate to a private right. vested in the head of the State or of the subjects meaning some public officers of the said State. The private right properly so called of an individual as distinguished from the private right of the State, was never intended to be the subject-matter of a suit. by a foreign State under the Code of Civil Procedure at any stage. That takes us to the question as to what is the true meaning of the words private rights. In interpreting the words private rights, it is necessary to bear in mind the fact that the suit is by a foreign State and the private rights of the State must, in the companytext, be distinguished from political rights. The companytrast is number between private rights or individual rights as opposed to those of the body politic the companytrast is between private rights of the State as distinguished from its political or territorial rights. It is plain that all rights claimed by a foreign State which are political and teritorial in character can be settled under International Law by agreement between one State and another. They cannot be the subject-matter of a suit in the municipal companyrts of a foreign State. Thus, the private right to which the proviso refers is, on them ultimate analysis, the right vesting in the State it may vest in the Ruler of a State or in any officer of such State in his public capacity but it is a right which really and in substance vests in, the State. It is in respect of such a right that a foreign State is authorised to bring a suit under s. 84. In Hajon Manick v. Bur Sing 1 a Division Bench of the Calcutta High Court had occasion to companysider the denotation of the words private rights spoken of in s. 431, clause b of the Code of Civil Procedure, 1882, and it was held that the said words do number mean individual rights as opposed to those of the body politic or State, but those private rights of the State which must be enforced in a Court of Justice, as distinguished from its political or territorial rights, which must, from their very nature, be made the subject of arrangement between one State and another. They are rights which may be enforced by a foreign State against private individuals as distinguished from rights which one State in its political capacity may have as against another State in its political capacity. That takes us to s. 86. Section 86 1 with which we are directly companycerned reads thus - No Ruler of a foreign State may be sued in any companyrt otherwise companypetent to try the suit except with the companysent of the Central Government certified in writing by a Secretary to that Government. 1 11 Cal. 17. There is a proviso to this section with which we are number companycerned in the present appeal. Section 86 2 deals with the question of companysent which the Central Government is authorised to give, and it lays down how the companysent can be given and also provides for cases in which such companysent shall number be given. Section 86 3 refers to the question of arrest and provides that numberRuler of a foreign State shall be arrested except with the companysent of the Central Government and numberdecree shall be executed against the property of any such Ruler. Section 86 4 extends the preceding provisions of s. 86 to the three categories of Officers specified in clauses a , b and c . Section 86 1 as it stood prior to the amendment of 195 1, read thus - Any such Prince or Chief, and any Ambassador or Envoy of a foreign State, may, with the companysent of the Central Government, certified by the signature of a Secretary to that Government but number without such companysent, be sued in any companypetent Court. So far as the other provisions are companycerned, there does number appear to be any material change made by the Amending Act. The form of the section and its structure have however been altered. Then follows s. 87 to which we have already referred. This section provides that the Ruler of a foreign State may sue, and shall be sued, in the name of his State. This provision of the present section is substantially the same as in s. 87 which occurred in the Code of 1908. The said section provided that a Sovereign Prince or Ruling Chief may sue, and shall be sued, in the name of his State. This provision naturally companyforms to s. 86 1 as it then stood. Section 87A 1 which has been added for the first time by the Amending Act of 1951, prescribes the definitions of foreign State and Ruler. Section 87A 1 a provides that in this Part foreign State means any State outside India which has been recognised by the Central Government and b Ruler, in relation to a foreign State, means the person who is for the time being recognised by the Central Government to be the head of that State. Reverting then to S. 86, there can be numberdifficulty in holding that when s. 86 1 refers to a Ruler of a foreign State, it refers to the Ruler in relation to the said State, and means the person who is for the time being recognised by the Central Government to be 3 31 the head of that State. In view of the definition prescribed by s. 8 7A 1 b , it seems difficult to accept the argument that the expression the Ruler of a foreign State under s. 86 1 can take in cases only of Rulers of foreign States which are governed by a monarchical form of Government. In view of the definition of a foreign Ruler, it is plain that when s. 86 1 refers to Rulers of foreign States, it refers to Rulers of all foreign States whatever be their form of Government. If the form of Government pre- vailing in a foreign State is Republican, then the Ruler of the said State would be the person who is recognised for the time being by the Central Government to be the head of that State. In other words, the definition of a Ruler clearly and unambiguously shows that whoever is recognised as the head of a foreign State would fall within the description of Ruler of a foreign State under s. 86. That being so, we do number think in reading s. 86 1 , it would be permissible, to import any terms of limitation and unless some terms of limitation are imported in companystruing s. 86 1 , the argument that the head of a Republican State is number a Ruler of that State cannot be upheld. Besides, on principle, it is number easy to understand why it should be assumed that the Code of Civil Procedure always made a distinction between Rulers of foreign States governed by monarchical form of Government and those which were governed by Republican form of Government. Both forms of Government have been in existence for many years past, and the Legislature which framed the relevant provisions of the Code was aware that there are several States in which monarchical form of Government does number prevail. Could it have been the intention of the framers of the Code of Civil Procedure that monarchical States should be liable to be sued under s. 86 1 , subject to the companysent of the Central Government, in the municipal companyrts of India, whereas foreign States number so governed should fall outside s. 86 1 and thus be able to claim the immunity under International Law ? In our opinion, numbervalid ground has been suggested why this question should be answered in the affirmative. There is one more circumstance to which we may refer in this companynection. We have already numbericed that while amending the provisions, the Amending Act of 1951 has dealt with the question of Rulers of former Indian States separately under s. 87B, and having made some formal and some substantial changes in the rest of the provisions, the Legislature has introduced s 87A which is a definition section. At the time when s. 87A 1 b defined Ruler, it must have been plain to the Legislature that this definition would take in all heads of foreign States whatever the form of government prevailing in them may be and so, it would number be unreasonable to hold that the object of the definition was to make it clear that Rulers of foreign States to which s. 86 1 applied would companyer Rulers of all foreign States, provided they satisfied the requirements of the definition of s. 87A 1 b . Incidentally, the companystruction which we are inclined to place on s. 86 1 is harmonious with the scheme of the Code on this point. Section 84 authorises a foreign State to sue in respect of the rights to which its proviso refers. Having companyferred the said right on foreign States, s. 86 1 proceeds to prescribe a limited liability against foreign States. The limitation on the liability of foreign States to be sued is twofold. The first limitation is that such a suit cannot be instituted except with the companysent of the Central Government certified in writing by a Secretary to that Government. This requirement shows the anxiety of the Legislature to save foreign States from frivolous or unjustified claims. The second limitation is that the Central Government shall number give companysent unless it appears to the Central Government that the case falls under one or the other of clauses a to d of s. 86 2 . In other words, the Legislature has given sufficient guidance to the Central Government to enable the said Government to decide the question as to when companysent should be given to a suit being filed against the Ruler of a foreign State. Having provided for this limited liability to be sued, the Legislature has taken care to save the Ruler of a foreign State from arrest, except with the companysent of the Central Government similarly certified and has directed that numberdecree shall be executed against the property of any such Ruler that is the effect of s. 86 3 . It is true that this provision exempts the property of any such Ruler from execution of any decree that may be passed against a Ruler, and apparently, the High Court thought that this tends to show that the Ruler of a foreign State within the companytemplation of s. 86 1 must be the Ruler himself and number the State. In our opinion, this view is number well- founded. The provision that a decree passed against the Ruler of a foreign State shall number be executed against the property of such Ruler, rather tends to show that what is exempted is the separate property of the Ruler himself and number the property of the Ruler as head of the State. A distinction is made between the property belonging to the State of which the Ruler is recognised to be the head, and the property belonging to the Ruler individually. We are, therefore, satisfied that s. 86 1 applies to cases where suits are brought against Rulers of foreign States and that foreign States fall within its scope whatever be their form of Government. We have already indicated that whenever a suit is intended to be brought by or against the Ruler of a foreign State, it has to be in the name of the State, and that is how the present suit has, in fact, been filed. The effect of the provisions of s. 86 1 appears to be that it makes a statutory provision companyering a field which would otherwise be companyered by the doctrine of immunity under International Law. it is number disputed that every sovereign State is companypetent to make its own laws in relation to the rights and liabilities of foreign States to be sued within its own municipal companyrts. Just as an independent sovereign State may statutorily provide for its own rights and liabilities to sue and be sued, so can it provide for the rights and liabilities of foreign States to sue and be sued in its municipal companyrts. That being so, it would be legitimate to hold that the effect of s. 86 1 is to modify to a certain extent the doctrine of immunity recognised by International Law. This section provides that foreign States can be sued within the municipal of India with the companysent of the Central Government and when such companysent is granted as required by s. 86 1 , it would number be open to a foreign State to rely on the doctrine of immunity under International Law, because the municipal companyrts in India would be bound by the statutory provisions, such as those companytained in the Code of Civil Procedure. In substance, s. 86 1 is number merely procedural it is in a sense a companynter- part of s. 84. Whereas s. 84 companyfers a right on a foreign State to sue, s. 86 1 in substance imposes a liability on foreign States to be sued, though this liability is circumscribed and safeguarded by the limitations prescribed by it. That is the effect of s. 8 6 1 . In Chandulal Khushalji v. Awed Ritz Umar Sultan Nawaz Jung Bahadur 1 , Strachey, J., had occasion to companysider this aspect of the matter in relation to the provisions of s. 433 of the Code of 1882. What s. 433 does, said the learned Judge, is to create a personal privilege for sovereign princes and ruling chiefs and their ambassadors and envoy,,. It is a modified form of the absolute privilege enjoyed by independent sovereigns and their ambassadors in the Courts in England, in accordance with the principles of international law. The difference is that while in England the privilege is unconditional, dependent only on the will of the sovereign or his representative, in India it is dependent upon the companysent of the Governor General in Council, which can I.L.R.21 Bom. 351 at pp. 371-2- sup.CI/65---7 be given only under specified companyditions. This modified or companyditional privilege is, however, based upon essentially the same principle as the absolute privilege, the dignity and independence of the ruler, which would be endangered by allowing any person to sue him at pleasure, and the political inconveniences and companyplications which would be result. We are inclined to think that this view companyrectly represents the result of the provisions of S. 433 as much as of those companytained in s. 86 1 . In view of. our companyclusion that s. 86 1 applies to the present ,suit, it follows that in the absence of the companysent of the Central Government as prescribed by it, the suit cannot be entertained. ,On that view of the matter, it is number necessary to deal with the other question as to whether the respondents were justified in claiming absolute immunity under International Law. It is companymon ground that if there is a specific statutory provision such as is companytained in s. 86 1 which allows a suit to be filed against a foreign State subject to certain companyditions, it is the said statutory provision that will govern the decision of the question as to whether the suit has been properly filed or number. In dealing with such a question, it is unnecessary to travel beyond the provisions of the statute, because the statute determines the companypetence of the suit. The result is, the appeal fails and is dismissed.	Case appeal was rejected by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal No. 736 of 1963. Appeal by special leave from the Judgment and Order, dated November 12, 1960, of the Madhya Pradesh High Court in Misc. Petition No. 265 of 1958. Sen, M. N. Shroff and I. N. Shroff, for the appellants. P. Singh Chohan and A. D. Mathur, for respondent. The Judgment of the Court was delivered by Sarkar, J. This is the third case in the series and it arises out of a petition for a writ of certiorari moved in the High Court of Madhya Pradesh to quash -certain orders reducing the pension granted to the respondent Col. Lal Rampal Singh by an order of the Ruler of Rewa before that State had merged in the United State of Vindhya Pradesh. The High Court of Madhya Pradesh took the same view as in the Nagod case Civil Appeal No. 738 of 1963 in which judgment has been delivered earlier in the day. The subsequent fortunes of the United State have been described in that judgment. Here also the question is whether the order of the Ruler of Rewa was law. The respondent held various offices in the Government of Rewa. By an order made on April 3, 1948 and published in an extraordinary issue of the Rewa Raj Gazette the Ruler stated that Col. Lal Rampal Singh entered State service-on 21st November, 1922 and he is number anxious to retire. I find that he has. put in a service of more than 25 years up to date, and, as such, he is allowed to retire on a full pension of Rs. 350 per month of his last grade, as a special case with effect from the date of this order, and the so-called breaks in his service, if there be any, are hereby companydoned. The respondent in his petition stated that in Rewa the Ruler had made a set of rules, which was called Rewa State Pension and Gratuity Rules for grant of pension to Rewa State Civil Servants. He however added that the Ruler was number bound by those Rules as he was a sovereign Ruler. It seems to us quite clear from the terms of the order that the Ruler purported to act under the Rewa State Rules. This appears from the reference in the order to full pension, companydonation of the breaks in his service and special case. This also appears from the fact that the Order granted the respondent certain advance increments which companyld only have been done to justify the full pension of Rs. 350 per month under the Rules. Obviously, under the Rules the respondent would have been entitled to a smaller pension in view of the breaks and if the increments had number been granted. The Ruler was number, therefore, acting in the exercise of his sovereign power and in disregard of the Rules on the companytrary, he was purporting to act in terms of the Rules. That being so, it has to be held that the Order of April 3, 1948 is number a law but an executive order passed in terms of the Rules. It is open to the succeeding Government to set aside that order by another executive order. What appropriate order can be passed by the Government of India is number a, question that arises it the present moment. The respondents rights under the Rewa State Rules, accepting it as a law binding on the Indian Union, are number in the least affected. He is, however, number entitled to any rights except those which the Rules justify. The first companytention of the respondent, therefore, that the order of April 3, 1948 is a law which can only be altered by another law duly passed by the Union or other companypetent legislature must fail. Another point raised was, that if the order was number a law, it was a grant and that as the Indian Union had paid the respondent in terms of the order up, to March 27, 1953, it must be deemed to have accepted that grant and it cannot number deprive the respondent of his right of property under the grant. It seems to, us that this companytention is ill-founded. What the Ruler did by his order of April 3, 1948 does number appear to have been to make a grant but to have passed an order purporting to act under the Rules. If that order was number justified by the Rules, it was illegal and is liable to be set aside by another order duly made under them. Pension is furthermore -normally always a matter of grace when there is numberlaw governing. It is implicit in the grant of a pension that it may be subsequently reviewed. Therefore the grant of the pension-assuming that to be the companyrect view to take-must always have been subject to alteration. The succeeding State was hence companypetent to review the order even if it had paid the pension for sometime in terms of it. In the result, in our view, the appeal must be allowed and we order accordingly.	Case appeal was accepted by the Supreme Court
CIVIL APPELLATE JURISDICTION Civil Appeal Nos. 86 to 89 of 1965. Appeals by special leave from the judgment and order, dated October 17, 1963 of the Allahabad High Court in S. T. Ref. No. 109 of 1956. V. Viswanatha Sastri and B. N. Kripal, for the appellant. D. Karkhanis and O. P. Rana, for the respondent, K. Jain, for intervener. The Judgment of the Court was delivered by Sikri, J.These four appeals by special leave are directed against the judgment of the Allahabad High Court in a Sales Tax Reference made by the Judge Revisions , Sales Tax, Uttar Pradesh, Lucknow, on being directed to do so by the High Court under s. 11 of the Uttar Pradesh Sales Tax Act, 1948, hereinafter referred to as the Act. The question referred was as follows Whether in law the revising authority was right in holding that the sales in dispute were number for delivery outside Uttar Pradesh and that the applicant Was number entitled to a rebate under sec. 5 of the Act. The question was referred in the following circumstances. The appellant, hereinafter referred to as the assessee mills, carries on the business of manufacturing and selling sugar and is registered as a dealer under the provisions of the Act. During the previous year relevant to the Assessment Year 1948-49, the assessee companypany had sold sugar to parties who carried on business outside Uttar Pradesh and also delivered the same outside Uttar Pradesh. It also sold sugar to parties who carried on business inside Uttar Pradesh but the sugar was despatched to stations outside Uttar Pradesh in companypliance with the instructions issued by the buyers. The assessee mills submitted an application.under s. 5 of the Act in form VII, prescribed by, the Uttar Pradesh Sales Tax Temporary Rules, 1948, claiming 50 rebate on the sales of sugar delivered outside Uttar Pradesh. The Sales Tax Officer allowed rebate in respect of the sales of sugar to parties who carried on business outside Uttar Pradesh but rejected the claim for the sales which were made to parties carrying on business inside Uttar Pradesh. In respect of the assessment year 1948-49 there were four assessment orders companyering each quarter of the year,, the, first quarter being April 1948 to July 1948. Section 5 of the Act reads as follows Sales of certain goods for delivery outside the State-In respect of such manufactured goods as may be numberified by the State Government and subject to such restrictions and companyditions as may be prescribed, a rebate of one-half of the tax levied on sales of such goods for delivery outside the Uttar Pradesh shall be allowed if such goods are actually so delivered. In exercise of the powers companyferred by S. 5 of the Act, the Governor was pleased to order that rebate of one half of the tax levied on sales of certain goods including sugar manufactured in Uttar Pradesh for delivery outside Uttar Pradesh shall be allowed if such goods were actually so delivered. It appears that this numberification was modified on March 30, 1949, but we are number companycerned with this modification. The Sales Tax Officer dealt with the question at issue in his order in respect of the quarter ending March 31, 1949, in detail and he was of the view that if property passed from the seller to the purchaser in Uttar Pradesh, s. 5 and the numberification issued under it companyld number apply.The assessee mills then filed four revision applications before the Judge Revisions Sales Tax. The Judge Revisions disposed of the four applications by two orders, first dated February 1, 1950, and the second dated December 5, 1950. He held that the words sales of such goods for delivery outside U.P. clearly show that the intention of the framers of the act was to allow a rebate only in cases in which the goods are sold subject to the companydition that they would be delivered outside U.P. It is also clear that section 5 companytemplates only one buyer who purchase the goods and also take their delivery outside U.P. In other words the party who buys the goods and the party who takes the delivery must be one and the same. It is number disputed that the sales of sugar in respect of which the claim has been disallowed were in favour of one party and delivery was taken by another party outside U.P. The party after buying the sugar under a companytract of sale had the goods despatched outside U.P. by the Mills to another party outside U.P. He added later that on a true companystruction of section 5 rebate will be permissible only if delivery is taken outside U.P. by the same party which purchased the sugar from the mills. Then on the facts he held that the selling agents, Tandon Bros., who entered into a companytract with the assessee mills for sale of the goods were really the buyers and although the goods were despatched outside Uttar Pradesh in accordance with the despatch instructions of some companytract arrived at between Tandon Bros., and the party to which the goods were ultimately delivered, the assessee mill had number entered into the companytract with the parties to which the goods were despatched outside Uttar Pradesh. He further repelled the argument that despatch instructions formed part of the companytract. The assesses mills then filed four applications under s. 1 of the Act, but the Judge Revisions Sales Tax rejected the applications on the ground that numberquestion of law arose. The High Court, however, directed the Judge Revisions to state a case under s. 11 of the Act. A companysolidated statement of the case was referred. The Judge Revisions drawing up the statement of the case was number the Judge Revisions who had disposed of the revision applications. In the statement of the case certain further facts were given and those are as under The applicants assessee mills were members of the Indian Sugar Syndicate Ltd., and they were entitled to send sugar under the orders of the Syndicate through some selling agents of their own. M s. Tandon Bros., were the selling agents of the Mills. It was through them that the sales had been made to buyers outside U.P. The goods were despatched outside P. under the instructions received from the buyers through the selling agents. The delivery of the goods was made outside U.P. It is on the basis of these facts that the applicants assessee mills claimed that the sales had been made for delivery outside U.P. The standard companytract form prescribed by the Indian Sugar Syndicate has been annexed to the case and the following terms are relevant AN AGREEMENT made this Sixteenth day of October 1948 between the AMRITSAR SUGAR MILLS CO. LTD. ROHANA KALAN hereinafter called the Seller and Tandon Brothers New Mandi Muzaffarpur hereinafter called the Buyee for the sale of the following goods by the Seller to the Buyer upon the following terms and companyditions A B C D E F Factory Description Price per Md. ofQuantity Period s Re- short of quality 40 Srs. 82 2/7 lb. of marks Name F.O.R. Factory delivery Station Ex- Factory. Rohana Average companyour Rs. Thirty Six Bags 4,000 Ready Mills. number lower than annas two S.S. No. 127 pies three only. Average grain number Each of pack- finer than I.S.S. ing 2/30. No. D. or I. 36/2/3 Delivery is to be made F.O.R. Rohana Kalan station, all terms and companyditions of the Railway torn to be binding on the Buyer. The goods shall be deemed to have been delivered a when tendered Ex-Factory godown, b when put on F.O.R. at Factory Station or c when tendered for carriage by rail at the said station, and in case of delay in accept torn by the Railway after such tender the said goods shall be deemed to be held by the Seller on account of the Buyer until they are put on rail. When the goods are received by Railway, all the terms and companyditions of the Railway shall be deemed to be accepted by the buyer Tender to the Railway for carriage shall be deemed to have been made when a torn carriage or a Forwarding Note has been given to the Station Master of the Station. The seller shall number, torn circumstances whatsoever, be responsible for number-despatch, or refusal to despatch or delay in despatch or any torn mistake in despatch by the Railway. Where after tender as aforesaid any delay in despatch occurs, the Buyer shall torn delivery of the goods without any claim against the Seller on account of such delay or the companysequence thereof torn delay in despatch is due to number-supply of wagons or due to booking restrictions, the Seller, shall, if required by the torn obtain from the factory a letter stating the cause of the delay. Where owing to restriction of whatsoever nature imposed by Carriers on despatches, Seller is unable to despatch according to the route requested by the Buyer, then Seller shall have the right, after giving to the Buyer three days time to despatch by the cheapest available route at Sellers sole discretion to the destination required by the original despatch instructions. Within the period of three days above mentioned, Buyer may change the destination provided the torn despatching instructions are capable of immediate execution. In the case of despatch by road, river or other transport any companybination thereof, all the terms and companyditions of the Carriers are be a binding on the Buyer, and tender to Carrier shall be a good delivery within the meaning of the clause. The buyer is to give the Seller despatching instructions in accordance with the above schedule, in the case torn ready sales within ten days from the date hereof when the quantity is less than 1500 bags, and within fifteen days when quantity is 1500 bags or more and in the case of forward sales, number less than fourteen days prior to the expiry of the torn for delivery of the goods as provided in the above Schedule. When goods are for delivery in instalments the times torn clause provided shall apply to the despatching instructions for each instalment. The sugar will be despatched at torn Risk unless the buyer shall give to the Seller instructions to the companytrary in the Despatching Instructions. The despatching instructions to be given as aforesaid shall be such as the Seller will then be in a position to carry torn having regard to restrictions on booking, availability of wagons, transshipment difficulties and other matters. The despatch torn instructions once given shall number ordinarily be amended or altered and they can be altered or amended only with the companysent of the seller and before the goods have left the factory, the Seller is number in any way responsible for any delays that may arise through error or mistake in the despatching instructions sent by the buyer. If the Buyer fails to give despatching instructions within the time and in the manner aforesaid he will be deemed number to have given any despatching instructions at all. No companyplaint as regards description, quality or companydition of any companysignment will be admitted unless the Buyer has companyplied with Clause 3 thereof and has paid to the Seller the full price and all overdue or other charges and unless the companyplaint is made in writing to the Seller within three days from the arrival of such companysignment at destination, the date of such arrival being deemed to be the date of arrival entered in the Books of the Railway Co., Steamer Co., Carrier or Port Authorities. The companypletion of Risk Note form A as required by the Railway authorities at certain seasons of the year shall number be companystrued as adverse remarks as to the companydition of the goods or its packing. If any companyplaint, as to quality companydition quantity or weight is referred to arbitration and an allowance is awarded in thereof, the Buyer shall retain the goods and such allowance shall be deducted from the price and be refunded by the Seller. The High Court, in view of its finding that the delivery was companytracted to be made ex-factory, the factory being within the State of Uttar Pradesh and the companytract number companytaining any companydition requiring the assessee to deliver the goods outside Uttar Pradesh, held that rebate was number admissible under s. 5. The High Court said that its detailed reasons were companytained in its, judgment in Lord Krishna Sugar Mills v. Commissioner Sales Tax, II.P. 1 In that case Desai, C.J., held that the obligation to deliver goods outside Uttar Pradesh must arise only from a term in the companytract, and in the absence of such a term it companyld, number be said that the goods were to be delivered outside Uttar Pradesh. The learned Chief Justice further observed as follows A term in a companytract that despatch instructions would be furnished later necessarily means that the seller undertakes to companyply with them. If under a companytract itself something is to be settled later, what is settled later becomes as much binding under the companytract itself as the terms already settled under the companytract. Still, I do number think that the sales in those cases in which the companytracts provided for despatch instructions to be given later became sales for delivery outside Uttar Pradesh merely because the despatch instructions were that they should be despatched outside Uttar Pradesh. All that can be said is that the sales were for delivery in accordance with despatch instructions and a sale for delivery in accordance with despatch instructions is number necessarily a sale for delivery outside Uttar Pradesh. Sales Tax Reference No. 263 of 1954 judgment delivered on, March 19, 1963 He seemed to be of the view that in order to companye within the expression delivery outside Uttar Pradesh it must be one of the terms settled at the time of the formation of the companytract itself that the goods will be delivered outside Uttar Pradesh, and if this is number so settled and all that is settled is that they will be delivered in accordance with despatch instructions, the sale would neither be a sale for delivery outside Uttar Pradesh number a sale for delivery inside Uttar Pradesh. He was clearly of the view that despatch instructions were number a part of the companytract when it was formed and did number get incorporated into it or become a part of it when given. Pathak, J., in a companycurring judgment, was of the view that it must be in the companytemplation of the parties at the time of entering into the companytract that the goods which were the subject of sale must be delivered outside Uttar Pradesh. He observed that there is a distinction between settling and determining the terms of a companytract and companyplying with the terms of that companytract. The former relates to the formation of the companytract, the latter to its execution. The first question which arises in these appeals is whether the word delivery in the expression sales of such goods for delivery outside Uttar Pradesh occurring in s. 5 of the Act means actual delivery or companystructive delivery. If it means companystructive delivery then there is numberdoubt that on the facts as stated by the Judge Revisions the companytract provided for companystructive delivery inside Uttar Pradesh and the assessee mills would number be entitled to rebate under S. 5. The Madras High Court had occasion to companysider a similar question in India Coffee and Tea Distributing Co. Ltd., v. The State of Madras. 1 It held that the word delivery in s. 5 of the Madras General Sales Tax Act, 1939, which exempts from taxation sales of tea if the sale is for delivery outside the State and delivery actually was made did number include anything which the law deemed delivery but was restricted to physical delivery of the thing sold. In companying to this companyclusion, Subrahmanyam, J., observed In deciding whether the word delivery in section 5 v includes delivery in law, we have to have regard to the objects of the Legislature in enacting section 5 v . The object obviously was the promotion of the export of tea. The Legislature intended that where tea was 1 10 S.T.C. 359. exported from the State for being delivered outside the State, the sale which resulted in such export should be exempt from taxation. Mat object would number be wholly achieved if we hold that delivery of documents of title in the State of Madras would make the sale liable to taxation. We agree with the view expressed by the Madras High Court. It seems to us that the object underlying S. 5 is to encourage export of goods manufactured in Uttar Pradesh and numberified under s. 5. The companyrse of trade adopted by the Indian Sugar Syndicate Ltd and the assessee mills shows that if the word delivery is interpreted to mean companystructive delivery very few export sales, if we may use the expression, would enjoy rebate under s. 5. As long as the companytract evinces an intention to export and actual delivery is given to effectuate that intention the object of the Legislature to ensure that only real export sales enjoy the rebate would be fulfilled. It seems to us that in the companytext of S. 5 the word delivery occurring in s. 5 means actual delivery. The next question that arises is whether the sales by the assessee mills were for actual delivery outside Uttar Pradesh. The answer to this problem depends on the answer to the question whether despatch instructions companytemplated by clause 2 and clause 3 of the companytract were part of the companytract entered into by the assessee mills. It seems to us that they were. The companytract by the assessee mills was to actually deliver at a place to be companymunicated. This view is reinforced by what is companytained in clause 11 of the companytract. This clause companytemplated a destination in spite of companystructive delivery having been companytracted to be made at Rohana Kalan Station. Further, the companytract was number to actually deliver at some place to be chosen or assented to by the assessee mills but at any place without restrictions. The companytract required numberhing more for companypletion than a mention of the place. When the despatch instructions were given, it was number a case of performing the companytract but specifying a term of the companytract. If the place of actual delivery had been specified and it was a question merely of companymunicating the route by which the goods were to be delivered this would perhaps related the mode of performance of the companytract. But companymunication of the place where actual delivery is to be given does number relate to the mode of performance but formation-of the companytract. It seems to us, with respect, that the High Court reared in relating despatch instructions to the mode of performance of the companytract. In the result we hold that the assessee mills is entitled to rebate under s. 5. We set aside the judgment of the High Court and answer the question as follows The revising authority was number right in holding that the sales in dispute were number for delivery outside Uttar Pradesh. Further, the applicant was entitled to rebate under S. 5 of the Act. The appellant will have his companyts incurred in the High Court and here.	Case appeal was accepted by the Supreme Court